UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
Commission File Number 1-3924
MAXXAM INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-2078752
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
5847 SAN FELIPE, SUITE 2600 77057
HOUSTON, TEXAS (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (713) 975-7600
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 / /
Number of shares of common stock outstanding at July 30, 1998: 7,000,597
TABLE OF CONTENTS
PAGE
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheet at June 30, 1998 and
December 31, 1997 3
Consolidated Statement of Operations for the three
and six months ended June 30, 1998 and 1997 4
Consolidated Statement of Cash Flows for the six months
ended June 30, 1998 and 1997 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 4. Submission of Matters to a Vote of Security
Holders 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures S-1
Appendix A - Glossary of Defined Terms A-1
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 277.3 $ 164.6
Marketable securities 35.4 84.6
Receivables:
Trade, net of allowance for doubtful
accounts of $6.4 and $5.9,
respectively 243.9 255.9
Other 74.5 126.3
Inventories 560.8 629.6
Prepaid expenses and other current assets 189.9 175.1
------------ ------------
Total current assets 1,381.8 1,436.1
Property, plant and equipment, net of
accumulated depreciation of $882.4 and
$845.6, respectively 1,318.4 1,320.9
Timber and timberlands, net of accumulated
depletion of $173.2 and $169.2,
respectively 297.6 299.1
Investments in and advances to unconsolidated
affiliates 153.5 159.5
Deferred income taxes 473.1 479.9
Long-term receivables and other assets 434.6 418.7
------------ ------------
$ 4,059.0 $ 4,114.2
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 169.4 $ 187.3
Accrued interest 68.0 68.7
Accrued compensation and related benefits 99.2 159.3
Other accrued liabilities 231.0 174.9
Payable to affiliates 79.2 82.9
Short-term borrowings and current
maturities of long-term debt 30.5 69.0
------------ ------------
Total current liabilities 677.3 742.1
Long-term debt, less current maturities 1,883.2 1,888.0
Accrued postretirement medical benefits 719.4 730.1
Other noncurrent liabilities 592.0 586.3
------------ ------------
Total liabilities 3,871.9 3,946.5
------------ ------------
Commitments and contingencies
Minority interests 175.7 170.6
Stockholders' equity (deficit):
Preferred stock, $.50 par value; 12,500,000
shares authorized; Class A $.05
Non-Cumulative Participating .3 .3
Convertible Preferred Stock; shares issued:
669,701
Common stock, $.50 par value; 28,000,000
shares authorized; 10,063,359 shares
issued 5.0 5.0
Additional capital 222.8 222.8
Accumulated deficit (104.2) (118.5)
Pension liability adjustment (3.3) (3.3)
Treasury stock, at cost (shares held:
preferred - 845; common: 3,062,762) (109.2) (109.2)
------------ ------------
Total stockholders' equity
(deficit) 11.4 (2.9)
------------ ------------
$ 4,059.0 $ 4,114.2
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales:
Aluminum operations $ 614.8 $ 597.1 $ 1,211.8 $ 1,144.5
Forest products operations 63.5 76.9 115.4 143.7
Real estate and other operations 21.3 15.1 36.4 32.5
------------ ------------ ------------ ------------
699.6 689.1 1,363.6 1,320.7
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales and operations:
Aluminum operations 506.1 489.3 1,005.7 950.0
Forest products operations 39.5 42.1 72.6 80.1
Real estate and other
operations 11.7 8.9 21.4 18.9
Selling, general and
administrative expenses 43.8 47.2 86.0 91.7
Depreciation and depletion 27.5 29.2 55.6 58.6
Restructuring of aluminum
operations - 19.7 - 19.7
------------ ------------ ------------ ------------
628.6 636.4 1,241.3 1,219.0
------------ ------------ ------------ ------------
Operating income 71.0 52.7 122.3 101.7
Other income (expense):
Investment, interest and other
income 10.2 5.3 21.8 16.2
Interest expense (52.5) (52.9) (106.4) (106.0)
------------- ------------- ------------- -------------
Income before income taxes and
minority interests 28.7 5.1 37.7 11.9
Credit (provision) for income taxes (10.2) 30.2 (13.4) 27.5
Minority interests (6.1) (3.4) (10.0) (6.8)
------------ ------------ ------------ ------------
Net income $ 12.4 $ 31.9 $ 14.3 $ 32.6
============ ============ ============ ============
Basic earnings per common share $ 1.76 $ 3.72 $ 2.04 $ 3.80
============ ============ ============ ============
Diluted earnings per common and
common equivalent share $ 1.57 $ 3.42 $ 1.83 $ 3.49
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------------
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14.3 $ 32.6
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and depletion 55.6 58.6
Restructuring of aluminum operations - 19.7
Net sales of marketable securities 56.1 5.3
Minority interests 10.0 6.8
Amortization of deferred financing costs
and discounts on long-term debt 12.1 12.4
Amortization of excess of investment over
equity in net assets of unconsolidated
affiliates 5.1 5.8
Equity in loss of unconsolidated
affiliates, net of dividends received .2 10.5
Increase (decrease) in cash resulting from
changes in:
Receivables 42.3 (37.0)
Payable to affiliates and other
liabilities (45.8) (48.5)
Inventories 66.3 2.8
Accrued interest (.4) 8.0
Prepaid expenses and other assets 15.8 (20.8)
Accounts payable (17.9) (43.1)
Accrued and deferred income taxes 3.3 (6.2)
Other (10.9) (9.3)
------------ ------------
Net cash provided by (used for)
operating activities 206.1 (2.4)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposition of property and
investments 14.8 26.5
Capital expenditures (53.5) (83.7)
Investment in subsidiaries and joint ventures (1.6) (7.1)
Other 3.1 (2.6)
------------ ------------
Net cash used for investing activities (37.2) (66.9)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit agreements - 30.0
Proceeds from issuance of long-term debt 4.8 19.0
Redemptions, repurchases and principal payments
on long-term debt (19.0) (65.3)
Dividends paid to Kaiser's minority preferred
stockholders - (4.2)
Redemption of preference stock (8.5) (2.0)
Restricted cash deposits - (10.1)
Treasury stock repurchases (35.1) (9.9)
Other 1.6 (.4)
------------ ------------
Net cash used for financing activities (56.2) (42.9)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112.7 (112.2)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 164.6 336.6
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 277.3 $ 224.4
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized interest $ 94.9 $ 85.6
Income taxes paid 9.0 9.3
Capital spending excluded from investing
activities - 9.7
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)
1. GENERAL
The information contained in the following notes to the
consolidated financial statements is condensed from that which would appear
in the annual consolidated financial statements; accordingly, the
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and related notes
thereto contained in the Form 10-K. Any capitalized terms used but not
defined in these Condensed Notes to Consolidated Financial Statements are
defined in the "Glossary of Defined Terms" contained in Appendix A. All
references to the "Company" include MAXXAM Inc. and its subsidiary
companies unless otherwise indicated or the context indicates otherwise.
Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. The results of operations for the
interim periods presented are not necessarily indicative of the results to
be expected for the entire year.
The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at June 30, 1998, the
consolidated results of operations for the three and six months ended June
30, 1998 and 1997 and consolidated cash flows for the six months ended June
30, 1998 and 1997. Certain reclassifications of prior period information
have been made to conform to the current presentation.
SFAS No. 130 was issued in June 1997 and was adopted by the
Company as of January 1, 1998. SFAS No. 130 requires the presentation of
an additional income measure (termed "comprehensive income"), which adjusts
traditional net income for certain items that previously were only
reflected as direct charges to equity (such as minimum pension
liabilities). SFAS No. 133, issued in June, 1998, requires companies to
recognize all derivative instruments as assets or liabilities in the
balance sheet and to measure those instruments at fair value. SFAS No. 133
must be adopted by the Company no later than January 1, 2000, although
earlier application is permitted. The Company is currently evaluating how
and when to implement SFAS No. 133.
The amount of the Company's comprehensive income adjustments is
not significant so there is not a significant difference between
"traditional" net income and comprehensive income for the three and six
month periods ended June 30, 1998 and 1997. However, differences between
comprehensive income and traditional net income may become significant in
future periods as a result of SFAS No. 133. As discussed more fully in
Note 7, the intent of Kaiser's hedging programs is to "lock-in" a price (or
range of prices) for products sold/used so that earnings and cash flows are
subject to reduced risk of volatility. Under SFAS No. 133, the Company
will be required to "mark-to-market" its hedging positions at the end of
each period in advance of the period of recognition for the transaction to
which the hedge relates. Pursuant to SFAS No. 130, the Company will
reflect changes in the fair value of its open hedging positions as an
increase or reduction in stockholders' equity through comprehensive income.
Under SFAS No. 130, the impact of the changes in the fair value of
financial instruments will be reversed from comprehensive income (net of
any fluctuations in other "open" positions) and will be reflected in
traditional net income upon occurrence of the transaction to which the hedge
relates.
The combined impact of implementing SFAS No. 130 and SFAS No. 133
will result in fluctuations in comprehensive income and stockholders'
equity in periods of price volatility, despite the fact that the Company's
cash flow and earnings will be "fixed" to the extent hedged. The amount of
such fluctuations could be significant.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Aluminum Operations:
Bauxite and alumina $ 111.6 $ 108.4
Primary aluminum and work in process 181.4 226.6
Finished fabricated aluminum products 89.6 103.9
Operating supplies and repair and
maintenance parts 124.2 129.4
------------- -------------
506.8 568.3
------------- -------------
Forest Products Operations:
Lumber 43.2 49.7
Logs 10.8 11.6
------------- -------------
54.0 61.3
------------- -------------
$ 560.8 $ 629.6
============= =============
</TABLE>
3. RESTRICTED CASH
Long-term receivables and other assets include restricted cash in
the amount of $32.2 and $33.7 at June 30, 1998 and December 31, 1997,
respectively. Such restricted cash primarily represents the amount held by
the trustee under the indenture governing the Old Timber Notes.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
12% MGHI Senior Secured Notes due August 1, 2003 $ 130.0 $ 130.0
11-1/4% MGI Senior Secured Notes due August 1,
2003 100.0 100.0
12-1/4% MGI Senior Secured Discount Notes due
August 1, 2003, net of discount 124.5 117.3
10-1/2% Pacific Lumber Senior Notes due March 1,
2003 235.0 235.0
Pacific Lumber Credit Agreement 9.4 9.4
7.95% Scotia Pacific Timber Collateralized Notes
due July 20, 2015 309.2 320.0
KACC Credit Agreement - -
10-7/8% KACC Senior Notes due October 15, 2006,
including premium 225.7 225.8
9-7/8% KACC Senior Notes due February 15, 2002,
net of discount 224.3 224.2
12-3/4% KACC Senior Subordinated Notes due
February 1, 2003 400.0 400.0
Alpart CARIFA Loans 60.0 60.0
Other aluminum operations debt 54.5 61.6
Other notes and contracts, primarily secured by
receivables, buildings, real estate and
equipment 38.6 36.1
------------ ------------
1,911.2 1,919.4
Less: current maturities (28.0) (31.4)
------------ ------------
$ 1,883.2 $ 1,888.0
============ ============
</TABLE>
See Note 8 for discussion of (i) the issuance of the Timber Notes
on July 20, 1998, (ii) the prepayment of the Old Timber Notes and outstanding
borrowings under the Pacific Lumber Credit Agreement and (iii) the
redemption of the Pacific Lumber Senior Notes and MGI Notes.
5. PER SHARE INFORMATION
Basic earnings per share is calculated by dividing net income by
the weighted average number of common shares outstanding during the period
including the weighted average impact of the shares of common stock issued
and treasury stock acquired during the year from the date of issuance or
repurchase. The weighted average common shares outstanding were 7,000,597
shares and 8,593,857 shares for the six months ended June 30, 1998 and
1997, respectively.
Diluted earnings per share calculations also include the dilutive
effect of the Class A Preferred Stock (which is convertible into Common
Stock) as well as common and preferred stock options. The weighted average
number of common and common equivalent shares was 7,813,317 shares and
9,363,195 shares for the six months ended June 30, 1998 and 1997,
respectively.
6. CONTINGENCIES
Environmental Contingencies
Kaiser and KACC are subject to a number of environmental laws and
regulations, to fines or penalties assessed for alleged breaches of the
environmental laws and regulations, and to claims and litigation based upon
such laws. KACC is currently subject to a number of lawsuits under CERCLA
and, along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites listed on
the National Priorities List under CERCLA.
Based on Kaiser's evaluation of these and other environmental
matters, Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters. At June 30, 1998, the balance of such accruals, which are
primarily included in noncurrent liabilities, was $28.6. These
environmental accruals represent Kaiser's estimate of costs reasonably
expected to be incurred based on presently enacted laws and regulations,
currently available facts, existing technology and Kaiser's assessment of
the likely remedial action to be taken. Kaiser expects that these remedial
actions will be taken over the next several years and estimates that annual
expenditures to be charged to these environmental accruals will be
approximately $2.0 to $9.0 for the years 1998 through 2002 and an aggregate
of approximately $7.0 thereafter.
As additional facts are developed and definitive remedial plans
and necessary regulatory approvals for implementation of remediation are
established or alternative technologies are developed, changes in these and
other factors may result in actual costs exceeding the current
environmental accruals. Kaiser believes that it is reasonably possible
that costs associated with these environmental matters may exceed current
accruals by amounts that could range, in the aggregate, up to an estimated
$18.0. As the resolution of these matters is subject to further regulatory
review and approval, no specific assurances can be given as to when the
factors upon which a substantial portion of this estimate is based can be
expected to be resolved. However, Kaiser is working to resolve these
matters. Kaiser believes that it has insurance coverage available to
recover certain incurred and future environmental costs and is actively
pursuing claims in this regard. However, no accruals have been made for
any such insurance recoveries, and no assurances can be given that Kaiser
will be successful in its attempt to recover incurred or future costs.
While uncertainties are inherent in the final outcome of these
environmental matters, and it is impossible to determine the actual costs
that ultimately may be incurred, management believes that the resolution of
such uncertainties should not have a material adverse effect on the
Company's consolidated financial position, results of operations or
liquidity.
Asbestos Contingencies
KACC is a defendant in a number of lawsuits, some of which
involve claims of multiple persons, in which the plaintiffs allege that
certain of their injuries were caused by, among other things, exposure to
asbestos during, and as a result of, their employment or association with
KACC or exposure to products containing asbestos produced or sold by KACC.
The lawsuits generally relate to products KACC has not manufactured for at
least 20 years. At June 30, 1998, the number of claims pending was
approximately 83,900 compared to 77,400 at December 31, 1997. During 1997,
approximately 15,600 of such claims were received and approximately 9,300
were settled or dismissed. During the quarter and six months ended June
30, 1998, approximately 5,100 and 10,500 of such claims were received and
2,700 and 4,000 of such claims were settled or dismissed, respectively.
However, the foregoing claim and settlement figures as of June 30, 1998 do
not reflect the fact that KACC reached agreements under which it will
settle approximately 22,000 of the pending asbestos-related claims over an
extended period.
