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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23259
U.S. TIMBERLANDS COMPANY, L.P.
(Exact name of registrant as specified in its charter)
Delaware 91-1842156
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
625 Madison Avenue, Suite 10-B, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-755-1100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
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<PAGE>
PART l. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
2000 1999
----------- ------------
<S> <C> <C>
Revenues $ 11,924 $ 11,129
Cost of timber harvested (3,887) (2,021)
Depletion, depreciation and road amortization (3,803) (3,984)
----------- ------------
Gross profit 4,234 5,124
Selling, general and administrative (1,956) (2,351)
Equity in net income of affiliate 996 -
----------- ------------
Operating income 3,274 2,773
Interest expense (5,454) (5,469)
Interest income 122 251
Financing fees (169) (169)
Other income 659 882
----------- ------------
Net loss before general partner and minority interest (1,568) (1,732)
General partner and minority interest 32 35
----------- ------------
Net loss allocable to Unitholders $ (1,536) $ (1,697)
=========== ============
Net loss per Unit - Basic
Common $ (0.12) $ (0.13)
=========== ============
Subordinated $ (0.12) $ (0.13)
=========== ============
Net loss per Unit - Diluted $ (0.12) $ (0.13)
=========== ============
Distributions per Unit $ 0.50 $ 0.50
=========== ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE>
U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ----------
(Unaudited) *
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,329 $ 2,798
Accounts and current portion of notes receivable - net 3,361 3,140
Prepaid expenses and other current assets 440 981
-------- --------
Total current assets 7,130 6,919
Timber and timberlands, net 290,575 293,828
Investment in affiliate 19,789 18,243
Property, plant and equipment, net 987 1,038
Notes receivable - long-term 311 2,304
Deferred financing fees 5,155 5,323
-------- --------
$323,947 $327,655
Total assets ======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $ 8,932 $ 4,472
Deferred revenue - 39
-------- --------
Total current liabilities 8,932 4,511
-------- --------
Long-term debt 225,000 225,000
-------- --------
Minority Interest 900 981
-------- --------
Partners' capital:
General partner interest 900 981
Limited partner interest (12,859,607 units issued and outstanding) 88,215 96,182
-------- --------
89,115 97,163
-------- --------
$323,947 $327,655
Total liabilities and partners' capital ======== ========
</TABLE>
* Derived from audited Consolidated Balance Sheet as of December 31, 1999
See accompanying notes to the condensed consolidated financial statements.
3 of 14
<PAGE>
U.S. TIMBERLANDS COMPANY, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 7,469 $ 1,746
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Timber, timberlands and road additions (417) (61)
Purchase of property, plant and equipment - net (6) (36)
Proceeds from sale of assets 46 -
Increase in other assets - (1,000)
----------- -----------
Net cash used in investing activities (377) (1,097)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings - 1,300
Distributions to unitholders, general partner,
and minority interest (6,561) (6,561)
----------- -----------
Net cash used in financing activities (6,561) (5,261)
----------- -----------
Increase (decrease) in cash and cash equivalents 531 (4,612)
Cash and cash equivalents - beginning of period 2,798 4,824
----------- -----------
Cash and cash equivalents - end of period $ 3,329 $ 212
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4 of 14
<PAGE>
U.S. TIMBERLANDS COMPANY, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per Unit amounts or as otherwise indicated)
(Unaudited)
1. Business and Basis of Presentation:
Business
U.S. Timberlands Company, LP (the "MLP"), a Delaware limited partnership, was
formed in 1997 to acquire and own 99% of the equity interests in U.S.
Timberlands Klamath Falls, LLC (the "Operating Company") and through the
Operating Company to acquire and own the business and assets of U.S. Timberlands
Management Company, LLC, formerly known as U.S. Timberlands Services Company,
LLC. As used herein, "Company" refers to the consolidated entities of the MLP
and the Operating Company.
The primary activity of the Company is the growing of trees and the sale of logs
and standing timber to third party wood processors. The Company's timber is
located in Oregon, east of the cascade Range. Logs harvested from the
timberlands are sold to unaffiliated domestic conversion facilities. These logs
are processed for sale as lumber, plywood and other wood products, primarily for
use in new residential home construction, home remodeling and repair and general
industrial applications.
U.S. Timberlands Services Company, LLC (the "General Partner") manages the
businesses of the MLP and the Operating Company. The General Partner owns a 1%
general partner interest in the MLP and a 1% managing member interest in the
Operating Company.
Basis of Presentation
These consolidated financial statements have been prepared by the Company,
without audit by independent public accountants, pursuant to the rules and
regulations of the United States Securities and Exchange Commission. In the
opinion of management, the consolidated financial statements include all normal
recurring adjustments necessary to present fairly the information required to be
set forth therein. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted from these statements pursuant to such
rules and regulations and, accordingly should be read in conjunction with the
consolidated financial statements included in the Company's 1999 Annual Report
on Form 10-K. Operating results for the three month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the full
year or any other period.
There have been no significant changes in the accounting policies of the
Company. There were no significant changes in the Company's commitments and
contingencies as previously described in the 1999 Annual Report on Form 10-K.
Reclassifications
Certain amounts presented for 1999 have been reclassified for comparability
purposes and have no impact on net income.
5 of 14
<PAGE>
2. Timber and Timberlands:
Timber and timberlands consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- -----------------
<S> <C> <C>
Timber and logging roads $ 317,869 $ 317,856
Timberlands 39,656 39,338
Seed orchard and nursery stock 1,374 1,277
--------------- -----------------
358,899 358,471
Less accumulated depletion and road amortization 68,324 64,643
--------------- -----------------
$ 290,575 $ 293,828
=============== =================
</TABLE>
3. Investment In Affiliate:
Following is summarized financial information for U.S. Timberlands Yakima, LLC,
an affiliate of the Company accounted for under the equity method, for the three
months ended March 31, 2000:
Net sales $ 4,785
Gross profit $ 3,111
Net income $ 1,401
There are no corresponding amounts for the first three months of 1999 as the
Company did not have an investment in the affiliate until October 1999.
4. Short-Term Debt:
The Company has a credit facility with an affiliate of the General Partner (the
"Affiliate Credit Facility") consisting of a revolving line of credit of up to
$12.0 million. Borrowings under the Affiliate Credit Facility bear interest at
the prime lending rate as published in the Wall Street Journal plus applicable
margin (1.25% at March 31, 2000), which is based on the Company's leverage
ratio. The prime lending rate was 9.0% at March 31, 2000. There were no
outstanding borrowings under the Affiliate Credit Facility at March 31, 2000.
The Affiliate Credit Facility expires June 30, 2000 and any amounts borrowed
thereunder shall then be due and payable. The Company intends during the second
quarter to renew the Affiliate Credit Facility for one year to mature on June
30, 2001.
5. Per Unit Information:
The Company accounts for income (loss) per unit in accordance with Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128") "Earnings Per Share."
Under SFAS No. 128, the Company is required to present basic income (loss) per
common and subordinated unit, and diluted loss per unit information. The
weighted average common and subordinated units outstanding were 8,577,487 and
4,282,120, respectively, for both of the three month periods ended March 31,
2000 and March 31, 1999.
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<PAGE>
6. New Accounting Pronouncement:
In June of 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which would require the Company to record
all derivatives as assets or liabilities at fair value. The statement was to be
effective for all fiscal quarters of fiscal years beginning after June 15, 1999
but has been delayed by SFAS No. 137 to all fiscal quarters of fiscal years
beginning after June 15, 2000. Consistent with SFAS No. 137, the Company will
adopt SFAS No. 133 as of January 1, 2001. Management believes that adoption of
this statement will not have a material impact on the Company.