Based on past experience and reasonably anticipated future
activity, Kaiser has established an accrual for estimated asbestos-related
costs for claims filed and estimated to be filed through 2008. There are
inherent uncertainties involved in estimating asbestos-related costs and
KACC's actual costs could exceed these estimates. Kaiser's accrual was
calculated based on the current and anticipated number of asbestos-related
claims, the prior timing and amounts of asbestos-related payments, and the
advice of Wharton, Levin, Ehrmantraut, Klein & Nash, P.A. with respect to
the current state of the law related to asbestos claims. Accordingly, an
asbestos-related cost accrual of $167.5, before consideration of insurance
recoveries, is included primarily in other noncurrent liabilities at June
30, 1998. While Kaiser does not believe there is a reasonable basis for
estimating such costs beyond 2008 and, accordingly, no accrual has been
recorded for such costs which may be incurred beyond 2008, there is a
reasonable possibility that such costs may continue beyond 2008, and such
costs may be substantial. Kaiser estimates that annual future cash
payments in connection with such litigation will be approximately $15.0 to
$22.0 for each of the years 1998 through 2002, and an aggregate of
approximately $83.0 thereafter.
Kaiser believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While active
coverage litigation has been resolved, the timing and amount of future
recoveries from the insurance carriers that remain at risk will depend on
the pace of claims review and processing by such carriers, and on the
resolution of any disputes which may arise in the course of discussions
regarding coverage under their policies. Kaiser believes, based on prior
insurance-related recoveries with respect to asbestos-related claims,
existing insurance policies, and the advice of Thelen, Reid & Priest LLP
(formerly Thelen, Marrin, Johnson & Bridges LLP) with respect to applicable
insurance coverage law relating to the terms and conditions of these
policies, that substantial recoveries from the insurance carriers are
probable. Accordingly, an estimated aggregate insurance recovery of
$128.1, determined on the same basis as the asbestos-related cost accrual,
is recorded primarily in long-term receivables and other assets at June 30,
1998.
Kaiser continues to monitor claims activity, the status of
lawsuits (including settlement initiatives), legislative progress, and
costs incurred in order to ascertain whether an adjustment to the existing
accruals should be made to the extent that historical experience may differ
significantly from Kaiser's underlying assumptions. While uncertainties
are inherent in the final outcome of these asbestos matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred and insurance recoveries that will be received, Kaiser believes
that, based on the factors discussed in the preceding paragraphs, the
resolution of asbestos-related uncertainties and the incurrence of
asbestos-related costs net of related insurance recoveries should not have
a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
OTS Contingency and Related Matters
On December 26, 1995, the OTS initiated a formal administrative
proceeding against the Company and others by filing the Notice. The Notice
alleges, among other things, misconduct by the Company, Federated, Mr.
Charles Hurwitz and others (the "respondents") with respect to the failure
of USAT, a wholly owned subsidiary of UFG. The Notice claims that the
Company was a savings and loan holding company, that with others it
controlled USAT, and that it was therefore obligated to maintain the net
worth of USAT. The Notice makes numerous other allegations against the
Company and the other respondents, including, among other things,
allegations that through USAT it was involved in prohibited transactions
with Drexel, Burnham, Lambert Inc. The OTS, among other things, seeks
unspecified damages in excess of $560.0 from the Company and Federated,
civil money penalties and the removal from, and prohibition against the
Company and the other respondents engaging in, the banking industry. The
hearing on the merits of this matter commenced on September 22, 1997,
adjourned on December 19, 1997, recommenced on June 16, 1998 and is
expected to continue until at least October 1998.
On August 2, 1995, the FDIC filed the FDIC action in the U.S.
District Court for the Southern District of Texas. The original complaint
against Mr. Hurwitz alleged damages in excess of $250.0 based on the
allegation that Mr. Hurwitz was a controlling shareholder, de facto senior
officer and director of USAT, and was involved in certain decisions which
contributed to the insolvency of USAT. The original complaint further
alleged, among other things, that Mr. Hurwitz was obligated to ensure that
UFG, Federated and the Company maintained the net worth of USAT. On
January 15, 1997, the FDIC filed an amended complaint which seeks,
conditioned on the OTS prevailing in its administrative proceeding,
unspecified damages from Mr. Hurwitz relating to amounts the OTS does not
collect from the Company and Federated with respect to their alleged
obligations to maintain USAT's net worth.
The Company's bylaws provide for indemnification of its officers
and directors to the fullest extent permitted by Delaware law. The Company
is obligated to advance defense costs to its officers and directors,
subject to the individual's obligation to repay such amount if it is
ultimately determined that the individual was not entitled to
indemnification. In addition, the Company's indemnity obligation can,
under certain circumstances, include amounts other than defense costs,
including judgments and settlements. The Company has concluded that it is
unable to determine a reasonable estimate of the loss (or range of loss),
if any, that could result from this contingency. Accordingly, it is
impossible to assess the ultimate outcome of the foregoing matters or their
potential impact on the Company; however, any adverse outcome of these
matters could have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity.
Other Matters
The Company is involved in various other claims, lawsuits and
other proceedings relating to a wide variety of matters. While
uncertainties are inherent in the final outcome of such matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred, management believes that the resolution of such uncertainties and
the incurrence of such costs should not have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity.
7. DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS
At June 30, 1998, the net unrealized gain on KACC's position in
aluminum forward sales and option contracts (based on an average contract
price of $.74 per pound of primary aluminum), natural gas, fuel oil and
diesel fuel forward purchase and option contracts, and forward foreign
exchange contracts, was approximately $28.3. Any gain or losses on the
derivative contracts utilized in KACC's hedging activities are offset by
losses or gains, respectively, on the transactions being hedged. See Note
1 for a discussion of SFAS No. 133, a new accounting pronouncement which
requires the Company to "mark-to-market" its hedging positions at each
period end in advance of the period of recognition for the transaction to
which the hedge relates.
Alumina and Aluminum
Kaiser's earnings are sensitive to changes in the prices of
alumina, primary aluminum and fabricated aluminum products, and also depend
to a significant degree upon the volume and mix of all products sold.
Primary aluminum prices have historically been subject to significant
cyclical fluctuations. Since 1993, the AMT Price for primary aluminum has
ranged from approximately $.50 to $1.00 per pound. Alumina prices as well
as fabricated aluminum product prices (which vary considerably among
products) are significantly influenced by changes in the price of primary
aluminum but generally lag behind primary aluminum price changes by up to
three months.
From time to time in the ordinary course of business, KACC enters
into hedging transactions to provide price risk management of the net
exposure of earnings resulting from (i) anticipated sales of alumina,
primary aluminum and fabricated aluminum products, less (ii) expected
purchases of certain items, such as aluminum scrap, rolling ingot, and
bauxite, whose prices fluctuate with the price of primary aluminum.
Forward sales contracts are used by KACC to effectively fix the price that
KACC will receive for its shipments. KACC also uses option contracts (i)
to establish a minimum price for its product shipments, (ii) to establish a
"collar" or range of prices for KACC's anticipated sales, and/or (iii) to
permit KACC to realize possible upside price movements. As of June 30,
1998, KACC had sold forward, at fixed prices, approximately 47,300 and
24,000 tons of primary aluminum with respect to 1998 and 1999,
respectively. As of June 30, 1998, KACC had also purchased put options to
establish a minimum price for approximately 22,500 tons of primary aluminum
with respect to 1998 and had entered into option contracts that established
a price range for an additional 115,800 and 124,500 tons with respect to
1998 and 1999, respectively. Additionally, at June 30, 1998, KACC also
held fixed price purchase contracts for 42,100 tons of primary aluminum
with respect to 1998.
As of June 30, 1998, KACC had sold forward virtually all of the
alumina available to it in excess of its projected internal smelting
requirements for 1998, 1999 and 2000 at prices indexed to future prices of
primary aluminum.
Energy
KACC is exposed to energy price risk from fluctuating prices for
fuel oil and natural gas consumed in the production process. Accordingly,
KACC from time to time in the ordinary course of business enters into
hedging transactions with major suppliers of energy and energy related
financial instruments. As of June 30, 1998, KACC had a combination of
fixed price purchase and option contracts for the purchase of approximately
45,000 MMBtu of natural gas per day during the remainder of 1998. As of
June 30, 1998, KACC also held a combination of fixed price purchase and
option contracts for an average of 232,000 and 138,800 barrels per month of
fuel oil and diesel fuel for 1998 and 1999, respectively.
Foreign Currency
KACC enters into forward exchange contracts to hedge material
cash commitments to foreign subsidiaries or affiliates. At June 30, 1998,
KACC had net forward foreign exchange contracts totaling approximately
$198.6 for the purchase of 285.6 Australian dollars from July 1998 through
December 2000, in respect of its commitments for 1998 through 2000
expenditures denominated in Australian dollars.
8. SUBSEQUENT EVENT
On July 20, 1998, Scotia LLC, a recently formed limited liability
company wholly owned by Pacific Lumber, issued the Timber Notes which
consist of an aggregate of $867.2 of Class A-1, Class A-2 and Class A-3
timber collateralized notes which are due on July 20, 2028 and have an
overall effective interest rate of 7.43% per annum. Net proceeds from
the offering were used primarily to prepay the Old Timber Notes and to
redeem the Pacific Lumber Senior Notes and the MGI Notes effective August
19, 1998. The Company expects to recognize an extraordinary loss of
approximately $42.5, net of the related income tax benefit of $22.9, in the
quarter ended September 30, 1998 for the early extinguishment of the Old
Timber Notes, Pacific Lumber Senior Notes and MGI Notes. Concurrently
with the issuance of the Timber Notes, (i) Scotia Pacific was merged into
Scotia LLC, (ii) Pacific Lumber transferred to Scotia LLC approximately
13,500 acres of timberlands and the timber and timber harvesting rights
with respect to an additional 19,700 acres of timberlands, and (iii)
Scotia LLC transferred to Pacific Lumber the timber and timber harvesting
rights related to approximately 1,400 acres of timberlands.
Under the Timber Notes Indenture, the business activities of
Scotia LLC are generally limited to the ownership and operation of its
timber and timberlands. The Timber Notes are senior secured obligations of
Scotia LLC and are not obligations of, or guaranteed by, Pacific Lumber or
any other person. The Timber Notes are secured by a lien on (i) Scotia
LLC's timber and timberlands (representing $246.2 of the Company's
consolidated balance at June 30, 1998), and (ii) substantially all of
Scotia LLC's other property. Interest on the Timber Notes is
further secured by the $63.5 Timber Notes Line of Credit. The Timber Notes
Indenture permits Scotia LLC to have outstanding up to $75.0 of non-recourse
indebtedness to acquire additional timberlands, to issue additional timber
notes provided certain conditions are met (including repayment or redemption of
the $160.7 Class A-1 Timber Notes), and to incur indebtedness under the
Timber Notes Line of Credit.
The Timber Notes are structured to link, to the extent of cash
available, the deemed depletion of Scotia LLC's timber (through the harvest
and sale of logs) to the required amortization of the Timber Notes. The
required amount of amortization on any Timber Note payment date is
determined by various mathematical formulas set forth in the Timber Notes
Indenture. The minimum amount of principal which Scotia LLC must pay (on a
cumulative basis and subject to available cash) through any Timber Note
payment date in order to avoid an Event of Default is referred to as
Minimum Principal Amortization. If the Timber Notes were amortized in
accordance with Minimum Principal Amortization, the final installment of
principal would be paid on July 20, 2028. The minimum amount of principal
which Scotia LLC must pay (on a cumulative basis) through any Timber Note
payment date in order to avoid payment of prepayment or deficiency premiums
is referred to as Scheduled Amortization. If all payments of principal are
made in accordance with Scheduled Amortization, the payment date on which
Scotia LLC will pay the final installment of principal is January 20, 2014.
Such final installment would include a single bullet principal payment of
$463.3 related to the Class A-3 Timber Notes.
Principal and interest on the Timber Notes are payable semi
annually on January 20 and July 20. The Timber Notes are redeemable at the
option of Scotia LLC at any time. The redemption price of the Timber Notes
is equal to the sum of the principal amount, accrued interest and a
prepayment premium calculated based upon the yield of like term Treasury
securities plus 50 basis points.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with the response to
Part I, Item 1 of this Report and Items 7 and 8 of the Form 10-K. Any
capitalized terms used but not defined in this Item are defined in the
"Glossary of Defined Terms" contained in Appendix A.
This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements appear in several places in this Form
10-Q. Such statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will,"
"should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of
strategy. Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors. These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new
or modified statutory or regulatory requirements and changing prices and
market conditions. This section and the Form 10-K identify other factors
that could cause such differences. No assurance can be given that these
are all of the factors that could cause actual results to vary materially
from the forward-looking statements.
RESULTS OF OPERATIONS
The Company operates in three principal industries: aluminum,
through its majority owned subsidiary, Kaiser, an integrated aluminum
producer; forest products, through MGI and its wholly owned subsidiaries,
principally Pacific Lumber and Britt; real estate investment and
development, managed through MAXXAM Property Company; and other commercial
operations through various other wholly owned subsidiaries. MGHI owns 100%
of MGI and is a wholly owned subsidiary of the Company. All references to
the "Company," "Kaiser," "MGHI," "MGI" and "Pacific Lumber" refer to the
respective companies and their subsidiaries, unless otherwise indicated or
the context indicates otherwise.
ALUMINUM OPERATIONS
Aluminum operations account for a substantial portion of the
Company's revenues and operating results. Kaiser, through its principal
subsidiary KACC, operates in two business segments: bauxite and alumina,
and aluminum processing. As an integrated aluminum producer, Kaiser uses a
portion of its bauxite, alumina and primary aluminum production for
additional processing at certain of its facilities.
Recent Events and Developments
Substantially all of KACC's hourly workforce at the Gramercy,
Louisiana, alumina reduction facility, Mead and Tacoma, Washington,
aluminum smelters, Trentwood, Washington, rolling mill, and Newark, Ohio,
extrusion facility is covered by a master agreement ("the Labor Contract")
with the United Steelworkers of America which expires on September 30,
1998. Negotiations concerning the Labor Contract are expected to commence
during the third quarter of 1998.
During April 1998, Kaiser's 90%-owned Valco smelter in Ghana
reached an agreement with the VRA to receive compensation in lieu of the
power necessary to run an additional potline that was curtailed on April 6,
1998. The compensation is expected to substantially mitigate the financial
impact of the curtailment. Valco is now operating only one if its five
potlines, as compared to 1997, when Valco operated four potlines. Valco
had previously curtailed two of its potlines in 1998, one in January, for
which it received no compensation, and one in February, for which it will
be compensated. As previously announced, Kaiser has notified the VRA that
it believes it had the contractual rights at the beginning of 1998 to
sufficient energy to run four and one-half potlines for the balance of the
year. Valco continues to seek compensation from the VRA with respect to
the January 1998 reduction of its power allocation. Valco and the VRA also
are in continuing discussions concerning other matters, including steps
that might be taken to reduce the likelihood of power curtailments beyond
1998. No assurances can be given as to the success of these discussions,
the possibility of requests from the VRA for additional curtailments, or as
to the operating level of Valco for the remainder of 1998 or beyond.
Summary
The following table presents selected operational and financial
information for the three and six months ended June 30, 1998 and 1997. The
information presented in the table is in millions of dollars, except
shipments and prices, and intracompany shipments have been excluded.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Shipments: (1)
Alumina 652.5 492.3 1,077.1 877.8
Aluminum products:
Primary aluminum 68.3 82.0 148.8 160.5
Fabricated aluminum products 107.8 100.4 213.3 194.3
------------- ------------- ------------- -------------
Total aluminum products 176.1 182.4 362.1 354.8
============= ============= ============= =============
Average realized sales price:
Alumina (per ton) $ 197 $ 196 $ 198 $ 193
Primary aluminum (per pound) .70 .75 .71 .75
Net sales:
Bauxite and alumina:
Alumina $ 128.3 $ 96.5 $ 213.8 $ 169.7
Other (2) (3) 26.8 26.5 52.5 53.1
------------- ------------- ------------- -------------
Total bauxite and alumina 155.1 123.0 266.3 222.8
------------- ------------- ------------- -------------
Aluminum processing:
Primary aluminum 105.8 135.3 232.0 264.5
Fabricated aluminum products 353.0 334.5 709.9 648.9
Other (3) .9 4.3 3.6 8.3
------------- ------------- ------------- -------------
Total aluminum processing 459.7 474.1 945.5 921.7
------------- ------------- ------------- -------------
Total net sales $ 614.8 $ 597.1 $ 1,211.8 $ 1,144.5
============= ============= ============= =============
Operating income (4) $ 56.8 $ 36.7 $ 103.1 $ 69.5
============= ============= ============= =============
Income before income taxes and minority
interests $ 27.3 $ 5.4 $ 46.3 $ 13.3
============= ============= ============= =============
Capital expenditures $ 23.0 $ 47.0 $ 36.7 $ 68.8
============= ============= ============= =============
<FN>
- ---------------
(1) Shipments are expressed in thousands of metric tons. A metric ton is
equivalent to 2,204.6 pounds.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority interests
in consolidated subsidiaries.
(4) Includes a pre-tax charge of $19.7 million related to restructuring of
the aluminum operations for both the three and six months ended June
30, 1997.
</TABLE>
Overview
Kaiser's operating results are sensitive to changes in the prices
of alumina, primary aluminum and fabricated aluminum products, and also
depend to a significant degree on the volume and mix of all products sold
and on KACC's hedging strategies. Primary aluminum prices have
historically been subject to significant cyclical fluctuations. Alumina
prices as well as fabricated aluminum product prices (which vary
considerably among products) are significantly influenced by changes in the
price of primary aluminum but generally lag behind primary aluminum price
changes by up to three months.
During 1997, the AMT Price for primary aluminum remained
relatively stable in the $.75 to $.80 per pound range through November and
then declined during December to the $.70 to $.75 per pound range. After
beginning 1998 at approximately $.73, the AMT Price for primary aluminum
declined to approximately $.69 at the end of March 1998 and further
declined to approximately $.63 at the end of June 1998. The AMT Price for
primary aluminum for the week ended July 24, 1998, was approximately $.66
per pound.
Net Sales - Bauxite and Alumina
Net sales of alumina increased by 33% for the quarter ended June
30, 1998, from the comparable period in the prior year, as a result of a
33% increase in alumina shipments, resulting from the timing of shipments
as well as reduced intercompany shipments to Valco. For the six month
period ended June 30, 1998, net sales of alumina increased by 26% from the
comparable period in the prior year due to a 23% increase in shipments and
a 3% increase in average realized prices between periods.
Net Sales - Aluminum Processing
Net sales of primary aluminum for the quarter ended June 30,
1998, decreased by 22% from the comparable prior year period as a result
of a 17% decrease in shipments, primarily as a result of the aforementioned
Valco potline curtailments, as well as a 6% decrease in average realized
prices. Net sales of fabricated aluminum products for the quarter ended
June 30, 1998, were up 6% as compared to the prior year period as a result
of an 7% increase in shipments offset by a 2% decrease in average realized
prices. The increase in fabricated aluminum product shipments over the
second quarter of 1997 was the result of Kaiser's June 1997 acquisition of
the Bellwood extrusion facility, as well as increased shipments of heat-
treat products, offset by reduced volumes in the engineered products
business unit, in part due to the formation of the AKW wheel manufacturing
joint venture.
For the six month period ended June 30, 1998, net sales for the
aluminum processing segment increased by approximately 3% as a 9% increase
in net sales of fabricated aluminum products more than offset a 12% decline
in net sales of primary aluminum. The increase in fabricated aluminum
product net sales and decrease in primary aluminum net sales resulted from
the same shipment and price factors discussed in the preceding paragraph.
Operating Income
Despite a significant decline in the average realized price for
primary aluminum, operating income for the three and six month periods
ended June 30, 1998, increased by 1% and 16%, respectively, as compared to
the comparable prior year periods and after adjusting 1997 results for the
impact of the non-recurring $19.7 million restructuring charge. Kaiser's
ability to sustain its operating earnings reflects increased alumina
production, the continued demand for heat-treat products, improvements in
performance at Kaiser's Trentwood, Washington, rolling mill, as well as
compensation recorded by Kaiser (which will be received over a 18-month
period beginning in July 1998) for two of the three Valco potlines
curtailed during 1998. Reduced power and raw material costs in the primary
aluminum operations also contributed to Kaiser's ability to maintain the
prior year earnings level. Operating income for the quarter and six-month
period ended June 30, 1997, included approximately $2.3 million and $5.2
million, respectively, of operating income related to the settlement of
certain issues related to energy service contracts.
FOREST PRODUCTS OPERATIONS
The Company's forest products operations are conducted by MGI
through its principal operating subsidiaries. MGI's business is seasonal
in that the forest products business generally experiences lower first
quarter sales due largely to the general decline in construction-related
activity during the winter months. Accordingly, MGI's results for any one
quarter are not necessarily indicative of results to be expected for the
full year. The following table presents selected operational and financial
information for the three and six months ended June 30, 1998 and 1997. The
information presented in the table is in millions of dollars except
shipments and prices.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shipments:
Lumber: (1)
Redwood upper grades 11.9 13.3 22.1 26.3
Redwood common grades 59.6 67.6 113.5 124.8
Douglas-fir upper grades 1.6 2.5 3.5 5.0
Douglas-fir common grades 12.1 17.1 21.3 36.5
Other 3.2 4.9 5.7 8.8
------------ ------------ ------------ ------------
Total lumber 88.4 105.4 166.1 201.4
============ ============ ============ ============
Logs (2) 1.3 4.1 1.3 6.6
============ ============ ============ ============
Wood chips (3) 48.6 62.1 80.8 122.3
============ ============ ============ ============
Average sales price:
Lumber: (4)
Redwood upper grades $ 1,513 $ 1,423 $ 1,503 $ 1,373
Redwood common grades 550 546 529 527
Douglas-fir upper grades 1,296 1,153 1,281 1,181
Douglas-fir common grades 331 497 340 491
Logs (4) 414 359 414 404
Wood chips (5) 75 76 70 76
Net sales:
Lumber, net of discount $ 57.3 $ 68.7 $ 105.8 $ 127.7
Logs .5 1.5 .5 2.7
Wood chips 3.7 4.7 5.7 9.2
Cogeneration power 1.2 1.2 1.8 2.2
Other .8 .8 1.6 1.9
------------ ------------ ------------ ------------
Total net sales $ 63.5 $ 76.9 $ 115.4 $ 143.7
============ ============ ============ ============
Operating income $ 14.7 $ 24.5 $ 24.8 $ 43.3
============ ============ ============ ============
Operating cash flow (6) $ 20.5 $ 31.1 $ 36.2 $ 56.5
============ ============ ============ ============
Income (loss) before income taxes $ (2.7) $ 9.5 $ (6.9) $ 9.8
============ ============ ============ ============
Capital expenditures $ 3.2 $ 10.2 $ 6.0 $ 12.4
============ ============ ============ ============
<FN>
- ---------------
(1) Lumber shipments are expressed in millions of board feet.
(2) Log shipments are expressed in millions of feet, net Scribner scale.
(3) Wood chip shipments are expressed in thousands of bone dry units of
2,400 pounds.
(4) Dollars per thousand board feet.
(5) Dollars per bone dry unit.
(6) Operating income before depletion and depreciation, also referred to
as "EBITDA."
</TABLE>
Net sales
Net sales declined from $76.9 million and $143.7 million in the
second quarter and first half of 1997, respectively, to $63.5 million and
$115.4 million for the second quarter and first half of 1998, respectively,
primarily due to lower shipments of lumber, logs and wood chips. This
decrease was principally due to the inclement weather during the 1998
periods, combined with wet weather operating restrictions and the
applicability of logging restrictions during the nesting seasons for the
northern spotted owl and the marbled murrelet, which factors have
restricted the Company's harvesting and transporting of logs to its mills.
These difficulties in harvesting and transporting logs affected the types
of logs available for the mills and the Company's ability to produce a
desirable mix of lumber products which in turn adversely affected sales.
The poor weather conditions also had an unfavorable impact on demand for
the Company's lumber products and its ability to ship its products using
rail transportation. The Company expects that its revenues in the third
quarter of 1998 will increase materially over the second quarter of 1998,
as it will, assuming normal rainfall patterns during such quarter, be able
to conduct operations in areas where it has been restricted due to
inclement weather, wet weather operating restrictions and the nesting
seasons which end during the third quarter of 1998, and therefore be able
to achieve normal levels of lumber production as well as a more desirable
mix of products.
Operating income
Operating income for the three and six months ended June 30, 1998
decreased from the comparable prior periods primarily due to the decrease
in net sales discussed above.
Income (loss) before income taxes and minority interests
Income before income taxes for the three and six months ended
June 30, 1998 decreased from the comparable 1997 periods, primarily due to
the decrease in operating income discussed above. Results for the second
quarter of 1998 were also affected by a decrease in investment income from
marketable securities.
REAL ESTATE AND OTHER OPERATIONS
The Company, principally through its wholly owned subsidiaries,
invests in and develops residential and commercial real estate primarily in
Arizona, California, Texas and Puerto Rico. The Company, through its
subsidiaries, also has majority ownership in SHRP, Ltd., a Texas limited
partnership, which owns and operates a Class 1 horse racing facility in
Houston, Texas.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Net sales:
Real estate $ 17.3 $ 10.6 $ 25.8 $ 22.0
SHRP, Ltd. 4.0 4.5 10.6 10.5
------------ ------------ ------------ ------------
Total net sales $ 21.3 $ 15.1 $ 36.4 $ 32.5
============ ============ ============ ============
Operating income (loss):
Real estate $ 2.7 $ (1.3) $ 0.2 $ (1.3)
SHRP, Ltd. (0.3) (.5) 0.6 (.1)
------------ ------------ ------------ ------------
Total operating income (loss) $ 2.4 $ (1.8) $ 0.8 $ (1.4)
============ ============ ============ ============
Income (loss) before income taxes and
minority interests:
Real estate $ 10.8 $ (.2) $ 10.6 $ 3.2
SHRP, Ltd. (1.0) (1.1) (0.8) (1.4)
------------ ------------ ------------ ------------
Total income (loss) before
income taxes and minority
interests $ 9.8 $ (1.3) $ 9.8 $ 1.8
============ ============ ============ ============
</TABLE>
Net sales
Net sales for the quarter and six months ended June 30, 1998
increased from the same prior year periods primarily due to higher revenues
from the Company's domestic U.S. real estate projects.
Operating income (loss)
Real estate and other operations had operating income for the
quarter and six months ended June 30, 1998 as compared to operating losses
for the same periods in 1997 primarily due to the higher net sales
discussed above.
Income (loss) before income taxes
Income before income taxes and minority interests for the quarter
and six months ended June 30, 1998 increased when compared to the income
(loss) for the same periods in 1997 due to a gain on the sale of the resort
operations of the Company's Waterwood development project and due to
increases in operating income discussed above.
OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Operating loss $ (2.9) $ (6.7) $ (6.4) $ (9.7)
Loss before income taxes and minority
interests (5.7) (8.5) (11.5) (13.0)
</TABLE>
Operating loss
The operating losses represent corporate general and
administrative expenses that are not allocated to the Company's industry
segments. The operating loss for the second quarter and the six months
ended June 30, 1998 decreased from the same periods in 1997 as 1997 results
included accruals for certain legal contingencies.
Loss before income taxes and minority interests
The loss before income taxes and minority interests includes
operating losses, investment, interest and other income (expense) and
interest expense, including amortization of deferred financing costs, which
are not attributable to the Company's industry segments. The losses for
the second quarter and the six months ended June 30, 1998 decreased from
the same periods in 1997 primarily due to lower operating losses described
above.
Minority interests
Minority interests primarily represents the minority
stockholders' interest in the Company's aluminum operations.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
PARENT COMPANY AND MGHI
This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. See above for cautionary information with respect to
such forward-looking statements.
The various credit instruments of KACC, MGHI, Pacific Lumber and
Scotia LLC contain various covenants which, among other things, limit the
ability of such entities to incur additional indebtedness and liens, to
engage in transactions with affiliates, to pay dividends and to make
investments. As of June 30, 1998, no dividends could be paid by MGHI.
Pursuant to the terms of the KACC Credit Agreement, Kaiser is prohibited
from paying any dividends with respect to its common stock. The most
restrictive covenants governing debt of the Company's real estate and other
subsidiaries would not restrict payment to the Company of all nonrestricted
cash and unused borrowing availability for such subsidiaries (approximately
$13.6 million could be paid as of June 30, 1998). However, on August 15,
1998, the MCOP Credit Agreement expires and the Company's real estate and
other subsidiaries are currently working with a bank to replace this credit
facility.
On May 14, 1998, the Company repaid the $35.1 million of one-year
notes issued to NL and CMRT.
Kaiser has an effective shelf registration statement covering the
offering of up to 10 million shares of Kaiser common stock owned by the
Company. Net proceeds from any transaction initiated by the Company
pursuant to this registration statement would be for the benefit of the
Company rather than Kaiser.
As of June 30, 1998, the Company (excluding its subsidiaries) had
cash and marketable securities of approximately $42.4 million and available
borrowings under the Custodial Trust Agreement and Salomon Smith Barney
facility aggregating $47.5 million. The Company believes that its existing
resources, together with the cash available from subsidiaries and other
sources of financing, will be sufficient to fund its working capital
requirements for the next year. With respect to its long-term liquidity,
the Company believes that its existing cash and cash resources, together
with the cash proceeds from the sale of assets and distributions from its
subsidiaries should be sufficient to meet its working capital requirements.
However, there can be no assurance that the Company's cash resources,
together with the cash proceeds from the sale of assets, distributions from
its subsidiaries and other sources of financing, will be sufficient for
such purposes. Any substantially adverse outcome of the litigation
described in Note 6 to the Consolidated Financial Statements could
materially adversely affect the Company's consolidated financial position,
results of operations or liquidity. See Note 6 to the Consolidated
Financial Statements for a discussion of the Company's material
contingencies.
ALUMINUM OPERATIONS
At June 30, 1998, Kaiser had long-term debt of $964.5 million,
compared with $971.7 million at December 31, 1997.