7. Subsequent Event:
On April 19, 2000, the Board of Directors of the General Partner authorized the
MLP to make a distribution of $0.50 per Unit. The total distribution will be
$6,561 (including $131 to the General Partner) and will be paid on May 15, 2000
to Unitholders of record on April 28, 2000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Forward-Looking Statements
Certain information contained in this report may constitute forward-looking
statements within the meaning of the federal securities laws. Although the
Company believes that expectations reflected in such forward-looking statements
are based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved. Forward-looking information is subject to certain
risks, trends and uncertainties that could cause actual results to differ
materially from those projected. Such risks, trends and uncertainties include
the highly cyclical nature of the forest products industry, general economic
conditions, competition, price conditions or trends for the Company's products,
the possibility that timber supply could increase if governmental, environmental
or endangered species policies change, and limitations on the Company's ability
to harvest its timber due to adverse natural conditions or increased
governmental restrictions. These and other risks are described in the Company's
other reports and registration statements, which are available from the United
States Securities and Exchange Commission.
Overview
The Company's principal operations consist of growing and harvesting timber and
selling logs, standing timber and related by-products to third party wood
processors. These logs and by-products are processed for sale as lumber; molding
products; doors; mill work; commodity, specialty, and overlaid plywood products;
laminated veneer lumber; engineered wood I-beams; particleboard; hardboard;
paper and other wood products. These products are used in residential,
commercial, and industrial construction; home remodeling and repair; general
industrial applications; and a variety of paper products. The results of the
Company's operations and its ability to pay quarterly distributions to its
Unitholders depend upon a number of factors, many of which are beyond its
control. These factors include general economic and industry conditions,
domestic and export prices, supply and demand for timber and logs, seasonality,
government
7 of 14
<PAGE>
regulations affecting the manner in which timber may be harvested, and
competition from other supplying regions and substitute products.
Seasonality
The Company's log and standing timber sales volumes are generally at their
lowest levels in the first and second quarter of each year. In the first
quarter, heavy snowfalls in higher elevations prevent access to many areas of
the Company's timberlands. This limited access, along with spring break-up
conditions (when warming weather thaws and softens roadbeds) in March or April,
restricts logging operations to lower elevations and areas with rockier soil
types. As a result of these constraints, the Company's sales volumes are
typically at their lowest in the first quarter, improving in the second quarter
and at their highest during the third and fourth quarters. Most customers in the
region react to this seasonality by carrying sufficiently high log inventories
at the end of the calendar year to carry them to the second quarter of the
following year.
Current Market Conditions
Prices for finished wood products such as lumber and plywood during the
first three months of 2000 were generally comparable to prices during the same
period in 1999; ponderosa pine #3 shop prices increased 5%, lodgepole pine stud
and white fir sheathing prices were flat, and Douglas fir #2 & better green stud
prices were down 6%. Log and timber prices were generally higher in the first
three months of 2000 as compared to the same period in 1999. This trend reflects
a dramatic increase in prices for finished wood products through the third
quarter of 1999 with a subsequent decline in prices through the first quarter of
2000. The log and timber price trend generally follows, but lags, finished wood
products as log and timber prices are typically agreed to in advance of actual
deliveries.
Results of Operations
Selected operating statistics for the Company:
<TABLE>
<CAPTION>
Sales Volume (MBF) Price Realization ($ per MBF)
---------------------------------- ----------------------------------
Timber Timber
Period Logs Stumpage Deeds Logs Stumpage Deeds
------ ---- -------- ----- ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
2000
Three Months Ended March 31 20,564 503 8,701 $ 425 $ 379 $ 325
1999
Three Months Ended March 31 11,996 1,921 17,759 $ 395 $ 440 $ 308
</TABLE>
8 of 14
<PAGE>
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
REVENUES Revenues for the quarter ended March 31, 2000 were $11.9 million,
an increase of $0.8 million or 7% over revenues of $11.1 million for the same
period in 1999. This increase in revenues was attributable to a $4.0 million
increase in log sales, partially offset by a $3.3 million decrease in timber
deed and stumpage sales.
Log sales for the quarter ended March 31, 2000 were $8.7 million on volume
of 20.6 million board feet ("MMBF"), as compared to the same period in 1999 when
log sales were $4.7 million on volume of 12.0 MMBF. The increase in log sales
volumes is due to a decision by the Company in the first quarter of 1999 to
convert certain stumpage sales to timber deed sales and reduce the need for log
sales by the Company. During the first quarter of 2000, the Company utilized log
sales to a much higher extent as compared to the first quarter of 1999. The
average log sales price was $425 per thousand board feet ("MBF") for the first
quarter of 2000, as compared to an average of $395 per MBF for the same period
in 1999. This reflects a general increase in log prices, as the species mix
remained relatively unchanged. The following explanation of changes in log sales
prices may differ from those current market conditions described previously, as
most pricing is agreed to prior to actual delivery. The increase in the average
log sales price was primarily attributable to a 14% increase in lodgepole pine
prices, a 5% increase in Douglas fir prices, and a 21% increase in white fir
prices.
Timber deed and stumpage sales for the first quarter were $3.0 million on
volume of 9.2 MMBF, as compared to the same period in 1999 when timber deed and
stumpage sales were $6.3 million on volume of 19.7 MMBF. The average timber deed
and stumpage sales price was $328 per MBF for the first quarter of 2000, as
compared to $321 per MBF for the same period in 1999. The slight price increase
reflects the log price increases described above offset by a lower value species
mix in the first quarter of 2000 as compared to the same period in 1999.
GROSS PROFIT Gross profit decreased by $0.9 million from $5.1 million in
the first quarter of 1999 to $4.2 million in the first quarter of 2000. As a
percentage of sales, gross profit decreased from 46% in the first quarter of
1999 to 36% in the first quarter of 2000. The decrease in gross profit was
primarily from three factors. First, the combined log and timber sales volume
declined 1.9 MMBF from 31.7 MMBF in the first quarter of 1999 to 29.8 MMBF in
the first quarter of 2000. Second, contracted log and haul costs on a per MBF
basis were up 11% in the first quarter of 2000 as compared to the same period in
1999 due to longer hauls for delivered logs in the first quarter of 2000. Third,
the Company's timber deed and stumpage sales in the first quarter of 2000 were
generally composed of a lower value species mix as compared to the same period
in 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses decreased by $0.4 million from $2.4 million in the first
quarter of 1999 to $2.0 million in the first quarter of 2000. As a percentage of
net sales, this expense decreased from 22% in the first quarter of 1999 to 17%
in the first quarter of 2000. The decrease was primarily due to one-time
expenses of $0.6 million related to severance costs incurred in the first
quarter of 1999.
EQUITY IN NET INCOME OF AFFILIATE Equity in net income of affiliate was
$1.0 million in the first three months of 2000. This amount reflects the
Company's share of the net income from an affiliate in which the Company made an
investment during the fourth quarter of 1999 and accounts for under the equity
method.
9 of 14
<PAGE>
OTHER INCOME Other income for the first quarter of 2000 was $0.7 million, a
decrease of $0.2 million from other income of $0.9 million for the same period
in 1999. The decrease is due to the Company recognizing in the first quarter of
1999 $0.8 million of income related to an unrealized gain from marking to market
an unhedged financial instrument, offset by $0.6 million of income in 2000 from
a guaranteed return on the Company's preferred interest in an affiliate.
PARTNERS' CAPITAL During the three months ended March 31, 2000, the limited
partner interests in the Company declined $8.0 million from $96.2 million to
$88.2 million. This decline is the result of the limited partners' $1.5 million
share of the Company's net loss plus the $6.4 million of distributions to
Unitholders during this period. The General Partner interest in the Company also
declined during the three months ended March 31, 2000 reflecting its share of
the Company's net loss and distributions for the period. The Company expects to
continue to make distributions to its Unitholders in excess of its operating
earnings. As a result, the Company anticipates that partners' capital will
continue to decline.
Financial Condition and Liquidity
OPERATING ACTIVITIES Cash flows provided by operating activities during the
three months ended March 31, 2000 were $7.5 million, as compared to $1.7 million
during the same period in 1999. The $5.8 million increase in cash flows provided
by operating activities was primarily due to changes in working capital
components. This change in working capital was driven by the Company's high
level of timber deed sales during the first quarter of 1999, as compared to the
first quarter of 2000. The timber deed sales in the first quarter of 1999
increased notes receivable by $4.3 million, which reduced operating cash flow,
while a $1.6 net reduction in notes receivable through collections in the first
quarter of 2000 increased operating cash flow.