At June 30, 1998, $271.3 million (of which $71.3 million could
have been used for letters of credit) was available to KACC under the KACC
Credit Agreement. Loans under the KACC Credit Agreement bear interest at a
spread (which varies based on the results of a financial test) over either
a base rate or LIBOR, at Kaiser's option. During the six months ended June
30, 1998, the average per annum interest rates on loans outstanding under
the KACC Credit Agreement were approximately 9%.
Kaiser has an effective shelf registration statement covering the
offering from time to time of up to $150.0 million of equity securities.
Kaiser's capital expenditures during the six months ended June
30, 1998, were $36.7 million, and were used primarily to improve production
efficiency, reduce operating costs, expand capacity at existing facilities,
and construct new facilities. Total capital expenditures (of which
approximately 8% is expected to be funded by Kaiser's minority partners in
certain foreign joint ventures) are expected to be between $75.0 and $125.0
million per annum in each of 1998 through 2000.
With respect to the Micromill(TM) facility, product trials for
international and domestic customers are ongoing. However, the
Micromill(TM) technology has not yet been fully implemented or
commercialized and there can be no assurances that full implementation or
commercialization will be successful.
Management continues to evaluate numerous projects, including the
Micromill(TM) technology, all of which require substantial capital in both
the United States and overseas.
Kaiser believes that its existing cash resources, together with
cash flow from operations and borrowings under the KACC Credit Agreement,
will be sufficient to satisfy its working capital and capital expenditure
requirements for the next year. With respect to its long-term liquidity,
Kaiser believes that operating cash flow, together with its ability to
obtain both short- and long-term financing, should provide sufficient funds
to meet its long-term working capital and capital expenditure requirements.
FOREST PRODUCTS OPERATIONS
As discussed further in Note 8 to the Consolidated Financial
Statements, on July 20, 1998, Scotia LLC issued $867.2 million of Timber
Notes. Proceeds from the offering were used primarily to prepay the Old
Timber Notes and redeem the Pacific Lumber Senior Notes and the MGI Notes
effective August 19, 1998.
As of June 30, 1998, $31.1 million of borrowings was available
under the Pacific Lumber Credit Agreement, of which $5.6 million was
available for letters of credit and $20.6 million was restricted to
timberland acquisitions. As of June 30, 1998, $9.4 million of borrowings
were outstanding and letters of credit outstanding amounted to $14.4
million. All of the $9.4 million of borrowings were repaid on July 20,
1998 in connection with the issuance of the Timber Notes.
MGI and its subsidiaries anticipate that cash from operations,
together with existing cash, cash equivalents, marketable securities and
available sources of financing, will be sufficient to fund their working
capital and capital expenditure requirements for the next year. With
respect to their long-term liquidity, MGI and its subsidiaries believe that
their existing cash and cash equivalents, together with their ability to
generate sufficient levels of cash from operations and their ability to
obtain both short and long-term financing, should provide sufficient funds
to meet their working capital and capital expenditure requirements.
However, due to their highly leveraged condition, MGI and its subsidiaries
(and in turn MGHI) are more sensitive than less leveraged companies to
factors affecting their operations, including litigation and governmental
regulation affecting their timber harvesting practices (see "--Trends"
below), increased competition from other lumber producers or alternative
building products and general economic conditions.
REAL ESTATE AND OTHER OPERATIONS
The Company's real estate and other subsidiaries are currently
working with a bank to obtain a replacement credit facility for the MCOP
Credit Agreement which expires on August 15, 1998. The Company believes
that the existing cash and credit facilities of its real estate and other
subsidiaries are sufficient to fund the working capital and capital
expenditure requirements of such subsidiaries for the next year. With
respect to the long-term liquidity of such subsidiaries, the Company
believes that their ability to generate cash from the sale of their
existing real estate, together with their ability to obtain financing,
should provide sufficient funds to meet their working capital and capital
expenditure requirements.
TRENDS
FOREST PRODUCTS OPERATIONS
Pacific Lumber's business is subject to a variety of California
and federal laws and regulations dealing with timber harvesting, threatened
and endangered species and habitat for such species, and air and water
quality. Compliance with such laws and regulations plays a significant
role in Pacific Lumber's business. While compliance with such laws,
regulations and judicial and administrative interpretations, together with
the cost of litigation incurred in connection with certain timber
harvesting operations of Pacific Lumber, have increased the costs of
Pacific Lumber, they have not had a significant adverse effect on the
Company's financial position, results of operations or liquidity. However,
these laws and related administrative actions and legal challenges have
severely restricted the ability of Pacific Lumber to harvest virgin old
growth timber, and to a lesser extent, residual old growth timber on its
timberlands.
On September 28, 1996, the Pacific Lumber Parties entered into
the Headwaters Agreement with the United States and California which
provides the framework for the acquisition by the United States and
California of the Headwaters Timberlands. A substantial portion of the
Headwaters Timberlands contains virgin old growth timber. Approximately
4,900 of these acres are owned by Salmon Creek, with the remaining acreage
being owned by Scotia LLC (Pacific Lumber owning the timber and related
timber harvesting rights on this acreage). The Headwaters Timberlands
would be transferred in exchange for (a) cash or other consideration from
the United States and California having an aggregate fair market value of
$300 million, and (b) approximately 7,700 acres of timberlands to be
acquired by the government from a third party. As part of the Headwaters
Agreement, the Pacific Lumber Parties agreed not to enter the Headwaters
Timberlands to conduct any logging or salvage operations.
Closing of the Headwaters Agreement is subject to various
conditions, including federal and California funding, approval of
an SYP, approval of a Multi-Species HCP, issuance of the Permits,
acquisition of the third party timberlands and the issuance of certain tax
agreements satisfactory to the Pacific Lumber Parties.
In November 1997, President Clinton signed an appropriations bill
which contains authorization for the expenditure of $250 million of federal
funds towards consummation of the Headwaters Agreement. These funds remain
available until March 1, 1999, and their availability is subject to, among
other things, contribution by California of its $130 million portion of
funding for the Headwaters Agreement. While the State of California has
not enacted legislation providing funds for its portion of the acquisition
contemplated by the Headwaters Agreement, on May 11, 1998, California
Governor Wilson announced that he would request that funding of California's
portion be included as part of the Budget Bill. The Budget Bill is subject
to approval by the California Senate and Assembly and signature by the
Governor. As of the date of this Report, funding of California's portion
of the purchase price under the Headwaters Agreement had not yet been
included in the Budget Bill. While a separate bill has been introduced in
the California Senate which would fund California's portion of the purchase
price, this bill would impose additional restrictions on Pacific Lumber,
including more restrictions on harvesting in streamside buffers. While
Pacific Lumber is working diligently toward approval of funding (without
such restrictions) for California's portion of the purchase price as part
of the Budget Bill prior to the March 1, 1999 expiration of the federal
funding, there can be no assurance that Pacific Lumber will be successful
or that the terms of any legislation which may be enacted will be
acceptable to Pacific Lumber.
On July 14, 1998, the proposed SYP and Multi-Species HCP were
made available to the public for review and comment. The proposed Multi-
Species HCP and related Permits would have a term of 50 years, and would
limit the activities which could be conducted by Pacific Lumber in eleven
forest groves to those which would not be detrimental to marbled murrelet
habitat. These groves aggregate approximately 7,600 acres and consist of
substantial quantities of virgin and residual old growth redwood and
Douglas-fir timber.
The Company believes that submission of the proposed SYP and
Multi-Species HCP for public review and comment is a favorable development
that enhances its position in connection with legal and regulatory
challenges to Pacific Lumber's THPs as well as the prospects for
consummation of the Headwaters Agreement, the approval of the Multi-Species
HCP and SYP and the issuance of the Permits. Several species, including
the northern spotted owl, the marbled murrelet and the coho salmon, have
been listed as endangered or threatened under the ESA and/or the CESA.
Pacific Lumber has developed federal and state northern spotted owl
management plans which permit harvesting activities to be conducted so long
as Pacific Lumber adheres to certain measures designed to protect the
northern spotted owl. The potential impact of the listings of the marbled
murrelet and the coho salmon is more uncertain. If the Multi-Species HCP
is approved, Pacific Lumber would be issued the Permits, which would allow
limited incidental "take" of listed species so long as there was no
"jeopardy" to the continued existence of such species, and the Multi-Species
HCP would identify the measures to be instituted in order to minimize and
mitigate the anticipated level of take to the greatest extent possible.
The Multi-Species HCP would not only provide for Pacific Lumber's
compliance with habitat requirements for currently listed species, it would
also provide greater certainty and protection for Pacific Lumber with
regard to identified species that may be listed in the future.
Lawsuits are pending or threatened which seek to prevent Pacific
Lumber from implementing certain of its approved THPs or other operations.
While challenges with respect to Pacific Lumber's young growth timber have
historically been limited, a lawsuit relating to the coho salmon was
recently filed under the ESA which relates to a significant number of THPs
covering young growth timber of Pacific Lumber. While the Company expects
these environmentally focused objections and lawsuits to continue, it
believes that the proposed Multi-Species HCP will enhance Pacific Lumber's
position in connection with these challenges. The Company also believes
that the Multi-Species HCP would expedite the preparation and facilitate
approval of its THPs.
With respect to the SYP, Pacific Lumber has proposed an LTSY
which is approximately 10% less than Pacific Lumber's average timber
harvest over the last three years. If the SYP is approved by the CDF,
Pacific Lumber will have complied with certain BOF regulations requiring
timber companies to project timber growth and harvest on their timberlands
over a 100-year planning period and establish an LTSY harvest level. The
SYP must demonstrate that the average annual harvest over any rolling ten-
year period will not exceed the LTSY harvest level and that Pacific
Lumber's projected timber inventory is capable of sustaining the LTSY
harvest level in the last decade of the 100-year planning period. The
SYP is expected to be valid for ten years, although it would be
subject to review after five years. Thereafter, revised SYPs would be
prepared every decade that address the LTSY harvest level based upon
reassessment of changes in the resource base and other factors.
After the public review and comment process is completed, the
regulatory agencies will determine whether to approve or disapprove the SYP
and Multi-Species HCP. While the parties are working diligently to
complete the closing conditions contained in the Headwaters Agreement,
there can be no assurance that the Headwaters Agreement will be consummated
or that the SYP, Multi-Species HCP or Permits acceptable to Pacific Lumber
will be approved. If the Headwaters Agreement is not consummated and
Pacific Lumber is unable to harvest or is severely limited in harvesting on
various of its timberlands, it intends to continue and/or expand its
takings litigation seeking just compensation from the appropriate
government agencies on the grounds that such restrictions constitute an
uncompensated governmental taking of private property for public use.
In the event that the Multi-Species HCP is not approved, Pacific
Lumber will not enjoy the benefits of a more streamlined THP preparation
and review process. Furthermore, it is impossible for the Company to
determine the potential adverse effect of (i) the listings of the marbled
murrelet and coho salmon if the Multi-Species HCP as approved is not
acceptable to Pacific Lumber, or (ii) the EPA's potential regulations
regarding water quality on the Company's financial position, results of
operations or liquidity until such time as the various regulatory and legal
issues are resolved; however, if Pacific Lumber is unable to harvest, or is
severely limited in harvesting, on significant amounts of its timberlands,
such effect could be materially adverse to the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 27, 1998, an action entitled Mateel Environmental Justice
Foundation v. Pacific Lumber, et. al. (No. 995329) was filed against MGI,
Scotia Pacific, Pacific Lumber and Salmon Creek in the California Superior
Court, San Francisco County. This action alleges, among other things,
violations of California's unfair competition law of the business and
professions code based on citations and violations (primarily water quality
related) issued against certain defendants since 1994 in connection with a
substantial number of THPs. The plaintiff seeks, among other things, an
injunction prohibiting alleged unlawful actions and requiring corrective
action, disgorgement of profits, appointment of a receiver to ensure
compliance with the law and any judgment, and financial security with
respect to future THPs to ensure full compliance with the Forest Practice
Act. The Company does not believe that this matter will have a material
adverse effect upon its business or financial condition.
Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company. No
material developments have occurred with respect to such legal proceedings
subsequent to the filing of the Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of the Company was held on May
20, 1998, at which meeting the stockholders voted to elect Messrs.
Rosenberg, Cruikshank and Schwartz, management's slate of nominees, as
directors of the Company, and voted to reapprove the MAXXAM 1994 Executive
Bonus Plan and approve amendments to that plan. Stockholders voted against
a proposal to declassify the Company's Board of Directors and against a
proposal regarding the Company's operations and forest management policies.
The results of the matters voted at the meeting are shown below.
NOMINEES FOR DIRECTOR
The nominees for election as directors of the Company are listed
below, together with voting information for each nominee. Mr. Charles E.
Hurwitz and Mr. Ezra G. Levin continued as directors for the Company.
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK
Stanley D. Rosenberg - 6,093,941 votes for, 388,069 votes
withheld and -0- broker non-votes.
Robert J. Cruikshank - 6,094,354 votes for, 387,656 votes
withheld and -0- broker non-votes.
NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK AND CLASS A
PREFERRED STOCK
Paul N. Schwartz - 12,673,311 votes for, 388,428 votes withheld
and -0- broker non-votes.
PROPOSAL TO REAPPROVE THE MAXXAM EXECUTIVE BONUS PLAN AND APPROVE
AMENDMENTS TO THAT PLAN
12,373,717 votes for, 453,017 votes against, 235,005 votes
abstaining and -0- broker non-votes.
PROPOSAL TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS
1,721,431 votes for, 10,219,149 votes against, 38,026 votes
abstaining and -0- broker non-votes.
PROPOSAL REGARDING THE COMPANY'S OPERATIONS AND FOREST MANAGEMENT POLICIES
345,537 votes for, 11,544,234 votes against, 88,835 votes
abstaining and -0- broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
*4.1 Indenture between Scotia LLC and State Street Bank and
Trust Company ("State Street"), as Trustee, regarding
the Timber Notes
*4.2 Deed of Trust, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Proceeds among Scotia
LLC, Fidelity National Title Insurance Company, as
Trustee, and State Street, as Collateral Agent
*4.3 Credit Agreement among Scotia LLC, Bank of America
National Trust and Savings Association and other
financial institutions party thereto
*11 Computation of Net Income Per Common and Common
Equivalent Share
*27.1 Financial Data Schedule for the quarter ended June 30,
1998
*27.2 Restated Financial Data Schedule for the periods ended
March 31, June 30, September 30, and December 31, 1997
*27.3 Restated Financial Data Schedule for the periods ended
March 31, June 30, September 30, and December 31, 1996
* Included with this filing.
B. REPORTS ON FORM 8-K:
On June 23, 1998, the Company filed a Current Report on Form 8-K
(under Item 5) concerning a private placement by Scotia LLC of the Timber
Notes (which Form 8-K was subsequently amended by a Form 8-K/A dated July
30, 1998).
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, who has signed this report on
behalf of the Registrant and as the principal accounting officer of the
Registrant.
MAXXAM INC.