INVESTING ACTIVITIES Cash flows used in investing activities were $0.4
million during the first three months of 2000, as compared to $1.1 million
during the same period in 1999. The decrease is primarily attributable to a $1.0
million deposit during the first quarter of 1999 that was subsequently returned
to the Company.
FINANCING ACTIVITIES Cash flows used in financing activities were $6.6
million for the first three months of 2000, as compared to $5.3 million during
the same period in 1999. The increase is attributable to the fact that the
Company had cash provided by net borrowings of approximately $1.3 million during
the first quarter of 1999 and had no such borrowings in the first quarter of
2000.
The Company has a credit agreement with an affiliate of the General Partner
(the "Affiliate Credit Facility"). The Affiliate Credit Facility allows the
Company to borrow up to $12.0 million under certain terms and covenants. The
covenants include restrictions on the Company's ability to make cash
distributions, incur certain additional indebtedness or incur certain liens. In
addition, the Company is required to maintain certain financial ratios. The
Affiliate Credit Facility will expire on June 30, 2000. At that time, any
amounts borrowed will be due and payable. As of March 31, 2000 there were no
outstanding borrowings under the Affiliate Credit Facility. The Company intends
during the second quarter to renew the Affiliate Credit Facility for one year to
mature June 30, 2001. The Company also has the ability to generate cash flow
through the acceleration of planned log and timber deed sales. In addition, the
Company's plan is to use investment and commercial banks to raise funds for
acquisitions.
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<PAGE>
The agreements governing the Company's 9-5/8% senior notes (the "Notes")
and the Affiliate Credit Facility contain restrictive covenants, including
limitations on harvest levels, land sales, cash distributions and the amount of
future indebtedness. In addition, these agreements require the Company to
maintain certain financial ratios. Under the Notes, the Company's average annual
adjusted harvest volume over any period of four consecutive years cannot exceed
150 MMBF (as adjusted for timberland sales and purchases). The Notes also limit
one-year harvest levels and average annual harvest levels for consecutive
two-and three-year periods. As of March 31, 2000 the Company was in compliance
with the covenants and ratios pertaining to the Notes and Affiliate Credit
Facility.
Through the first three months of 2000, the Company funded its operations
and met its cash obligations for distributions to its Unitholders and debt
service from cash on hand, cash generated from current operations and borrowings
under its Affiliate Credit Facility. Cash required to make distributions to all
Unitholders at current levels and to pay interest on the Notes is $26.2 million
and $21.7 million, respectively, per year. To make these payments and meet its
working capital requirements, the Company has been selling logs and timber at a
rate in excess of the General Partner's estimate of the current annual board
footage growth on the Company's timberlands. The General Partner expects that
the debt service and quarterly cash distributions will be funded from operations
and borrowings. Given projected volumes for sales of logs and timber, estimated
current board footage growth on the timberlands and the harvest restrictions in
the Notes, unless prices improve, costs are reduced, new markets are developed
or the Company makes accretive acquisitions, the Company's ability in the future
to make distributions at current levels may be adversely affected. The Company
continues to evaluate means to improve cash flows, including the factors
mentioned above. However, there can be no assurance that prices will improve or
that the Company will be able to take any of these actions.
Year 2000 Issues
The Company has completed its Year 2000 readiness work and did not
experience disruption in its business related to the Year 2000 Issue. In
addition to internally assessing its systems and business for Year 2000, the
Company contacted all major external third parties that provide products and
services to the Company to assess their readiness for Year 2000. The Company
made certain investments in systems, applications and products to address the
Year 2000 Issue. The Company did not, however, track internal resources
dedicated to the resolution of the Year 2000 Issue and therefore, is unable to
quantify internal costs incurred to date that are associated with the Year 2000
Issue. The Company believes that direct and indirect expenditures to address the
Year 2000 Issue were immaterial to the Company's operations. To date, the
Company has not experienced any significant, known Year 2000 issues and has been
informed by material third parties that they have also not experienced material
Year 2000 issues. The Company will continue to monitor any on-going Year 2000
issues.
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<PAGE>
PART ll. OTHER INFORMATION
Item 1. Legal Proceedings
There is no pending litigation and, to the knowledge of the Company, there
is no threatened litigation, the unfavorable resolution of which could have a
material adverse effect on the business or financial condition of the Company.
Items 2, 3, 4 and 5 of Part II are not applicable and have been omitted.
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
<TABLE>
<CAPTION>
<S> <C>
+3.1 -- Amended and Restated Agreement of Limited Partnership of U.S. Timberlands Company, LP
+3.2 -- Second Amended and Restated Operating Agreement of U.S. Timberlands Klamath Falls, LLC
+10.2 -- Indenture among U.S. Timberlands Klamath Falls, LLC, U.S. Timberlands Finance Corp. and
State Street Bank and Trust Company, as trustee
+10.3 -- Contribution, Conveyance and Assumption Agreement among U.S. Timberlands Company, LP and
certain other parties
*10.4 -- Form of U.S. Timberlands Company, LP 1997 Long-Term Incentive Plan
*10.5 -- Employment Agreement for Mr. Rudey
*10.9 -- Supply Agreement between U.S. Timberlands Klamath Falls, LLC and Collins Products LLC
10.10 -- Operating Agreement of U.S. Timberlands Yakima, LLC
**16 -- Letter from Arthur Andersen, LLP dated December 8, 1998
*21.1 -- List of Subsidiaries
27.1 -- Financial Data Schedule
</TABLE>
* Incorporated by reference to the same numbered Exhibit to the Registrant's
Registration Statement on Form S-1 filed November 13, 1997.
** Incorporated by reference to Exhibit 1 to the Registrant's Form 8-K filed
on December 8, 1998.
+ Incorporated by reference to the same numbered Exhibit to the Registrant's
Current Report on Form 8-K filed January 15, 1998.
(b.) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter ended March 31,
2000.
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<PAGE>
SIGNATURES
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.
Date: May 15, 2000 U.S. TIMBERLANDS COMPANY, LP
By: U.S. Timberlands Services Company, LLC
as General Partner
By: /s/ Greg G. Byrne
---------------------------------
Greg G. Byrne
Chief Financial Officer
(Chief Financial Officer
and Duly Authorized Officer)
By: /s/ Toby A. Luther
----------------------------------
Toby A. Luther
Corporate Controller - Western Operations
(Principal Accounting Officer)
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OPERATING AGREEMENT
OF
U.S. TIMBERLANDS YAKIMA, LLC
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
ARTICLE I DEFINITIONS 1
<S> <C>
1.1 Section Definitions..........................................................1
1.2 Construction................................................................12
ARTICLE II ORGANIZATION....................................................................................12
2.1 Formation...................................................................12
2.2 Name........................................................................12
2.3 Registered Office; Registered Agent; Principal Office; Other Offices........12
2.4 Purpose and Business........................................................13
2.5 Powers......................................................................13
2.6 Power of Attorney...........................................................13
2.7 Term........................................................................15
2.8 Title to Company Assets.....................................................15
ARTICLE III RIGHTS OF MEMBERS..............................................................................16
3.1 Limitation of Liability.....................................................16
3.2 Outside Activities of the Members...........................................16
3.3 Rights of Members...........................................................16
ARTICLE IV TRANSFERS OF INTERESTS..........................................................................17
4.1 Transfer Generally..........................................................17
4.2 Transfer of Membership Interest.............................................17
4.3 Restrictions on Transfers...................................................18
ARTICLE V ADMISSION OF MEMBERS; CAPITAL....................................................................18
5.1 Classes of Interests........................................................18
5.2 Capital Contributions.......................................................18
5.3 Additional Capital Contributions............................................19
5.4 Interest and Withdrawal.....................................................19
5.5 Capital Accounts............................................................19
5.6 Redemption of Klamath Preferred Interest....................................22
5.7 Loans From Members..........................................................23
5.8 Limited Preemptive Rights...................................................23
<PAGE>
5.9 Fully Paid and Nonassessable Nature of Membership Interests.................23
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS...................................................................24
6.1 Allocations for Capital Account Purposes....................................24
6.1.1 Net Income.......................................................24
6.1.2 Net Loss.........................................................24
6.1.3 Special Allocations..............................................25
6.1.3.1 Partnership Minimum Gain Chargeback..............................25
6.1.3.2 Chargeback of Partner Nonrecourse Debt Minimum Gain..............25
6.1.3.3 Qualified Income Offset..........................................26
6.1.3.4 Gross Income Allocations.........................................26
6.1.3.5 Nonrecourse Deductions...........................................26
6.1.3.6 Partner Nonrecourse Deductions...................................27
6.1.3.7 Nonrecourse Liabilities..........................................27
6.1.3.8 Code Section 754 Adjustments.....................................27
6.1.3.9 Curative Allocation..............................................27
6.2 Allocations for Tax Purposes................................................28
6.3 Distributions...............................................................30
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS...........................................................31
7.1 Management..................................................................31
7.2 Certificate of Formation....................................................33
7.3 Restrictions on Manager's Authority.........................................34
7.4 Management Fee; Reimbursement of the Manager................................34
7.5 Outside Activities..........................................................35
7.6 Loans From the Manager; Loans or
Contributions From the Company; Contracts With
Affiliates; Certain Restrictions on the Manager.............................36
7.7 Indemnification.............................................................38
7.8 Liability of Indemnitees....................................................40
7.9 Resolution of Conflicts of Interest.........................................40
7.10 Other Matters Concerning the Manager........................................42
7.11 Reliance by Third Parties...................................................43
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ARTICLE VIII BOOKS, RECORDS AND ACCOUNTING.................................................................43
8.1 Books, Records and Accounting...............................................43
8.2 Fiscal Year.................................................................44
ARTICLE IX TAX MATTERS.....................................................................................44
9.1 Tax Returns and Information.................................................44
9.2 Tax Elections...............................................................44
9.3 Tax Controversies...........................................................44
9.4 Withholding.................................................................45
ARTICLE X ADMISSION OF SUBSTITUTED AND ADDITIONAL MEMBERS; APPOINTMENT OF MANAGERS.........................45
10.1 Admission of Substituted Members............................................45
10.2 Admission of Additional Members.............................................46
10.3 Amendment of Agreement and Certificate of Formation.........................46
10.4 Appointment of Managers.....................................................46
ARTICLE XI WITHDRAWAL OR REMOVAL OF MANAGER; WITHDRAWAL OF MEMBERS.........................................47
11.1 Withdrawal of the Manager...................................................47
11.2 Removal of the Manager......................................................48
11.3 Entitlement to Reimbursement................................................49
11.4 Withdrawal of Members.......................................................49
ARTICLE XII DISSOLUTION AND LIQUIDATION....................................................................49
12.1 Dissolution.................................................................49
12.2 Continuation of the Business of the Company After Dissolution...............50
12.3 Liquidator..................................................................51
12.4 Liquidation.................................................................51
12.4.1 Disposition of Assets............................................51
12.4.2 Discharge of Liabilities.........................................52
12.4.3 Liquidation Distributions........................................52
12.5 Cancellation of Certificate of Formation....................................52
12.6 Return of Contributions.....................................................53
12.7 Section Waiver of Partition.................................................53
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12.8 Capital Account Restoration.................................................53
ARTICLE XIII AMENDMENT OF AGREEMENT........................................................................53
13.1 Amendments to Be Adopted Solely by the Manager..............................53
13.2 Amendment Procedures........................................................55
ARTICLE XIV MERGER.........................................................................................55
14.1 Authority...................................................................55
14.2 Procedure for Merger or Consolidation.......................................55
14.3 Approval by Members of Merger or Consolidation..............................56
14.4 Certificate of Merger.......................................................57
14.5 Effect of Merger............................................................57
ARTICLE XV GENERAL PROVISIONS..............................................................................58
15.1 Addresses and Notices.......................................................58
15.2 Further Action..............................................................58
15.3 Binding Effect..............................................................58
15.4 Integration.................................................................59
15.5 Creditors...................................................................59
15.6 Waiver......................................................................59
15.7 Counterparts................................................................59
15.8 Applicable Law..............................................................59
15.9 Invalidity of Provisions....................................................59
</TABLE>
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<PAGE>
OPERATING AGREEMENT OF
U.S. TIMBERLANDS YAKIMA, LLC
THIS OPERATING AGREEMENT OF U.S. TIMBERLANDS YAKIMA, LLC, dated as of
September__, 1999 (the "Effective Date"), is entered into by and between U.S.
TIMBERLANDS HOLDINGS GROUP, L.L.C., a Delaware limited liability company, U.S.
TIMBERLANDS COMPANY, L.P., a Delaware limited partnership, and U.S. TIMBERLANDS
KLAMATH FALLS, L.L.C., a Delaware limited liability company, together with any
other Persons who hereafter become Members in the Company or parties hereto as
provided herein.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Section 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 meanings
assigned to such terms in the MLP Agreement (defined below).
"Additional Member" means a Person admitted to the Company as a Member
pursuant to Section 10.2 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 obligated to restore under the standards set by
Treasury Regulations Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulations 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
Regulations 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
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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 6.1.3.1 or 6.1.3.2). The foregoing
definition of Adjusted Capital Account is intended to comply with the provisions
of Treasury Regulations 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(c)(i) or 5.5(c)(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
Regulations Section 1.708-1(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(c)(i) or 5.5(c)(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; provided, however, that the Agreed Value of any property deemed
contributed to the Company for federal income tax purposes upon termination and
reconstitution thereof pursuant to Section 708 of the Code (whether before or
after finalization of Proposed Treasury Regulations Section 1.708-1(b)(l)(iv))
shall be determined in accordance with Section 5.5(c)(i). Subject to Section
5.5(c)(i), 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. The initial Agreed Value of the Antelope Timberlands
shall be $22,000,000.
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"Agreement" means this Operating Agreement of U.S. Timberlands Yakima,
LLC, as it may be amended, supplemented or restated from time to time. This
Agreement shall constitute a "limited liability company agreement" as such term
is defined in the Delaware Limited Liability Company Act.
"Antelope Timberlands" means the piece of real property to be
contributed by Klamath." 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 6.3 in respect of any one or more of the next four Quarters; provided,
however, 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.
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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 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 Washington 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 that 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(c)(i) and 5.5(c)(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,
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as such Certificate of Formation may be amended, supplemented or restated from
time to time.
"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 a successor law.
"Commission" means the United States Securities and Exchange Commission.
"Common Interest" means that undivided interest in the Company owned by
Holdings and MLP, including, without limitation, such Member's rights to Net
Income, Net Loss and distributions of Available Cash.
"Common Interest Member" means a Member who owns a Common Interest in
the Company.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Company" means U.S. Timberlands Yakima, LLC, a Delaware limited
liability company, and any successors thereto.
"Company Group" means the Company and any Subsidiary of the Company,
treated as a single consolidated entity.
"Conflicts Committee" has the meaning assigned to such term in the MLP
Agreement.
"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 the Company on
termination and reconstitution thereof pursuant to Section 708 of the Code,
whether before or after finalization of Proposed Treasury Regulations Section
1.708-1(b)(1)(iv)). Once the Carrying Value of a Contributed Property is
adjusted pursuant to Section 5.5(c), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"Credit Agreement" means that certain Credit Agreement to be entered
into between this Company and the Bank of Montreal in connection with the
financing of the purchase of timberlands by this Company.
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"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1.3.9.
"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, respectively.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulations Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Gross Asset Value" has the meaning assigned to such term in the MLP
Agreement.
"Group Member" means a member of the Company Group.
"Guaranteed Payment" means an amount equal to 5% per annum, determined
on a year of 365 or 366 days, as the case may be, for the actual number of day
for which the Guaranteed Payment is being determined, cumulative to the extent
not paid in a prior period pursuant to Section 6.3(b), compounded annually, on
the average daily balance of the Unreturned Antelope Timberlands Agreed Value
from time to time to which the Guaranteed Payment relates commencing on the
Effective Date.