Date: July 31, 1998 By: /S/ PAUL N. SCHWARTZ
Paul N. Schwartz
President,
Chief Financial Officer and
Director
Date: July 31, 1998 By: /S/ ELIZABETH D. BRUMLEY
Elizabeth D. Brumley
Assistant Controller
(Principal Accounting Officer)
APPENDIX A
GLOSSARY OF DEFINED TERMS
AMT Price: Average Midwest United States transaction price for primary
aluminum
BOF: California Board of Forestry
Britt: Britt Lumber Co., Inc., an indirect, wholly owned subsidiary of MGI
Budget Bill: California's 1998-99 budget bill
CDF: California Department of Forestry
CERCLA: Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act
of 1986
CESA: California Endangered Species Act
Class A Preferred Stock: Class A $.05 Non-Cumulative Participating
Convertible Preferred Stock of the Company
CMRT: The Combined Master Retirement Trust
Common Stock: $.50 par value common stock of the Company
Company: MAXXAM Inc., including its subsidiaries unless otherwise
noted or the context indicates otherwise
Custodial Trust Agreement: A loan and pledge agreement between the Company
and the Custodial Trust Company providing for up to $25.0 million in
borrowings
EPA: Environmental Protection Agency
ESA: The federal Endangered Species Act
FDIC: Federal Deposit Insurance Corporation
FDIC action: A civil action filed by the FDIC on August 2, 1995 entitled
Federal Deposit Insurance Corporation, as manager of the FSLIC Resolution
Fund v. Charles E. Hurwitz
Federated: Federated Development Company, a principal stockholder of the
Company
Form 10-K: The Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended December 31,
1997
HCP: Habitat Conservation Plan
Headwaters Agreement: The September 28, 1996 agreement among the Pacific
Lumber Parties, the United States and California which provides the
framework for the acquisition by the United States and California of the
Headwaters Timberlands
Headwaters Timberlands: Approximately 5,600 acres of Pacific Lumber's
timberlands consisting of two forest groves commonly referred to as the
Headwaters Forest and the Elk Head Springs Forest
KACC: Kaiser Aluminum & Chemical Corporation, Kaiser's principal
operating subsidiary
KACC Credit Agreement: The revolving credit facility with KACC and a bank
under which KACC is able to borrow by means of revolving credit advances
and letters of credit (up to $125.0 million) in an aggregate amount equal
to the lesser of $325.0 million or a borrowing base relating to eligible
accounts receivable plus eligible inventory
Kaiser: Kaiser Aluminum Corporation, a subsidiary of the Company engaged
in aluminum operations
LTSY: Long-term sustained yield
MCOP Credit Agreement: $14.0 million revolving credit facility between the
Company's real estate and other subsidiaries and a bank
MGHI: MAXXAM Group Holdings Inc.
MGI: MAXXAM Group Inc.
MGI Discount Notes: 12-1/4% MGI Senior Secured Discount Notes due August
1, 2003
MGI Notes: MGI Discount Notes and MGI Senior Notes
MGI Senior Notes: 11-1/4% MGI Senior Secured Notes due August 1, 2003
Minimum Principal Amortization: The minimum amount of principal on the
Timber Notes which Scotia LLC must pay (on a cumulative basis and subject
to available cash) through any Timber Note payment date in order to avoid
an Event of Default (as defined in the Timber Note Indenture)
Multi-Species HCP: The HCP covering multiple species contemplated by the
Headwaters Agreement
NMFS: National Marine Fisheries Service
NL: NL Industries, Inc.
Notice: A Notice of Charges filed on December 26, 1995 by the OTS against
the Company and others with respect to the failure of USAT
Old Timber Notes: The 7.95% Scotia Pacific Timber Collateralized Notes due
July 20, 2015
OTS: The United States Department of Treasury's Office of Thrift
Supervision
Pacific Lumber: The Pacific Lumber Company, an indirect, wholly owned
subsidiary of MGI
Pacific Lumber Credit Agreement: The revolving credit agreement between
Pacific Lumber and a bank which provides for borrowings of up to
$60,000,000, of which $20,000,000 may be used for standby letters of credit
and $30,000,000 is restricted to timberland acquisitions
Pacific Lumber Parties: Pacific Lumber, including its subsidiaries and
affiliates, and MAXXAM
Pacific Lumber Senior Notes: 10-1/2% Pacific Lumber Senior Notes due March
1, 2003
Permits: The incidental take permits related to the Multi-Species HCP
Pre-Permit Agreement: A February 27, 1998 Pre-Permit Application Agreement
in Principle entered into by Pacific Lumber, MAXXAM and various government
agencies regarding certain understandings that they had reached regarding
the Multi-Species HCP, the Permits and the SYP
RTC Portfolio: A portfolio originally consisting of 27 parcels of income
producing real property and 28 loans purchased from the Resolution Trust
Corporation in June 1991
Salmon Creek: Salmon Creek Corporation, a wholly owned subsidiary of
Pacific Lumber
Scheduled Amortization: The minimum amount of principal on the Timber
Notes which Scotia LLC must pay (on a cumulative basis) through any Timber
Note payment date in order to avoid payment of prepayment or deficiency
premiums
Scotia LLC: Scotia Pacific Company LLC, a limited liability company
wholly owned by Pacific Lumber
Scotia Pacific: Scotia Pacific Holding Company, a wholly owned subsidiary
of Pacific Lumber, which was merged into Scotia LLC on July 20, 1998
SFAS No. 130: Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income"
SFAS No. 133: Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
SHRP, Ltd.: Sam Houston Race Park, Ltd., a 90.5%-owned subsidiary of
MAXXAM
SYP: The sustained yield plan establishing LTSY harvest levels for
Pacific Lumber's timberlands
THP: Timber harvesting plan required to be filed with and approved by the
CDF prior to the harvesting of timber
Timber Note Indenture: The indenture dated July 20, 1998 governing the
Timber Notes
Timber Notes: The Scotia LLC 6.55% Class A-1, 7.11% Class A-2 and 7.71%
Class A-3 Timber Collateralized Notes due July 20, 2028
Timber Notes Line of Credit: A line of credit agreement provided as
security for the payment of interest on the Timber Notes
UFG: United Financial Group, Inc.
USAT: United Savings Association of Texas
USFWS: United States Fish and Wildlife Service
Valco: Volta Aluminium Company Limited, Kaiser's 90%-owned smelter
facility in Ghana
VRA: Volta River Authority, an electric power supplier to Valco
SCOTIA PACIFIC COMPANY LLC
AND
STATE STREET BANK AND TRUST COMPANY,
as Trustee
_______________
INDENTURE
Dated as of July 20, 1998
_______________
6.55% CLASS A-1 TIMBER COLLATERALIZED NOTES
7.11% CLASS A-2 TIMBER COLLATERALIZED NOTES
7.71% CLASS A-3 TIMBER COLLATERALIZED NOTES
DUE 2028
===============
Table of Contents
ARTICLE 1 DEFINITIONS; RULES OF CONSTRUCTION; INCORPORATION BY
REFERENCE OF TRUST INDENTURE ACT PROVISIONS 1
1.1 Definitions. 1
1.2 References to Instruments. 1
1.3 Incorporation by Reference of Trust Indenture Act. 1
1.4 Rules of Construction. 2
ARTICLE 2 THE NOTES 2
2.1 Form and Dating. 2
2.2 Execution and Authentication. 2
2.3 Registrar and Paying Agent. 3
2.4 Paying Agent to Hold Money in Trust. 3
2.5 Noteholder Lists. 3
2.6 Transfer and Exchange; Transfer Restrictions. 3
2.7 Replacement Notes. 11
2.8 Outstanding Timber Notes. 11
2.9 Cancellation. 11
2.10 Payments in Respect of the Notes. 11
2.11 Payments of Principal, Regular Interest and Default
Interest on Notes. 11
2.12 Premiums on Timber Notes. 12
2.13 Source and Manner of Payments on Notes. 12
2.14 Additional Timber Notes. 13
ARTICLE 3 OPTIONAL REDEMPTION AND OPTIONAL PREPAYMENT 14
3.1 Notices to Trustee. 14
3.2 No Partial Redemption of a Class. 14
3.3 Notice of Redemption. 14
3.4 Effect of Notice of Redemption. 15
3.5 Deposit of Redemption Price. 15
3.6 Redemption Price. 15
3.7 Optional Prepayment. 15
ARTICLE 4 COVENANTS 15
4.1 Payment of Notes. 15
4.2 Money for Timber Note Payments to Be Held in Trust. 15
4.3 SEC Reports. 15
4.4 Maintenance of Office or Agency; Existence; Payment
of Taxes and Other Claims, Etc. 16
4.5 Separate Existence and Formalities. 17
4.6 Reports, Notices and Certificates. 17
4.7 Access to Records. 18
4.8 Limitation on Liens on Company Owned Timberlands or
Company Timber Rights. 18
4.9 Limitation on Indebtedness. 18
4.10 Investments, Loans and Advances. 18
4.11 Limitation on Restricted Payments. 19
4.12 Certain Consents. 19
4.13 Restrictions on Consolidation, Etc. 19
4.14 No Other Business. 20
4.15 Transactions with Affiliates. 20
4.16 Insurance. 21
4.17 Company Timber Sales. 21
4.18 Opinion as to Mortgaged Property. 21
4.19 Performance of Obligations. 21
4.20 New Services Agreement; Operating Default; Termination
of New Services Agreement. 21
4.21 New Master Purchase Agreement; Purchase Agreement
Default; Termination of New Master Purchase Agreement. 22
4.22 Distributions from Accounts. 22
4.23 Status of the Deed of Trust. 22
4.24 No Other Agreements. 22
4.25 Relocation of Chief Executive Office, Etc. 22
4.26 Timber Harvesting Plans, Etc. 23
4.27 [Intentionally Omitted] 23
4.28 Sale of Company Timber or Logs. 23
4.29 GIS 23
4.30 [Intentionally Omitted] 23
4.31 Liquidity Reserve. 23
4.32 Deed of Trust Covenants. 23
ARTICLE 5 ACCOUNTS 24
5.1 Establishment of Accounts. 24
5.2 Initial Deposits. 24
5.3 Collection Account. 24
5.4 Expense Reserve; Payment of Expenses. 28
5.5 Deemed Production. 28
5.6 Investment of Accounts, Etc. 29
5.7 Withdrawals and Deposits on Note Payment Dates. 29
5.8 Title Insurance Policy Proceeds. 32
5.9 Release of Liquidity Account. 32
5.10 Releases from Prefunding Account. 33
5.11 Releases from Indebtedness Reserve Account. 34
ARTICLE 6 SALE OF COMPANY OWNED TIMBERLANDS OR COMPANY TIMBER
RIGHTS; CERTAIN TIMBER SALES; SUBSTITUTIONS 34
6.1 Release of Company Owned Timberlands or Company Timber
Rights. 34
6.2 Sale of Company Timber. 37
6.3 Sale of Pacific Lumber Timber Rights Property. 37
6.4 Release of Company Owned Timberlands or Company Timber
Rights Upon Substitution of Property. 38
6.5 Trust Indenture Act Requirements. 42
ARTICLE 7 DEFAULTS AND REMEDIES 42
7.1 Events of Default. 42
7.2 Acceleration of Maturity; Rescission and Annulment. 43
7.3 Collection of Indebtedness and Suits for Enforcement
by Trustee. 44
7.4 Trustee May File Proofs of Claim. 45
7.5 Trustee May Enforce Claims Without Possession of Notes.45
7.6 Remedies. 45
7.7 Application of Money Collected. 46
7.8 Limitation of Suits. 46
7.9 Unconditional Rights of Noteholders To Receive Principal
and Interest. 46
7.10 Restoration of Rights and Remedies. 47
7.11 Rights and Remedies Cumulative. 47
7.12 Delay or Omission Not a Waiver. 47
7.13 Control by Majority Holders. 47
7.14 Course of Dealing Not a Waiver. 47
7.15 Waiver of Stay or Extension Laws. 48
7.16 Action on Notes. 48
7.17 Waiver of Past Defaults. 48
7.18 Certain Limitations on Exercise of Remedies under
Deed of Trust. 48
ARTICLE 8 DEFEASANCE AND COVENANT DEFEASANCE 48
8.1 Issuer's Option to Effect Defeasance or Covenant
Defeasance. 48
8.2 Defeasance and Discharge. 48
8.3 Covenant Defeasance. 49
8.4 Conditions to Defeasance or Covenant Defeasance. 49
8.5 Deposited Money and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous Provisions. 51
8.6 Reinstatement. 51
ARTICLE 9 THE TRUSTEE AND THE COLLATERAL AGENT 51
9.1 Duties of Trustee and Collateral Agent. 51
9.2 Rights of Trustee and Collateral Agent. 52
9.3 Individual Rights of Trustee and Collateral Agent. 53
9.4 Trustee's and Collateral Agent's Disclaimer. 53
9.5 Notice of Defaults. 53
9.6 Reports by Trustee to Noteholders. 53
9.7 Compensation and Indemnity. 53
9.8 Replacement of Trustee and Collateral Agent. 54
9.9 Successor Trustee or Collateral Agent by Merger. 54
9.10 Eligibility; Disqualification. 55
9.11 Preferential Collection of Claims Against Issuer. 55
9.12 Trustee and Collateral Agent. 55
9.13 Escrow Agreement. 55
ARTICLE 10 AMENDMENTS 55
10.1 Without Consent of Noteholders. 55
10.2 With Consent of Noteholders. 56
10.3 Compliance with Trust Indenture Act. 57
10.4 Effect of Consents and Waivers; No Revocation of
Consents. 57
10.5 Notation on or Exchange of Notes. 57
10.6 Trustee to Sign Amendments, Etc. 57
ARTICLE 11 LINE OF CREDIT 57
11.1 Line of Credit Agreement. 57
11.2 Advances Under Line of Credit Agreement. 58
11.3 Amendments to Line of Credit Agreement. 59
11.4 Replacement of Line of Credit Agreement. 59
ARTICLE 12 MISCELLANEOUS 60
12.1 Trust Indenture Act Controls. 60
12.2 Notices. 60
12.3 Communication by Holders with Other Noteholders. 62
12.4 Certificate and Opinion as to Conditions Precedent. 62
12.5 Statements Required in Certificate or Opinion. 62
12.6 When Timber Notes Disregarded. 63
12.7 Rules by Trustee, Paying Agent and Registrar. 63
12.8 Business Days. 63
12.9 GOVERNING LAW. 63
12.10 No Recourse Against Others. 63
12.11 Successors. 63
12.12 Severability. 63
12.13 Multiple Originals. 64
12.15 Benefits of Indenture. 64
12.16 Limitations on Bankruptcy Petition Against Issuer. 64
12.17 Entire Agreement. 64
12.18 Concerning Paying Agents, Registrars, Securities
Intermediaries and Collateral Agents 64
ARTICLE 13 DISCHARGE 64
13.1 Discharge. 64
Schedule A - Definitions
Schedule B - Scheduled Amortization and Minimum
Principal Amortization
Schedule C - Structuring Schedule
Exhibit A-1-1 - Form of Class A-1 Unrestricted Global Note
Exhibit A-1-2 - Form of Class A-1 Restricted Global Note
Exhibit A-1-3 - Form of Class A-1 Definitive Note
Exhibit A-2-1 - Form of Class A-2 Unrestricted Global Note
Exhibit A-2-2 - Form of Class A-2 Restricted Global Note
Exhibit A-2-3 - Form of Class A-2 Definitive Note
Exhibit A-3-1 - Form of Class A-3 Unrestricted Global Note
Exhibit A-3-2 - Form of Class A-3 Restricted Global Note
Exhibit A-3-3 - Form of Class A-3 Definitive Note
Exhibit B-1 - Form of Accountant's Letter Re: Compliance
Exhibit B-2 - Form of Accountant's Letter Re: No Defaults
Exhibit C - Form of Monthly Trustee Certificate
Exhibit D - Form of Monthly Noteholder Certificate
Exhibit E - Form of Note Payment Trustee Certificate
Exhibit F - Form of Note Payment Noteholder Certificate
Exhibit G - Form of Rule 144A Transfer Certificate
Exhibit H - Form of Regulation S Transfer Certificate
Exhibit I - Form of Regulation S Exchange Certificate
Exhibit J - Form of Rule 144A Exchange Certificate
Exhibit K - Form of Transferee Letter
Exhibit L - Form of Clearing System Certificate
Exhibit M -Form of Participant Certificate
INDENTURE dated as of July 20, 1998 between SCOTIA PACIFIC
COMPANY LLC, a Delaware limited liability company, having its principal
office at 125 Main Street, Second Floor, Scotia, California 95565 (the
"Issuer"); and State Street Bank and Trust Company, a Massachusetts trust
company, as trustee, having its Corporate Trust Office at Two International
Place, 4th Floor, Boston, Massachusetts 02110 (the "Trustee").