"Holdings" means U.S. Timberlands Holdings Group, L.L.C., a Delaware
limited liability company possessing 25% of the Voting Interests of the 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, however, that a Person shall not be an Indemnitee by
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reason of providing, on a fee-for-services basis, trustee, fiduciary or
custodial services.
"Initial Member" means Holdings, Klamath and MLP.
"Klamath" means U.S. Timberlands Klamath Falls, L.L.C., a Delaware
limited liability company possessing 51% of the Voting Interests of the Company.
"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.
"Majority of the Voting Interests" means at least 51% of the Voting
Interests.
"Management Fee" means the maximum amount that can be paid to the
Manager pursuant to Section 8.30 of the Credit Agreement.
"Manager" means U.S. Timberlands Services Company, L.L.C. and its
successors and permitted assigns as manager of the Company.
"Member" means a Person possessing a Membership Interest in 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 possessing 24% of the Voting Interests of the Company.
"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(c)(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 6.1.3.
"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 6.1.3.
"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 6.1.3.
"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
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shall not include any items of income, gain or loss specially allocated under
Section 6.1.3.
"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), 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 Regulations Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulations Section 1.752-1(a)(2).
"Operating Company" has the meaning assigned to such term in the MLP
Agreement.
"Opinion of Counsel" has the meaning assigned to such term in the MLP
Agreement.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations 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 Regulations 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 Regulations Section 1.704-2(d).
"Percentage Interest" means, (a) as to MLP, 49% and (b) as to Holdings,
51%.
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"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.
"Preferred Interest" means that undivided interest in the Company owned
by Klamath, including, without limitation, such Member's rights to Net Income,
Net Loss and distributions of Available Cash.
"Preferred Interest Member" means a Member who owns a Preferred
Interest in the Company.
"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 Section 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.
"Required Allocations" means any allocation of an item of income, gain,
loss or deduction pursuant to Section 6.1.3.1, 6.1.3.2, 6.1.3.4, 6.1.3.7 or
6.1.3.9.
"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 (a) 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, (b)
harvesting of timber other than harvesting that 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 that 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 (d) any and all other activities
relating to the United States forest products industry to the extent such
activities compete with the operations of the MLP or the Company.
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"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 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 10.1 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.
"Supermajority of the Voting Interests" means at least 80% of the
Voting Interests.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Tax Distributions" has the meaning assigned to such term in Section
8.9 of the Credit Agreement.
"Transfer" has the meaning assigned to such term in Section 4.1(a).
"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(c)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(c) as of such date).
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"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(c) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5()).
"Unreturned Antelope Timberlands Agreed Value" means the amount of
Agreed Value of the Antelope Timberlands less the sum of all distributions made
to Klamath pursuant to Section 6.3(c).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Voting Interests" means the proportion in which voting rights are
shared among the Members.
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
2.1 Formation
The Company filed a Certificate of Formation with the Secretary of
State of the State of Delaware on May 3, 1999. 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.
2.2 Name
The name of the Company shall be "U.S. Timberlands Yakima, LLC." The
Company's business may be conducted under any other name or names deemed
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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 Members of such change in the next regular communication to
the Members.
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 1013 Centre Road, New
Castle County, Wilmington, Delaware 19805, and the registered agent for service
of process on the Company in the State of Delaware at such registered office
shall be the Corporation Service Company. The principal office of the Company
shall be located at 625 Madison Ave., Suite 10-B, New York, New York 10022, 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 York, New
York 10022, or such other place as the Manager may from time to time designate
by notice to the Members.
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) 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 that 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 the
rights and powers conferred on 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 an MLP activity that generates qualifying income, and
(c) 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.
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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.
2.6 Power of Attorney
(a) Each Member hereby constitutes and appoints the Manager and, if a
Liquidator shall have been selected pursuant to Section 12.3, the Liquidator
(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 its true and lawful agent
and attorney-in-fact, with full power and authority in its 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 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
relating to 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,
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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, however, 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.
(iii) 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 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.
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 be perpetual unless earlier terminated and dissolved 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.
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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
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.
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.
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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 their 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 it a current list of the name
and last known business, residence or mailing address of each Member;
(iv) to have furnished to it 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) any Group Member is required by law or by agreement with any third
party to 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).
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ARTICLE IV
TRANSFERS OF INTERESTS
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.
4.2 Transfer of Membership Interest
A Member 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 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
Company or such Member, and except for the transfers contemplated by Section
10.1, a Member may not transfer all or any part of its Membership Interest or
withdraw from the Company.
4.3 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).
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(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
ADMISSION OF MEMBERS; CAPITAL
5.1 Classes of Interests
The Company shall be authorized to issue two classes of interests, a
Common Interest and a Preferred Interest.
5.2 Capital Contributions
(a) On the Effective Date, MLP shall contribute $294,000 to the
Company, as a Capital Contribution, in exchange for a 49% Common
Interest.
(b) On the Effective Date, Holdings shall contribute $306,000 to the Company as
a Capital Contribution in exchange for a 51% Common Interest.
(c) On the Effective Date, Klamath shall contribute the property known
as Antelope Timberlands to the Company as a Capital Contribution in exchange for
a 100% Preferred Interest. Antelope Timberlands shall have an initial Agreed
Value of $22,000,000.
5.3 Additional Capital Contributions
With the consent of the Manager, any Member may, but shall not be
obligated to, make additional Capital Contributions to the Company.
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
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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.
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 Regulations
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
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 that 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.
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(iii) Except as otherwise provided in Treasury Regulations
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 that 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 includible 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 Regulations 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 was 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 was equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section 5.5(c)
to the Carrying Value of any Company 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
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
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shall, to the extent possible, be allocated in the same manner to the Members to
whom such deemed deduction was allocated.
(vii) 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.
(c) (i) In accordance with Treasury Regulations 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 Regulations 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 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
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distribution shall (A) in the case of an actual distribution that 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(c)(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.
5.6 Redemption of Klamath Preferred Interest
(a) Klamath's Preferred Interest may be redeemed for an amount equal to
the sum of the Unreturned Antelope Timberlands Agreed Value plus the unpaid
Guaranteed Payment pursuant to Section 6.3(b), both of which being determined as
of the date of redemption, as follows:
(i) By Klamath on December 31, 2004; or
(ii) By the Company, at its option, at any time prior to December 31,
2004; or
(iii) By Klamath following a change in control of the Company.
(b) Any payment of the Unreturned Antelope Timberlands Agreed Value and
unpaid Guaranteed Payment owing to Klamath resulting from a redemption under
this Section 5.6 shall, at the Company's option, be payable by the following
means:
(i) 100% cash or
(ii) Return of the Antelope Timberlands plus any accrued but yet
unpaid distributions pursuant to Section 6.3.
(c) Notwithstanding anything contained in Section 5.6(a) and 5.6(b), no
redemption shall take place during any period in which such a redemption would
be prohibited by applicable law or by any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which the Company
is a party or by which it is bound or its assets are subject.
5.7 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
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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.
5.8 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) the issuance or sale of any class or series of Membership
Interests, whether unissued, held in the treasury or hereafter created; (c) the
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) the 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) the
issuance or sale of any other securities that may be issued or sold by the
Company.
5.9 Fully Paid and Nonassessable 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 nonassessable Membership
Interests, except as such nonassessability may be affected by Section 18-607 of
the Delaware Limited Liability Company Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
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.
6.1.1 Net Income
After giving effect to the special allocations set forth in Section
6.1.3, 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 period
shall be allocated among the Members as follows.
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(a) First, among the Common Interest Members in accordance with their
Percentage Interests until the cumulative amount of Net Income
allocated to the Common Interest Members pursuant to this Section
6.1.1(a) equals the cumulative amount of Net Losses allocated to the
Common Interest Members pursuant to Section 6.1.2(d);
(b) Second, to Klamath until the cumulative amount of Net Income allocated
to Klamath pursuant to this Section 6.1.1(b) equals the cumulative
amount of Net Losses allocated to Klamath pursuant to Section
6.1.2(c);
(c) Third, among the Common Interest Members in accordance with their
Percentage Interests until the cumulative amount of Net Income
allocated to the Common Interest Members pursuant to this Section
6.1.1(c) equals the cumulative amount of Net Losses allocated to the
Common Interest Members pursuant to Section 6.1.2(b); and
(d) Thereafter, to the Common Interest Members in accordance with their
respective Percentage Interests.
6.1.2 Net Loss
After giving effect to the special allocations set forth in Section
6.1.3, Net Loss for each taxable period and all items of income, gain, loss and
deduction taken into account in computing Net Loss for such taxable period shall
be allocated among the Members as follows:
(a) First, among the Common Interest Members in accordance with their
Percentage Interests until the cumulative amount of Net Losses
allocated to the Common Interest Members pursuant to this Section
6.1.2(a) equals the cumulative amount of Net Income allocated to the
Common Interest Members pursuant to Section 6.1.1(d);
(b) Second, among the Common Interest Members in proportion to and to the
extent necessary to cause each Common Interest Member's Capital
Account to equal zero;
(c) Third, to Klamath to the extent necessary to cause Klamath's Capital
Account to equal zero; and
(d) Thereafter, among the Common Interest Members in accordance with their
respective Percentage Interests.
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6.1.3 Special Allocations
Notwithstanding any other provision of this Section 6.1, the following
special allocations shall be made for such taxable period:
6.1.3.1 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 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
Regulations 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 6.1.3, 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 6.1.3 with respect to such taxable period
(other than an allocation pursuant to Sections 6.1.3.5 and 6.1.3.6). This
Section 6.1.3.1 is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.
6.1.3.2 Chargeback of Partner Nonrecourse Debt Minimum Gain
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1.3.1), except as provided in Treasury Regulations 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 Regulations
Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For
purposes of this Section 6.1.3, 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 6.1.3, other than Section 6.1.3.1 and other than an allocation
pursuant to Sections 6.1.3.5 and 6.1.3.6, with respect to such taxable period.
This Section 6.1.3.2 is intended to comply with the chargeback of items of
income and gain requirement in Treasury Regulations Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.
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6.1.3.3 Qualified Income Offset
In the event any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulations Section
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 6.1.3.1 or 6.1.3.2.
6.1.3.4 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 Regulations 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, however, that an allocation pursuant to
this Section 6.1.3.4 shall be made only 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 6.1.3.4 were not in this Agreement.
6.1.3.5 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 Members, to revise the
prescribed ratio to the numerically closest ratio that does satisfy such
requirements.
6.1.3.6 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 Regulations Section 1.704-2(i). If more
than one Member bears the Economic Risk of Loss with respect to a Partner
Nonrecourse Debt, such
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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.
6.1.3.7 Nonrecourse Liabilities
For purposes of Treasury Regulations 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.
6.1.3.8 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 Regulations 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.
6.1.3.9 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 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 6.1.3.9(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
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Members. Further, allocations pursuant to this Section 6.1.3.9(a) shall be
deferred with respect to allocations pursuant to clauses (1) and (2) above 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 6.1.3.9(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 6.1.3.9(a) among the Members in a manner that is likely to minimize such
economic distortions.
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 to take into account the Unrealized
Gain or Unrealized Loss attributable to such property and the allocations
thereof pursuant to Section 5.5(c)(i) or 5.5(c)(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.
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(iii) The Manager shall apply the principles of Treasury
Regulations 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 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 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 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 Regulations Section 1.168-2(n), Treasury Regulations Section
1.167(c)-l(a)(6) or the legislative history of Section 197 of the Code. 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 in the same month would receive
depreciation and amortization deductions, based on 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.
(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
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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 that 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 Membership Interest
as it determines necessary, to the extent permitted or required by Section 706
of the Code and the Regulations and 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.
6.3 Distributions
(a) Notwithstanding any limitations provided elsewhere in this
Agreement, the Manager shall, for each taxable year, cause the Company to
distribute pro rata among the Members the Tax Distributions; provided, however,
that no such Tax Distributions shall be made to the extent that the Manager
determines, in its sole discretion, that funds are not legally available for
such distribution by virtue of applicable law or contractual obligation.
Distributions pursuant to this Section 6.3(a) shall be applied against amounts
otherwise distributable to them pursuant to Section 6.3(b) or 6.3(c).
(b) After giving effect to the distributions set forth in Section
6.3(a), an amount shall be paid to Klamath equal to the excess, if any, of (i)
the cumulative Guaranteed Payment owed to Klamath from the inception of the
Company through the date of such payment over (ii) the sum of all prior payments
made to Klamath pursuant to this Section 6.3(b). If any such amount required
pursuant to this Section 6.3(b) would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Company is a party or by which it is bound or its
assets are subject, then such unpaid
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amount shall compound and be paid as soon as such prohibitions are eliminated;
provided, however, that no other Member shall be obligated to contribute
additional amounts to the Company in order to fund such payments. Amounts
distributed to Klamath pursuant to this Section 6.3(b) are intended to
constitute guaranteed payments within the meaning of Section 707(c) of the Code
and shall not be treated as distributions for purposes of determining Klamath's
Capital Account.
(c) The Manager may make such other distributions as it deems
appropriate in its sole discretion. Any distributions made pursuant to this
Section 6.3(c) shall first be made to Klamath in an amount equal to the
Unreturned Antelope Timberlands Agreed Value and then to the Common Interest
Members pro rata in proportion to their Percentage Interests. No such
distributions shall be made if prohibited by applicable law or by any loan
agreement, security agreement, mortgage, debt instrument or other agreement or
obligation to which the Company is a party or by which it is bound or its assets
are subject.
(d) The Manager shall have the discretion to treat taxes paid by the
Company on behalf of, or amounts withheld with respect to, all or less than all
of the Members as a distribution of Available Cash to such Members.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management
(a) The Manager shall conduct, direct and manage all activities of the
Company. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Company shall be
exclusively vested in the Manager, and no Member shall have any management power
over the business and affairs of the Company. In addition to the powers now or
hereafter granted a manager of a limited liability company under applicable law
or that are granted to the Manager under any other provision of this Agreement,
the Manager, 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 Company, 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 a Membership Interest, and the
incurring of any other obligations;
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(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 Company;
(iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all of the assets of the
Company or the merger or other combination of the Company 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 Company (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 Company Group, the lending
of funds to other Persons (including the Company), the repayment of obligations
of the Company Group and the making of capital contributions to any member of
the Company Group;
(v) the negotiation, execution and performance of any
contracts, conveyances or other instruments (including instruments that limit
the liability of the Company under contractual arrangements to all or particular
assets of the Company, with the other party to the contract to have no recourse
against the Manager or its assets, even if same results in the terms of the
transaction being less favorable to the Company than would otherwise be the
case);
(vi) the distribution of Company 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 Company Group and the Members 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
subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and
obligations of the Company, including the bringing and defending of actions at
law or in equity and
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otherwise engaging in the conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation; and
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(xii) the making of and implementation of operating and
capital decisions, and the establishment of annual operating budgets.
(b) Notwithstanding any other provision of this Agreement, the Delaware
Limited Liability Company Act or any applicable law, rule or Regulations, each
of the Members and each other Person who may acquire an interest in the Company
hereby agrees that the execution, delivery or performance by the Manager or 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 Manager or any Affiliate of the Manager of the rights accorded pursuant
to Article XV) shall not constitute a breach by the Manager of any duty that the
Manager may owe the Company or the Members or any other Persons under this
Agreement (or any other agreements) or of any duty stated or implied by law or
equity.
7.2 Certificate of Formation
The Manager has caused the Certificate of Formation to be filed with
the Secretary of State of the State of Delaware as required by the Delaware
Limited Liability Company Act and shall use all reasonable efforts to cause to
be filed such other certificates or documents as may be determined by the
Manager in its sole discretion to be reasonable and necessary or appropriate for
the formation, continuation, qualification and operation of a limited liability
company in the State of Delaware or any other state in which the Company may
elect to do business or own property. To the extent that such action is
determined by the Manager in its sole discretion to be reasonable and necessary
or appropriate, the Manager shall file amendments to and restatements of the
Certificate of Formation and do all things to maintain the Company as a limited
liability company under the laws of the State of Delaware or of any other state
in which the Company may elect to do business or own property. Subject to the
terms of Section 3.3(a), the Manager shall not be required, before or after
filing, to deliver or mail a copy of the Certificate of Formation, any
qualification document or any amendment thereto to any Member.