WHEREAS, the Issuer, the Collateral Agent and the Deed of Trust
Trustee have entered into the Deed of Trust to grant a lien on, and a
security interest in, the Mortgaged Property, as security for the
obligations of the Issuer under its 6.55% Class A-1 Timber Collateralized
Notes, 7.11% Class A-2 Timber Collateralized Notes and 7.71% Class A-3
Timber Collateralized Notes due 2028 (the "Timber Notes"), this Indenture
and the other Secured Obligations; and
WHEREAS, the Issuer has satisfied all conditions and taken all
actions necessary or appropriate for the issuance of the Notes;
NOW, THEREFORE, each party agrees, for the benefit of the other
parties and the equal and ratable benefit of the holders of the Notes, as
follows:
ARTICLE 1
DEFINITIONS; RULES OF CONSTRUCTION; INCORPORATION BY
REFERENCE OF TRUST INDENTURE ACT PROVISIONS
1.1 Definitions. For all purposes of this Indenture, unless the
context otherwise requires, all defined terms not defined herein shall have
the meaning set forth in Schedule A hereto, which is incorporated by
reference as if fully set forth herein.
1.2 References to Instruments. In the event that any Operative
Document is amended, modified or supplemented in accordance with the
provisions hereof, the provisions thereof and the provisions of the Deed of
Trust, as the case may be, reference herein to such Operative Document
shall be to such Operative Document as so amended, modified or
supplemented.
1.3 Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture notes" means the Timber Notes and any Additional
Timber Notes.
"indenture security holder" means a Noteholder or Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture notes means the Issuer and any other
obligor on the indenture notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule
have the meanings assigned to them by such definitions.
1.4 Rules of Construction. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted
accounting principles as in effect on the date hereof;
(3) "or" is not exclusive;
(4) "including" means including, without limitation;
(5) words in the singular include the plural and words in
the plural include the singular;
(6) reference herein to "this Indenture" are to this
instrument as originally executed and delivered by the Issuer and the
Trustee unless an amendment shall have been entered into, in which
event references herein to "this Indenture" are to this instrument as
so amended; and
(7) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Indenture as a whole (including,
without limitation, the Exhibits and Schedules to this Indenture) and
not to any particular Section or other subdivision, and the terms
"Section," "Exhibit" and "Schedule," unless otherwise specified or
indicated by the context, mean the corresponding Section of, or the
corresponding Exhibit or Schedule to, this Indenture.
ARTICLE 2
THE NOTES
2.1 Form and Dating. The Class A-1, A-2 and A-3 Timber Notes
and the Trustee's certificate of authentication shall be substantially in
the form of Exhibits A-1-1, A-1-2, A-1-3, A-2-1, A-2-2, A-2-3, A-3-1, A-3-2
and A-3-3, respectively, which are hereby incorporated into this Indenture.
The Timber Notes may have notations, legends or endorsements required by
law, stock exchange rule, the Issuer's limited liability company agreement
or other agreements to which the Issuer is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form
acceptable to the Issuer). Each Timber Note shall be dated the date of its
authentication. The terms of the Timber Notes set forth in Exhibits A-1-1,
A-1-2, A-1-3, A-2-1, A-2-2, A-2-3, A-3-1, A-3-2 and A-3-3, respectively,
are part of the terms of this Indenture. The Timber Notes shall be
evidenced by one or more typewritten or printed notes representing the
entire aggregate original principal balance of the Timber Notes. The
Timber Notes sold within the United States to U.S. person(s) will be issued
in fully registered form without interest coupons (i) to qualified
institutional buyers meeting the requirements of Rule 144A under the
Securities Act, in the form of the beneficial interests in one or more
restricted global Notes (the "Restricted Global Notes"), deposited with the
Trustee as custodian for DTC (in such capacity the "DTC Custodian") or any
successor or (ii) to certain "institutional accredited investors" (for
purposes hereof, entities meeting the requirements of Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act), in certificated form
in minimum denominations of U.S. $100,000 or any integral multiple of
$1,000 in excess thereof (the "Definitive Notes"). The Timber Notes sold
in offshore transactions in reliance on Regulation S under the Securities
Act will be in the form of beneficial interests held by the DTC
participants for Euroclear and Cedel, in one or more unrestricted Global
Notes (the "Unrestricted Global Notes") deposited with the Custodian (the
Unrestricted Global Notes, together with the Restricted Global Notes, shall
collectively be hereafter referred to as the "Global Notes"). The Timber
Notes will not be issued in bearer form. Beneficial interest in the Global
Notes may be held in minimum denominations of U.S. $100,000 or any integral
multiple of $1,000 in excess thereof.
2.2 Execution and Authentication. Two officers shall sign the
Timber Notes for the Issuer by manual or facsimile signature.
If an officer whose signature is on a Timber Note no longer holds
that office at the time the Trustee authenticates the Timber Note, the
Timber Note shall be valid nevertheless.
A Timber Note shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Timber
Note. The signature shall be conclusive evidence that the Timber Note has
been authenticated under this Indenture.
The Trustee shall authenticate and deliver Class A-1, Class A-2
and Class A-3 Timber Notes for original issue in an aggregate principal
amount of up to $160,700,000, $243,200,000 and $463,348,000, respectively,
upon a written order of the Issuer signed by an Officer of the Issuer.
Such order shall specify the amount of the Timber Notes of each Class to be
authenticated and the date on which the original issue of Timber Notes is
to be authenticated. The aggregate principal amount of Timber Notes of
each Class outstanding at any time shall not exceed the amount set forth in
this paragraph except as provided in Sections 2.7 and 2.8.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate the Timber Notes (the "Authenticating Agent").
Unless limited by the terms of such appointment, an authenticating agent
may authenticate Timber Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights
as any Registrar, Paying Agent or agent for service of notices and demands.
2.3 Registrar and Paying Agent. The Issuer shall maintain an
office or agency where Timber Notes may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where
Timber Notes may be presented for payment (the "Paying Agent"). The
Registrar shall keep a register (the "Register") of the Timber Notes and of
their transfer and exchange. The Issuer may have one or more
co-registrars. The term "Registrar" includes any co-registrar.
The Issuer hereby initially appoints the Trustee and its
affiliate, State Street Bank and Trust Company N.A., in New York, New York,
as sole Paying Agents in respect of the Timber Notes and hereby initially
appoints the Trustee as Registrar in connection with the Timber Notes. The
Issuer shall enter into an appropriate agency agreement with any subsequent
Registrar which is not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such agent. The
Issuer shall notify the Trustee of the name and address of any such agent.
If the Issuer fails to maintain a Registrar, the Trustee shall act as such
and shall be entitled to appropriate compensation therefor pursuant to
Section 9.7. The Issuer or any Affiliate of the Issuer may act as
Registrar or transfer agent.
2.4 Paying Agent to Hold Money in Trust. All amounts withdrawn
from the Payment Account on each Note Payment Date for application pursuant
to clauses (i), (ii), (iv), (v), (vi), (vii), (viii) or (ix) of Section
5.7(b) shall, pending application in the order provided in Section 5.7(b),
be held by the Paying Agent in trust for the benefit of Noteholders and, to
the extent applicable, the Liquidity Providers.
2.5 Noteholder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of
the names and addresses of the Noteholders. If the Trustee is not the
Registrar, the Issuer shall furnish to the Trustee, in writing at least
seven Business Days before each Note Payment Date as set forth in the
Timber Notes and at such other times as the Trustee may request in writing,
a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of the Noteholders.
2.6 Transfer and Exchange; Transfer Restrictions.
(a) The Timber Notes shall be issued in the form of (i) one or
more Unrestricted Global Notes evidencing Class A-1, Class A-2 and Class A-
3 Timber Notes, which Unrestricted Global Notes shall be substantially in
the forms of Exhibits A-1-1, A-2-1 and A-3-1, respectively, hereto, (ii)
one or more Restricted Global Notes evidencing Class A-1, Class A-2 and
Class A-3 Timber Notes, which Restricted Global Notes shall be
substantially in the forms of Exhibits A-1-2, A-2-2 and A-3-2,
respectively, hereto, and/or (iii) one or more Definitive Notes evidencing
Class A-1, Class A-2 and Class A-3 Timber Notes, which Definitive Notes
shall be substantially in the forms of Exhibits A-1-3, A-2-3 and A-3-3,
respectively, hereto, all in an aggregate original principal amount that
shall equal the aggregate original principal amount of the related Class of
Notes that are to be issued on the Closing Date.
The Global Notes (i) shall be delivered by the Registrar to DTC
acting as the Depository or, pursuant to DTC's instructions, shall be
delivered by the Registrar on behalf of DTC to and deposited with the DTC
Custodian, and in each case shall be registered in the name of Cede & Co.
and (ii) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation
("DTC"), to the Registrar or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the
name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein."
The Global Notes may be deposited with such other Depository as
the Registrar may from time to time designate, and shall bear such legend
as may be appropriate; provided that such successor Depository maintains a
book-entry system that qualifies to be treated as "registered form" under
Section 163(f)(3) of the Code.
(b) The Restricted Global Note, and Legended Definitive Notes
shall bear the following legend:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
UNDER ANY STATE SECURITIES OR BLUE SKY LAW OF ANY STATE OF THE UNITED
STATES OR ANY FOREIGN SECURITIES LAW. THE HOLDER HEREOF, BY
PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE TRUSTEE AND THE
ISSUER THAT THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (1) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A") TO AN INSTITUTIONAL INVESTOR THAT THE
HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN
THE MEANING OF RULE 144A ("QUALIFIED INSTITUTIONAL BUYER"), PURCHASING
FOR ITS OWN ACCOUNT OR A QUALIFIED INSTITUTIONAL BUYER, WHOM THE
HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE,
OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (2) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION
S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT (IF
AVAILABLE), OR (4) IN CERTIFICATED FORM TO AN "INSTITUTIONAL
ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT PURSUANT TO
ANY OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT, IN THE CASE OF TRANSFERS PURSUANT TO THIS
CLAUSE (4), TO THE RECEIPT BY THE REGISTRAR OF SUCH OTHER EVIDENCE
ACCEPTABLE TO THE REGISTRAR THAT SUCH REOFFER, RESALE, PLEDGE OR
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE
LAWS OR (5) TO THE ISSUER OR ITS AFFILIATES.
(c) The Unrestricted Global Note shall bear the following
legend:
PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD AND UPON RECEIPT OF
CERTIFICATION OF NON-U.S. OWNERSHIP FROM EUROCLEAR AND CEDEL ON BEHALF
OF THEIR MEMBER ORGANIZATIONS ONLY THE DTC PARTICIPANTS FOR EUROCLEAR
AND CEDEL MAY HOLD POSITIONS IN THIS NOTE AT DTC. NO INTEREST WILL BE
PAID ON THIS NOTE UNTIL THE EXPIRATION OF THE RESTRICTED PERIOD AND
UNTIL RECEIPT BY THE REGISTRAR OF CERTIFICATION OF NON-U.S. OWNERSHIP
AS SET FORTH IN SECTION 2.6 OF THE INDENTURE.
(d) If the Trustee has instituted or has been directed to
institute any judicial proceeding in a court to enforce the rights of the
Holders of the Class A-1, Class A-2 or Class A-3 Timber Notes, as the case
may be, and the Trustee has been advised by counsel that in connection with
such proceeding it is necessary or appropriate for the Trustee to obtain
possession of the Class A-1, Class A-2 or Class A-3 Timber Notes, the
Trustee may in its sole discretion determine that the Class A-1, Class A-2
or Class A-3 Timber Notes represented by Global Notes shall no longer be
represented by such Global Notes. In such event, the Trustee will execute,
the Authenticating Agent will authenticate and the Registrar will deliver,
in exchange for such Global Notes, Definitive Notes, of like Class and in
authorized denominations, in an aggregate principal balance equal to the
principal balance of such Global Notes.
(e) The Global Notes shall in all respects be entitled to the
same benefits under this Indenture as Definitive Notes authenticated and
delivered hereunder.
(f) A Timber Note may be transferred by the Holder thereof only
upon presentation and surrender of such Timber Note at the Corporate Trust
Office of the Registrar, duly endorsed or accompanied by an assignment duly
executed by such Holder or his duly authorized attorney-in-fact in such
form as shall be satisfactory to the Registrar. Upon the transfer of any
Timber Note in accordance with the preceding sentence and subject to the
provisions of this Section 2.6, the Trustee shall execute, the Issuer or
the Authenticating Agent shall authenticate and the Registrar shall deliver
to the transferee one or more new Timber Notes of like Class, in authorized
denominations, evidencing, in the aggregate, the same aggregate principal
balance as the Timber Notes transferred.
A Timber Note may be exchanged by the Holder thereof for any
number of new Timber Notes of like Class, in authorized denominations,
representing in the aggregate the same Timber Note as the Timber Note
surrendered, upon surrender of the Timber Note to be exchanged at the
Corporate Trust Office of the Registrar subject to the provisions of this
Section 2.6. Timber Notes delivered upon any such exchange will evidence
the same obligations under the Timber Notes and this Indenture, and will be
entitled to the same rights and privileges, as the Timber Notes
surrendered. Upon the exchange of any Timber Note in accordance with the
preceding sentence, the Trustee shall execute, the Issuer or Authenticating
Agent shall authenticate and the Registrar shall deliver to the exchanging
Holder one or more new Timber Notes of like Class, in authorized
denominations, evidencing, in the aggregate, the same aggregate principal
balance as the Timber Notes being exchanged.