7.3 Restrictions on Manager's Authority
(a) The Manager may not, without written approval of the specific act
by the Common Interest Members or by other written instrument executed and
delivered by the Common Interest Members subsequent to the date of this
Agreement, take any action in contravention of this Agreement, including, except
as otherwise provided in
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this Agreement, (i) committing any act that would make
it impossible to carry on the ordinary business of the Company; (ii) possessing
Company property, or assigning any rights in specific Company property, for
other than a Company purpose; (iii) admitting a Person as a Member; or (iv)
amending this Agreement in any manner.
(b) Except as provided in Articles XII and XIV, the Manager may not
sell, exchange or otherwise dispose of all or substantially all of the Company's
assets in a single transaction or a series of related transactions or approve on
behalf of the Company the sale, exchange or other disposition of all or
substantially all of the assets of the Company, without the approval of the
Common Interest Members; provided, however, that this provision shall not
preclude or limit the Manager's ability to mortgage, pledge, hypothecate or
grant a security interest in all or substantially all of the assets of the
Company and shall not apply to any forced sale of any or all of the assets of
the Company pursuant to the foreclosure of, or other realization on, any such
encumbrance.
(e) The Manager may not, without first obtaining approval of Members owning a
Majority of the Voting Interests effect changes to the Company's Certificate of
Formation or this Agreement that would modify the term, preference, voting or
other rights of the Preferred Interest Members or cause the creation of an
interest class senior in rights to the Preferred Interest Members.
7.4 Management Fee; Reimbursement of the Manager
(a) As consideration for its services, the Manager shall be entitled to
receive an annual Management Fee, payment of which will be senior to all other
claims. If there is no Available Cash in a particular fiscal year, the Manager
shall not be entitled to a Management Fee for that year and no such fee shall
accrue to any other year.
(b) Except as provided in this Section 7.4 and elsewhere in this
Agreement, the Manager shall not be compensated for its services as general
partner of the MLP or as general partner or managing member of any Group Member.
(c) The Manager shall be reimbursed on a monthly basis, or such other
reasonable basis as the Manager may determine in its sole discretion, for (i)
all direct and indirect expenses it incurs or payments it makes on behalf of the
Company (including salary, bonus, incentive compensation and other amounts paid
to any Person including Affiliates of the Manager to perform services for the
Company or for the Manager in the discharge of its duties to the Company) and
(ii) all other necessary or appropriate expenses allocable to the Company or
otherwise reasonably incurred by the Manager in connection with operating the
Company's business (including
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expenses allocated to the Manager by its Affiliates). The Manager shall
determine the expenses that are allocable to the Company in any reasonable
manner determined by the Manager in its sole discretion. Reimbursements pursuant
to this Section 7.4 shall be in addition to any reimbursement to the Manager as
a result of indemnification pursuant to Section 7.7.
7.5 Outside Activities
(a) After the Effective Date, the Manager, for so long as it is the
Manager of the Company, (i) agrees that its sole business will be to act as the
Manager of the Company, the general partner of the MLP, and a general partner or
managing member of any other partnership or limited liability company of which
the Partnership or the Company is, directly or indirectly, a partner or member
and to undertake activities that are ancillary or related thereto (including
being a limited partner in the MLP), (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 the MLP or as general
partner or managing member or Manager of one or more Group Members or (B) the
acquiring, owning or disposing of debt or equity securities in any Group Member,
and (iii) shall not engage in the retail sale of timber to end users in the
continental United States.
(b) Except as specifically restricted by Section 7.5(a), each
Indemnitee (other than the Manager) 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) 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 Member or Assignee. Neither any Group
Member nor any Member nor any other Person shall have any rights by virtue of
this Agreement or the relationship established hereby in any business ventures
of any Indemnitee.
(c) Subject to the terms of Sections 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 Manager) in accordance
with the provisions of this Section 7.5 is hereby approved by the Company and
all Members and (ii) it shall be deemed not to be a breach of the Manager's
fiduciary duty or any other obligation of any type whatsoever of the Manager for
the Indemnitees (other than the Manager) to engage in such business interests
and activities in
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preference to or to the exclusion of the Company (including, without limitation,
the Manager and the Indemnities shall have no obligation to present business
opportunities to the Company).
(d) The Manager and any of its Affiliates may acquire Common Units or
other MLP Securities and, except as otherwise provided in this Agreement, shall
be entitled to exercise all rights relating to such Common Units or MLP
Securities.
(e) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Section 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 Manager to the Company and its Members, or to
constitute a waiver or consent by the Members to any such restriction, such
provisions shall be inapplicable and have no effect in determining whether the
Manager has complied with its fiduciary duties in connection with determinations
made by it under this Section 7.5.
7.6 Loans From the Manager; Loans or Contributions From the Company; Contracts
With Affiliates; Certain Restrictions on the Manager
(a) The Manager or its Affiliates may lend to any Group Member, and any
Group Member may borrow from the Manager or any of its Affiliates, funds needed
or desired by the Group Member for such periods of time and in such amounts as
the Manager 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 Manager or
any of its Affiliates (other than another Group Member).
(b) The Company may lend or contribute to any Group Member, and any
Group Member may borrow from the Company, funds on terms and conditions
established in the sole discretion of the Manager; provided, however, that the
Company may not charge the Group Member interest at a rate less than the rate
that
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would be charged to the Group Member (without reference to the Manager's
financial abilities or guarantees) by unrelated lenders on comparable loans. The
foregoing authority shall be exercised by the Manager in its sole discretion and
shall not create any right or benefit in favor of any Group Member or any other
Person.
(c) The Manager may enter into an agreement with any of its Affiliates
to render services to a Group Member or to the Manager in the discharge of its
duties as Manager of the Company. Any services rendered to a Group Member by the
Manager or any of its Affiliates shall be on terms that are fair and reasonable
to the Company; 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
Company 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 Company Group), is
equitable to the Company Group. The provisions of Section 7.4 shall apply to the
rendering of services described in this Section 7.6(c).
(d) The Company 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 Manager nor any of its Affiliates shall sell, transfer
or convey any property to, or purchase any property from, the Company, directly
or indirectly, except pursuant to transactions that are fair and reasonable to
the Company; 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, (ii) any transaction approved by Special Approval, (iii)
any transaction, the terms of which are no less favorable to the Company 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 Company), is equitable to the
Company.
(f) The Manager and its Affiliates will have no obligation to permit
any Group Member to use any facilities or assets of the Manager 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 Manager or its Affiliates to enter into such contracts.
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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 Company 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, however, 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 Manager) not opposed to, the best interests of the Company and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement or 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 Company, it being agreed that the Manager
shall not be personally liable for such indemnification and shall have no
obligation to contribute or loan any monies or property to the Company 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 Company prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Company 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 Members, 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 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 Company may purchase and maintain (or reimburse the Manager or
its Affiliates for the cost of) insurance, on behalf of the Manager, its
Affiliates and such other Persons as the Manager shall determine, against any
liability that may be
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asserted against or expense that may be incurred by such Person in connection
with the Company's activities or such Person's activities on behalf of the
Company, regardless of whether the Company 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 Company 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 Company 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 that is in, or not
opposed to, the best interests of the Company.
(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, or 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.
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
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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 on 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 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.
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
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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 Regulations.
(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 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
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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
Regulations. 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.
(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.
7.10 Other Matters Concerning the Manager
(a) The Manager may rely and shall be protected in acting or refraining
from acting on 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
advisors selected by it, and any act taken or omitted to be taken in reliance on
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.
(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.
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(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
Regulations 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.
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 this 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 on the Company.
ARTICLE VIII
BOOKS, RECORDS AND ACCOUNTING
8.1 Books, 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,
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including all books and records necessary to provide to the Members any
information required to be provided pursuant to Section 3.3(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 on, or be in the form of, computer disks, hard drives, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device; provided, however, 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.