(g) Subject to Section 2.6(f), no restrictions shall apply to
the transfer or registration of transfer of an Unlegended Definitive Note
to a transferee that takes delivery in the form of a Definitive Note. By
acceptance of a Legended Definitive Note, whether upon original issuance or
subsequent transfer, each holder of such a Note acknowledges the
restrictions on the transfer of such Note set forth in the Securities
Legend and agrees that it will transfer such a Timber Note only as provided
herein and therein. In addition to the provisions of Section 2.6(f), the
following restrictions shall apply with respect to the transfer and
registration of transfer of a Legended Definitive Note to a transferee that
takes delivery in the form of a Definitive Note:
(i) The Registrar shall register the transfer of a Legended
Definitive Note if the requested transfer is (x) to the Issuer or
an Affiliate of the Issuer or (y) being made by a transferor who
has provided the Registrar with a Rule 144A Transfer Certificate.
(ii) The Registrar shall register the transfer of a Legended
Definitive Note if the transferor has provided the Registrar with
a Regulation S Transfer Certificate.
(iii) The Registrar shall register the transfer of a
Legended Definitive Note if (x) the transferor has advised the
Registrar in writing that the Note is being transferred to an
Institutional Accredited Investor and (y) prior to transfer the
transferor furnishes to the Registrar a Transferee Letter,
provided that, (a) in lieu thereof, the transferee or proposed
transferor may furnish such other certifications, legal opinions
or other information as are reasonably satisfactory to the Issuer
and the Registrar to confirm that the proposed transfer is being
made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act
or (b) if based upon an Opinion of Counsel to the effect that the
delivery of (x) and (y) above are not sufficient to confirm that
the proposed transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act, the Issuer and the Registrar
may as a condition of the registration of any such transfer
require the transferor to furnish other certifications, legal
opinions or other information prior to registering the transfer
of a Legended Definitive Note.
In each case described in clause (i), (ii) and (iii) above, the
Registrar shall deliver a Legended Definitive Note to the transferee unless
the Company has delivered an Officers Certificate to the Registrar
approving removal of the legends.
(h) Subject to Section 2.6(f), so long as any of the Global
Notes remains outstanding and is held by or on behalf of the Depository,
transfers of beneficial interests in any of such Global Notes, or transfers
by holders of Definitive Notes to transferees that take delivery in the
form of beneficial interests in such Global Notes, may be made only in
accordance with this Section 2.6 and in accordance with the rules of the
Depository and Euroclear or Cedel.
(i) Prior to the expiration of the Restricted Period, no
beneficial interest in the Unrestricted Global Note may at any time be
transferred to a transferee that takes delivery in the form of a
Definitive Note or Notes.
(ii) Prior to the expiration of the Restricted Period, a
beneficial interest in the Unrestricted Global Note may, to the extent
permitted by applicable law, be transferred to a person who takes
delivery in the form of a beneficial interest in the Restricted Global
Note upon receipt by the Registrar of a Rule 144A Transfer
Certificate. After the Restricted Period, no such certification will
be required with respect to such transfers.
(iii) Prior to the expiration of the Restricted Period, a
beneficial interest in the Unrestricted Global Note may only be held
by the DTC participants for Euroclear and Cedel until receipt by the
Registrar of a Clearing System Certificate from Euroclear or Cedel, as
applicable which clearing system certificate evidences receipt by
Euroclear and Cedel of certificates of non-U.S. ownership
(substantially in the form of Exhibit L to this Indenture) from their
respective member organizations for the aggregate principal amount
held by Euroclear and Cedel, respectively, relating to the appropriate
portion of the Unrestricted Global Note.
(iv) A beneficial interest in a Restricted Global Note may
be transferred to a transferee that takes delivery in the form of a
beneficial interest in an Unrestricted Global Note only upon receipt
by the Registrar of a Regulation S Transfer Certificate if such
transfer occurs prior the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through the
DTC participants for Euroclear and Cedel until the certification
process of (iii) above is completed.
(v) In the case of a beneficial interest in a Restricted
Global Note being transferred to an Institutional Accredited Investor,
such transferee shall be required to take delivery in the form of a
Definitive Note or Notes and the Registrar shall register such
transfer only upon compliance with the provisions of Section 2.6 (f)
and (g)(iii).
(vi) In the case of a beneficial interest in a Restricted
Global Note being transferred to a transferee that takes delivery in
the form of an Definitive Note or Notes, except as set forth in clause
(v) above, the Registrar shall register such transfer only upon
compliance with the provisions of Section 2.6 (f) and (g)(i) or (ii).
(vii) In the case of a Legended Definitive Note being
transferred to a transferee that takes delivery in the form of a
beneficial interest in the Restricted Global Notes, the Registrar
shall register such transfer if the transferor has provided the
Registrar with either (x) a Rule 144A Transfer Certificate or (y) if
such transfer occurs after the expiration of the Restricted Period, a
Regulation S Transfer certificate.
(viii) In the case of a Legended Definitive Note being
transferred to a transferee that takes delivery in the form of a
beneficial interest in the Unrestricted Global Notes, the Registrar
shall register such transfer if the transferor has provided the
Registrar with a Regulation S Transfer Certificate.
(ix) Prior to the expiration of the Restricted Period, no
Unlegended Definitive Notes may be transferred for beneficial
interests in the Unrestricted Global Notes.
(x) No restrictions shall apply with respect to the
transfer or registration of transfer of (x) a beneficial interest in a
Restricted Global Note to a transferee that takes delivery in the form
of a beneficial interest in the Restricted Global Note; (y) a
beneficial interest in an Unrestricted Global Note to a transferee
that takes delivery in the form of Definitive Notes after the
expiration of the Restricted Period or in the form of a beneficial
interest in the Unrestricted Global Note after the expiration of the
Restricted Period; or (z) an Unlegended Definitive Note or Notes to a
transferee that takes delivery in the form of a beneficial interest in
the Unrestricted Global Note after the expiration of the Restricted
Period.
(i) Subject to Section 2.6 (f), an exchange of a beneficial
interest in the Unrestricted Global Note for a beneficial interest in the
Restricted Global Note may be made only after the expiration of the
Restricted Period and only upon receipt by the Registrar of a Clearing
System Certificate from Euroclear or Cedel, as applicable.
(j) Subject to Section 2.6(h), an exchange of a beneficial
interest in any of the Global Notes for a Definitive Note or Notes, an
exchange of a Definitive Note or Notes for a beneficial interest in any of
the Global Notes and an exchange of a Definitive Note or Notes for another
Definitive Note or Notes (in each case, whether or not such exchange is
made in anticipation of subsequent transfer, and in the case of either
Global Note, so long as such Global Note remains outstanding and is held by
or on behalf of the Depository) may be made only in accordance with this
Section 2.6(h) and in accordance with the rules of the Depository and
Euroclear or Cedel.
(i) Prior to the expiration of the Restricted Period, no
holder of a beneficial interest in the Unrestricted Global Note may
exchange such beneficial interest for a Definitive Note or Notes.
(ii) A holder of a beneficial interest in the Restricted
Global Note may at any time exchange such beneficial interest for a
Legended Definitive Note or Notes.
(iii) After the expiration of the Restricted Period, a
holder of a beneficial interest in the Unrestricted Global Note may at
any time exchange such beneficial interest for an Unlegended
Definitive Note or Notes.
(iv) A holder of a Legended Definitive Note may exchange
such Note for a beneficial interest in the Restricted Global Notes if
such holder furnishes to the Registrar either (x) a Rule 144A Exchange
Certificate or (y) on and after the Restricted Period, a Regulation S
Exchange Certificate.
(v) A holder of a Legended Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note, of
the same class if such holder furnishes to the Registrar a Regulation
S Exchange Certificate.
(vi) A holder of an Unlegended Definitive Note may exchange
such Timber Note for a beneficial interest in any Global Note of the
same class without any certification, except that prior to the
expiration of the Restricted Period in the case of a Restricted Global
Note, such holder must furnish to the Issuer and to the Registrar a
Rule 144A Exchange Certificate.
(vii) A holder of a Definitive Note may exchange such Timber
Note for an equal aggregate principal balance of Definitive Notes of
the same Class and in different authorized denominations without any
certification.
(k) (i) Upon acceptance for exchange or transfer of a
Definitive Note for a beneficial interest in any Global Note as provided
herein, the Registrar shall cancel such Definitive Note and shall (or shall
request the Depository to) adjust its books and records to reflect such
increase, evidencing the date of such exchange or transfer and an increase
in the aggregate principal amount of the applicable Global Note equal to
the aggregate principal amount of such Definitive Note exchanged or
transferred therefor.
(ii) Upon acceptance for exchange or transfer of a
beneficial interest in a Global Note for a Definitive Note as provided
herein, the Registrar shall (or shall request the Depository to) adjust its
books and records to reflect such decrease, evidencing the date of such
exchange or transfer and a decrease in the aggregate principal amount of
the applicable Global Note equal to the aggregate principal amount of such
Definitive Note issued in exchange therefor or upon transfer thereof.
(iii) Upon acceptance for transfer of a beneficial interest
in any Global Note for a beneficial interest in another Global Note as
provided herein, the Registrar shall (or shall request the Depository to)
adjust its books and records to reflect such increase or decrease,
evidencing the date of such transfer and (x) in the case of the Global Note
from which such transfer is made, a decrease in the aggregate principal
amount of such Global Note equal to the aggregate principal amount being
transferred and (y) in the case of the Global Note into which such transfer
is made, an increase in the aggregate principal amount of such Global Note
equal to the aggregate principal amount being transferred.
(l) The following provisions shall apply to the placement of the
Securities Legend on any Definitive Note issued in exchange for or upon
transfer of another Definitive Note or of a beneficial interest in any of
the Global Notes and to the removal of the Securities Legend from any
Legended Definitive Note.
(i) Until the Timber Notes have been registered pursuant to
an effective registration statement or the Registrar receives an
opinion of counsel stating that a Securities Legend is no longer
required, a Definitive Note issued upon transfer of or exchange for a
beneficial interest in the Restricted Global Notes shall bear the
Securities Legend.
(ii) A Definitive Note issued upon transfer of or exchange
for a beneficial interest in the Unrestricted Global Notes on or after
the expiration of the Restricted Period shall not bear the Securities
Legend.
(iii) Upon the transfer, exchange or replacement of a
Legended Definitive Note, or upon specific request of a holder of a
Legended Definitive Note for removal of the Securities Legend
therefrom, the Registrar shall deliver an Unlegended Definitive Note
or Notes if there is provided to the Registrar evidence reasonably
satisfactory to the Registrar and the Issuer (which may include an
Opinion of Counsel) as may reasonably be required by the Registrar and
the Issuer that neither the Securities Legend nor the restrictions on
transfer set forth therein are required to ensure compliance with the
provisions of the Securities Act.
(iv) Upon the transfer, exchange or replacement of an
Unlegended Definitive Note for a Definitive Note, the Registrar shall
deliver an Unlegended Definitive Note or Notes, as the holder may
request.
(m) Subject to the restrictions on transfer and exchange set
forth in this Section 2.6, the holder of any Definitive Note may transfer
or exchange the same in whole or in part (in an initial aggregate principal
amount equal to the minimum authorized denomination of U.S. $100,000 or any
integral multiple of $1,000 in excess thereof) by surrendering such
Definitive Note at the Corporate Trust Office of the Registrar or at the
office of any other transfer agent, together with an executed instrument of
assignment and transfer satisfactory in form and substance to the Registrar
in the case of transfer and a written request for exchange in the case of
exchange, together with all transfer documentation required in Section
2.6(f) hereof in form and substance satisfactory to the Registrar and the
Company. The holder of a beneficial interest in a Global Note may, subject
to the rules and procedures of the Depository, cause the Depository (or its
nominee) to notify the Registrar in writing of a request for transfer or
exchange of such beneficial interest for a Definitive Note or Notes.
Following a proper request for transfer or exchange, together with the
documentation required by this Section 2.6, the Registrar shall, within
five Business Days of such request if made at such Corporate Trust Office,
or within 10 Business Days if made at the office of another transfer agent
(other than the Registrar), cause the Trustee to execute and the
Authenticating Agent to authenticate, and the Registrar shall deliver at
such Corporate Trust Office or such transfer agent, as the case may be, to
the transferee (in the case of transfer) or holder (in the case of
exchange) or send by first class mail at the risk of the transferee (in the
case of transfer) or holder (in the case of exchange) to such address as
the transferee or holder, as applicable, may request, a Definitive Note or
Notes, as the case may require, of like Class and for a like aggregate Note
Balance and in such authorized denomination or denominations as may be
requested. The presentation for transfer or exchange of any Definitive
Note shall not be valid unless made at the Corporate Trust Office of the
Registrar or other transfer agent by the registered holder in person, or by
a duly authorized attorney-in-fact. The Issuer shall not be required to
make, and the Registrar need not register, transfers or exchanges of Timber
Notes called for redemption or for a period of 15 days before such Timber
Notes are to be redeemed or 15 days before a Note Payment Date, as set
forth in the Timber Notes.
(n) Transfer, registration and exchange shall be permitted as
provided in this Section 2.6 without any charge to the Holder except for
the expenses of delivery (if any) not made by regular mail and except, if
the Registrar shall so require, the payment of a sum sufficient to cover
any stamp duty, tax or governmental charge or insurance charge that may be
imposed in relation thereto; provided that any Opinions of Counsel or
certificates required by this Section 2.6 shall be at the expense of the
Holder or its proposed transferee. Registration of the transfer of a
Timber Note by the Registrar shall be deemed to be the acknowledgment of
such transfer on behalf of the Issuer.
(o) the Issuer and the Trustee may deal with the Clearing Agency
and the Clearing Agency Participants for all purposes (including the making
of distributions on the Timber Notes ) as the authorized representatives of
the Note Owners:
(i) to the extent that the provisions of this Section
2.6(o) conflict with any other provisions of this Indenture, the
provisions of this Section 2.6(o) shall control;
(ii) the rights of Note Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and
shall be limited to those established by law and agreements between
such Note Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Clearing Agency Agreement, (except the
Definitive Notes), the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit distributions of principal of, premium, if any, and interest
on the Timber Notes (except the Definitive Notes) to such Clearing
Agency Participants; and
(iii) whenever a notice, report or other communication to
the Noteholders is required under this Indenture, the Trustee shall
give all such notices and communications specified herein to be given
to Noteholders (except those to be given to the holders of Definitive
Notes) to the Clearing Agency.
(p) In the event that:
(i)(A) the Issuer or the Clearing Agency advises the
Trustee in writing that the Clearing Agency is no longer willing
or able to discharge properly its responsibilities as Clearing
Agency, and (B) the Trustee or the Issuer is unable to locate a
qualified successor within 90 days,
(ii) the Issuer, at its option, with the consent of Note
Owners representing not less than 51% of the aggregate principal
balance of outstanding Timber Notes, advises the Trustee in
writing that it elects to terminate the book-entry system through
the Clearing Agency, or
(iii) during the continuance of an Event of Default, Note
Owners representing not less than 51% of the aggregate principal
balance of outstanding Timber Notes advise the Trustee and the
Clearing Agency through the Clearing Agency Participants in
writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of the Note
Owners,
the Trustee shall notify all Note Owners, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive
Notes to Note Owners requesting the same. Upon surrender to the Trustee of
the Timber Notes by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Trustee shall
issue the Definitive Notes. Neither the Issuer nor the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. The
Issuer shall arrange for, and will bear the costs of, printing and issuance
of any Definitive Notes. Upon the issuance of Definitive Notes, all
references herein to obligations imposed upon or to be performed by the
Clearing Agency shall be deemed to be imposed upon and performed by the
Trustee, to the extent applicable with respect to such Definitive Notes,
and the Trustee shall recognize the Holders of the Definitive Notes as
Holders of Timber Notes hereunder.