8.2 Fiscal Year
The fiscal year of the Company shall be a fiscal year ending December
31.
ARTICLE IX
TAX MATTERS
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.
9.2 Tax Elections
(a) With the best interests of the Members in mind, the Manager shall
make a determination as to whether the Company shall make the election under
Section 754 of the Code in accordance with applicable Regulations thereunder.
(b) The Company shall elect to deduct expenses incurred in organizing
the Company ratably over a 60 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.
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9.3 Tax Controversies
Subject to the provisions hereof, Holdings 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 Holdings and to do or refrain from doing any or all things
reasonably required by Holdings to conduct such proceedings.
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 SUBSTITUTED AND ADDITIONAL MEMBERS; APPOINTMENT OF MANAGERS
10.1 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
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Substituted Member (i) at such time as Members owning a Majority of the Voting
Interests consent thereto, which consent may be given or withheld in the
Members' discretion, and (ii) 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. If no such written direction is
received, such Membership Interests will not be voted. An Assignee shall have no
other rights of a Member.
10.2 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 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 10.2, no
Person shall be admitted as an Additional Member without the consent of Members
owning a Majority of the Voting Interests, which consent may be given or
withheld in the Member's discretion. The admission of any Person as an
Additional Member shall become effective on the date on which the name of such
Person is recorded as such in the books and records of the Company, following
the consent of Members owning a Majority of the Voting Interests to such
admission.
10.3 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.
10.4 Appointment of Managers
U.S. Timberlands Services Company, L.L.C., a Delaware limited liability
company, shall be the initial Manager of the Company. Upon approval of Members
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owning a Supermajority of the Voting Interests, new or additional Managers may
be appointed.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF MANAGER; WITHDRAWAL OF MEMBERS
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 Members;
(ii) The Manager is removed pursuant to Section 11.2;
(iii) The Manager withdraws from, or is removed as the
General Partner of, the MLP;
(iv) 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)(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 Manager
or of all or any substantial part of its properties;
(v) A final and nonappealable 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
(vi) (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
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Manager is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the Manager.
(b) If an Event of Withdrawal specified in Section 11.1(a)(iii), (iv),
(v) or (vi) occurs, the withdrawing Manager shall give notice to the 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.
(c) 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
Effective Date and ending at 12:00 midnight, Eastern standard time, on December
31, 2009, the Manager voluntarily withdraws by giving at least 90 days' advance
notice of its intention to withdraw to the Members; provided that prior to the
effective date of such withdrawal, the withdrawal is approved by the MLP 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,
2009, the Manager voluntarily withdraws by giving at least 90 days' advance
notice to the MLP, such withdrawal to take effect on the date specified in such
notice; or (iii) at any time 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 MLP 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 limited partners of the MLP 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 11.2.
11.2 Removal of the Manager
The Manager shall automatically be removed if the Manager is removed as
the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such
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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. The Manager may also be removed by Members owning a
Supermajority of the Voting Interests.
11.3 Entitlement to Reimbursement
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.
11.4 Withdrawal of Members
Without the prior written consent of the Manager, which may be granted
or withheld in its sole discretion, no Member shall have the right to withdraw
from the Company.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
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, 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) an Event of Withdrawal of the Manager, unless a successor is
elected and an Opinion of Counsel is received as provided in Section 11.1(c);
(b) an election to dissolve the Company by the Manager that is approved
by Members owning a Supermajority of the Voting Interests;
(c) the entry of a decree of judicial dissolution of the Company
pursuant to the provisions of the Delaware Limited Liability Company Act;
(d) the sale of all or substantially all of the assets and properties
of the Company Group; or
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(e) the dissolution of the MLP.
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 Sections 11.1
and 11.2, respectively and the failure of the Common Interest Members to select
a successor to such Departing Manager pursuant to Section 11.1(c), 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, Members owning a Majority of the Voting Interests 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 Common Interest 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, elect to reconstitute the
Company in accordance with the immediately preceding sentence. Upon any such
election by the Common Interest 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 unless
earlier dissolved in accordance with this Article XII; and
(b) 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, however, 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 has received an Opinion of Counsel that (i) the exercise of
the right would not result in the loss of limited liability of any Member and
(ii) neither the Company nor 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.
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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 Members owning a Majority of
the Voting Interests. 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 Members owning a
Majority of the Voting Interests. 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 Members owning a Majority of the Voting
Interests. 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 the powers conferred on the Manager
under the terms of this Agreement (but subject to all the applicable
limitations, contractual and otherwise, on the exercise of such powers, other
than the limitation on sale set forth in Section 7.3(a)) 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.
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:
12.4.1 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 12.4.3 to
have received cash equal to
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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 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.
12.4.2 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.
12.4.3 Liquidation Distributions
All property and all cash in excess of that required to discharge
liabilities as provided in Section 12.4.2 shall be distributed to the Members in
the following manner:
(a) First, to Klamath to the extent of any unpaid Guaranteed Payment
due Klamath pursuant to Section 6.3(b) through the date of liquidation
(b) Second, to Klamath to the extent of it Unreturned Antelope
Timberlands Agreed Value; and
(c) Third, among the Common Interest 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 12.4.3) 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 Regulations
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).
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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.
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.
12.7 Section Waiver of Partition
To the maximum extent permitted by law, each Member hereby waives any
right to partition of the Company property.
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
13.1 Amendments 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 as 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;
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(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 the 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 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 Regulations of any federal or state agency
or judicial authority or contained in any federal or state statute (including
the Delaware Limited Liability Company Act), and (iii) 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;
(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) an amendment that, in the discretion of the Manager, is necessary
or advisable in connection with the authorization of issuance of any class or
series of MLP Securities;
(h) any amendment expressly permitted in this Agreement to be made by
the Manager 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 Manager, is necessary
or advisable to reflect, account for and deal with appropriately the formation
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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;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
13.2 Amendment Procedures
Except with respect to amendments of the 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 Manager which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
Members owning a Supermajority of the Voting Interests.
ARTICLE XIV
MERGER
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 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.
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");
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(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) that 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 Manager.
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, 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
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<PAGE>
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 Members owning a
Majority of the Voting Interests.
(c) Except as provided in Section 14.3(d), after such approval by vote
or consent of Members owning a Majority of the Voting Interests, 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 the
Company's assets to, another limited liability entity that 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 member in the Operating Company or cause the Company 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 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.
14.4 Certificate of Merger
Upon the required approval of the Merger Agreement by the Manager and
Members owning a Majority of the Voting Interests, 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.
14.5 Effect of Merger
(a) At the effective time of the certificate of merger:
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(i) all 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 XIV
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
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.
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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.
15.3 Binding Effect
This Agreement shall be binding on and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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.
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.
15.6 Waiver
No failure by any party to insist on 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 a waiver of
any such breach of any other covenant, duty, agreement or condition.
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.
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.
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
By: U.S. TIMBERLANDS HOLDINGS GROUP,
L.L.C., a Delaware limited liability company
By: /s/ John M. Rudey
----------------------------------
Name John M. Rudey
Its: President
U.S. TIMBERLANDS COMPANY, L.P.
By: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
Its General Partner
By: /s/ John M. Rudey
----------------------------------
Name John M. Rudey
Its: President
U.S. TIMBERLANDS KLAMATH FALLS, L.L.C.
By: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
Its Manager
By: /s/ John M. Rudey
----------------------------------
Name John M. Rudey
Its: President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF U.S. TIMBERLANDS COMPANY, LP FOR THE THREE
MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,329
<SECURITIES> 0
<RECEIVABLES> 3,561
<ALLOWANCES> 200
<INVENTORY> 0
<CURRENT-ASSETS> 7,130
<PP&E> 1467
<DEPRECIATION> 480
<TOTAL-ASSETS> 323,947
<CURRENT-LIABILITIES> 8,932
<BONDS> 225,000
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 323,947
<SALES> 11,924
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<CGS> 7,690
<TOTAL-COSTS> 9,646
<OTHER-EXPENSES> (489)
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<INTEREST-EXPENSE> 5,454
<INCOME-PRETAX> (1,569)
<INCOME-TAX> 0
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