(q) Prior to the due presentation for registration of transfer
of any Timber Note, the Issuer, the Paying Agent or the Registrar may deem
and treat the person in whose name a Timber Note is registered as the
absolute owner of such Timber Note for the purpose of receiving payment of
principal of and interest on such Timber Note and for all other purposes
whatsoever, and none of the Issuer, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
(r) The Timber Notes of each Class may be exchanged for Exchange
Timber Notes of the corresponding Class pursuant to the terms of the
Registered Exchange Offer. The Trustee shall make the exchange upon
receipt of an Officer's Certificate of the Issuer certifying that (A) a
registration statement filed with the SEC covering the Timber Notes has
been declared effective and (B) all conditions precedent to the exchange
have been complied with.
Upon receipt by the Trustee of such Officer's Certificate
and an Officer's Certificate requesting that the principal amount of Timber
Notes of each Class accepted for exchange in the Exchange Offer that are
represented by Restricted Global Notes, Unrestricted Global Notes and
Definitive Notes shall be cancelled in exchange for the issuance of an
equal aggregate principal amount of Exchange Timber Notes of such Class and
form, the Trustee shall authenticate (A) one or more Global Notes for each
Class and form of Global Note of Exchange Timber Notes in aggregate
principal amount equal to the aggregate principal amount of the
corresponding Class and form of Global Note of Timber Notes represented by
the Global Notes which will be simultaneously cancelled as indicated in
such Officer's Certificate as having been accepted for exchange and (B)
Definitive Notes representing Exchange Timber Notes registered in the names
of, and in the principal amounts indicated in, such Officer's Certificate.
If the principal amount of the Restricted Global Notes or
the Unrestricted Global Notes of the Exchange Timber Notes is less than the
aggregate principal amount of the Restricted Global Notes or the
Unrestricted Global Notes, respectively, of the Timber Notes for which they
were exchanged, the Trustee shall adjust its books and records to reflect
the reduction of the principal amounts represented thereby.
The Trustee shall deliver any Definitive Notes delivered as
Exchange Timber Notes to the holders thereof as indicated in such Officer's
Certificate.
Following the exchange of Timber Notes for Exchange Timber
Notes, the Exchange Timber Notes of each Class will be treated for purposes
of the Indenture as the Timber Notes of such Class.
2.7 Replacement Notes. If a mutilated Timber Note is
surrendered to the Registrar or if the Holder of a Timber Note claims that
the Timber Note has been lost, destroyed or wrongfully taken, the Issuer
shall issue and the Trustee shall authenticate a replacement Timber Note if
the Trustee's requirements are met. If required by the Trustee or the
Issuer, such Noteholder shall furnish an indemnity bond sufficient in the
judgment of the Issuer and the Trustee to protect the Issuer, the Trustee,
the Paying Agent and the Registrar from any loss which any of them may
suffer if a Timber Note is replaced. The Issuer and the Trustee may charge
the Noteholder for their expenses in replacing a Timber Note.
Every replacement Timber Note is an additional obligation of the
Issuer.
2.8 Outstanding Timber Notes. Timber Notes outstanding at any
time are all Timber Notes authenticated by the Trustee except for those
canceled by it, those delivered to it for cancellation and those described
in this Section as not outstanding. Subject to the last clause of the
definition of the term "outstanding," a Timber Note does not cease to be
outstanding because the Issuer or an Affiliate of the Issuer holds the
Timber Note.
If a Timber Note is replaced pursuant to Section 2.7, it ceases
to be outstanding unless the Trustee and the Issuer receive proof
satisfactory to them that the replaced Timber Note is held by a bona fide
purchaser.
If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient
to pay Timber Notes payable on that date and the Paying Agent is not
prohibited from paying such money to the Noteholders on that date pursuant
to the terms of this Indenture, then on and after that date such Timber
Notes cease to be outstanding and interest on them ceases to accrue.
2.9 Cancellation. The Issuer at any time may deliver Timber
Notes to the Trustee for cancellation. The Registrar shall forward to the
Trustee any Timber Notes surrendered to it for transfer, exchange or
payment. The Trustee and no one else shall cancel and destroy all Timber
Notes surrendered for transfer, exchange, payment or cancellation and
deliver a certificate of such destruction to the Issuer unless the Issuer
directs the Trustee to deliver canceled Timber Notes to the Issuer. The
Issuer may not issue new Timber Notes to replace Timber Notes it has
redeemed, paid or delivered to the Trustee for cancellation.
2.10 Payments in Respect of the Notes. The Issuer agrees to
cause each payment in respect of each outstanding Timber Note to be made in
accordance with the provisions of Section 5.7. Such payments shall be made
to the Noteholders on the Record Date immediately preceding the respective
Note Payment Date.
2.11 Payments of Principal, Regular Interest and Default Interest
on Notes.
(a) The aggregate unpaid principal amount of the outstanding
Timber Notes shall become due and payable on the Final Maturity Date unless
the aggregate unpaid principal amount of the outstanding Timber Notes shall
have earlier become due and payable.
(b) Subject to the limitation of Section 2.11(d), on each Note
Payment Date that precedes the Final Maturity Date, there shall become due
and payable an aggregate unpaid principal amount of the outstanding Timber
Notes of each Class equal to any Minimum Principal Amortization Amount for
such Class at such Note Payment Date.
(c) Subject to the limitation of Section 2.11(d), on each Note
Payment Date that precedes the Final Maturity Date, there shall become due
and payable, in addition to any aggregate unpaid principal amount of the
outstanding Timber Notes of each Class that becomes due and payable on that
Note Payment Date pursuant to Section 2.11(b), an aggregate unpaid
principal amount of the outstanding Timber Notes equal to any Depletion
Amortization Amount at such Note Payment Date.
(d) The principal amount due and payable on each Class of Timber
Notes pursuant to Sections 2.11(b) and 2.11(c) shall not exceed the amount
available for the payment of principal on the Timber Notes set forth in
Section 5.7.
(e) Accrued and unpaid Regular Interest, and accrued and unpaid
Default Interest, if any, on Timber Notes shall become due and payable on
each Note Payment Date.
2.12 Premiums on Timber Notes.
(a) If, on any date (including any redemption date), the amount
of principal paid to the holders of any Class of Timber Notes on such date
exceeds the Scheduled Amortization Amount for such Class on such date, a
Premium shall become payable on such date to the Holders of the Timber
Notes of such Class with respect to the lesser of (i) the amount of such
excess and (ii) the amount of principal paid to the Holders of such Class
of Timber Notes on such date (such lesser amount, an "Excess Payment").
Such Premium shall be in an amount equal to the Prepayment Premium Amount
with respect to such Excess Payment.
(b) If the Scheduled Amortization Amount for any Class of Timber
Notes at any Note Payment Date exceeds the aggregate principal amount of
such Class of Timber Notes paid on that Note Payment Date, then (i) the
amount of such excess shall constitute a "Payment Deficiency" for the
period from and including that Note Payment Date to but excluding the next
succeeding Note Payment Date and (ii) on the next succeeding Note Payment
Date, there shall become payable to the holders of such Class of Timber
Notes a Premium in an amount equal to the Deficiency Premium Amount with
respect to such Payment Deficiency. For purposes of Section 2.11(e), this
Section 2.12(b), Section 2.12(c) and Section 2.12(d), if any portion of the
principal amount of any Timber Note remains unpaid after the Final Maturity
Date, and, if the Timber Notes shall not have been accelerated pursuant to
Section 7.2, the last day of each month that occurs after such Final
Maturity Date and prior to the date on which the entire unpaid principal
amount of such Timber Note is paid shall be deemed to constitute a Note
Payment Date.
(c) Upon the occurrence of any Registration Default with respect
to a Class of Timber Notes or any portion thereof, a Non-Registration
Premium equal to an amount of interest (computed on the basis of a 360-day
year of twelve 30-day months) at a rate of 0.50% per annum on the
outstanding principal amount of the Timber Notes with respect to which a
Registration Default is continuing will accrue until all Registration
Defaults are cured. Non-Registration Premiums, if any, will be payable on
each Note Payment Date as provided in Section 5.7.
(d) Any unpaid portion of Premium for the outstanding Timber
Notes of any Class that has accrued shall bear interest (computed on the
basis of a 360-day year of twelve 30-day months) from the date such Premium
became payable until such Premium is paid at a rate per annum equal to the
Note Rate for such Class. The Issuer shall cause such interest to be paid
on such amount on the date or dates provided for in this Indenture.
2.13 Source and Manner of Payments on Notes. All amounts payable
pursuant to Sections 2.11 and 2.12 shall be payable from funds to be
withdrawn from the Payment Account pursuant to Section 5.7 in the priority
set forth therein. All payments on Definitive Notes shall be made (i) by
U.S. dollar checks drawn on a bank in New York City or Boston,
Massachusetts mailed to the Holders at their registered addresses or (ii)
upon application by a Holder of at least U.S. $5,000,000 in principal
amount of Definitive Notes to a Paying Agent not later than five Business
Days prior to the related Record Date, by wire transfer in immediately
available funds to a U.S. dollar account maintained by such Holder with a
bank in New York City or Boston, Massachusetts. All payments to any Holder
of a Global Note shall be made (i) by a U.S. dollar check drawn on a bank
in New York City or Boston, Massachusetts delivered to the registered owner
of such Global Note at its registered address or (ii) by wire transfer in
immediately available funds to a U.S. dollar account maintained by such
registered owner with a bank in New York City or Boston, Massachusetts.
2.14 Additional Timber Notes.
(a) Subject to satisfaction of the conditions described below, the
Issuer may issue Additional Timber Notes secured by the Lien of the Deed of
Trust. Such Additional Timber Notes and the Timber Notes shall be equally
and ratably secured by the Mortgaged Property and other collateral for
payment of the Timber Notes. Prior to or simultaneously with the issuance
of Additional Timber Notes, the following conditions must be satisfied:
(i) After giving effect to the issuance of such Additional
Timber Notes (including any amendment or supplement to the Indenture
or the other Operative Documents in connection with such issuance),
the Rating Agency Condition shall be satisfied with respect to each
Class of Timber Notes then outstanding (other than any Class of Timber
Notes then being called for redemption or paid in full);
(ii) The Scheduled Amortization Amount for each Class of Timber
Notes shall be zero on the date of issuance of such Additional Timber
Notes, after giving effect to any payments of principal to be made to
the Holders of Timber Notes on such date and any redemption of any
Timber Notes called, on or prior to such date, for redemption
(including any payment of principal or redemption to be made with the
proceeds of the issuance of such Additional Timber Notes);
(iii) The amount available under the Line of Credit Agreement
plus the funds on deposit in the Liquidity Account shall equal or
exceed the Required Liquidity Amount (as such amount may be modified
in connection with such issuance) after giving effect to the issuance
of such Additional Timber Notes;
(iv) Each issuance of Additional Timber Notes shall be in a
principal amount of at least $100,000,000.
(v) The Additional Timber Notes shall be rated at least as high
as "Baa2" by Moody's and "BBB" by S&P;
(vi) No Class A-1 Timber Notes shall be outstanding or,
simultaneously with the issuance of such Additional Timber Notes, all
outstanding Class A-1 Timber Notes shall be paid in full or called for
redemption; and
(vii) The issuance of the Additional Timber Notes shall not
violate the Line of Credit Agreement.
(b) If each of the conditions specified in Section 2.14(a) is
satisfied,the Indenture and the other Operative Documents and the Line of
Credit Agreement may be amended or supplemented, without the consent of the
Noteholders, as necessary or required to effect the issuance of such
Additional Timber Notes. Such amendments may, among other things, modify
the Required Liquidity Amount and provide for the use of the Line of Credit
Agreement (or other liquidity arrangement) to make such liquidity available
to pay interest on the Additional Timber Notes or change the basis upon
which the actual amortization of the Timber Notes is calculated. No such
amendment or supplement, however, may, except as otherwise permitted by the
provisions of Section 10.1, without the consent of Noteholders (i) effect
any of the changes referred to in Section 10.2(b), (ii) extend the Minimum
Principal Amortization Schedule or change the Scheduled Amortization
Schedule for any Class of then outstanding Timber Notes, (iii) cause any
Additional Timber Notes or other Indebtedness (except Indebtedness arising
pursuant to a liquidity facility that supports the payment of interest, but
not the payment of principal, premiums, or interest on premiums, on the
Timber Notes and/or on any Additional Timber Notes) to have a Lien senior
to the Lien securing the Timber Notes under the Deed of Trust, (iv) permit
any payments of principal on any Additional Timber Notes while any Timber
Notes are outstanding (unless the Timber Notes and the Additional Timber
Notes have been accelerated), (v) change the Note Payment Dates or provide
that the Note Payment Dates for the payment of interest on Additional
Timber Notes will, so long as any Timber Notes are outstanding, be
different from the Note Payment Dates for the Timber Notes, (vi) change the
definition of "Cash Retention Event" in a manner adverse to the interests
of the Holders of the Timber Notes, (vii) during the continuance of a Cash
Retention Event, permit the release of any funds to the Company free and
clear of the Lien of the Deed of Trust (except as contemplated by clauses
(i), (ii) and (x) of Section 5.3(c) (as modified by Section 5.3(d)), (viii)
modify any covenant contained in Sections 4.5, 4.8, 4.9, 4.10, 4.11, 4.12,
4.13, 4.14, 4.15, 4.17, 4.18, 4.19, 4.20, 4.21, 4.23, 4.24, 4.25, 4.26,
4.28 and 4.31 of the Indenture (except for any modification that is to cure
any ambiguity, omission, defect or inconsistency, or to add to the
covenants of the Company for the benefit of the Holders of the Timber Notes
and any Additional Timber Notes), (ix) amend the definition of Event of
Default (except for any amendment that is to cure any ambiguity, omission,
defect or inconsistency, or to add to the Events of Default for the benefit
of the Holders of the Timber Notes and any Additional Timber Notes) under
the Indenture or provide for any event of default or remedy with respect to
the Additional Timber Notes that is not, while any Timber Notes are
outstanding, substantially identical to the Events of Default and remedies
with respect to the Timber Notes or (x) except to the extent necessary or
appropriate to secure the Additional Timber Notes on a pari passu basis, or
to make the Indebtedness represented by the Additional Timber Notes pari
passu, with the Timber Notes, modify the provisions of any Operative
Document other than the Indenture in a manner that would have a material
adverse effect on the Holders of the Timber Notes.
ARTICLE 3
OPTIONAL REDEMPTION AND OPTIONAL PREPAYMENT
3.1 Notices to Trustee. If the Issuer elects to redeem Timber
Notes of any Class pursuant to paragraph 6 of the Timber Notes of such
Class, it shall notify the Trustee in writing of the redemption date and
the principal amount of Timber Notes of such Class to be redeemed. The
Issuer shall give each notice to the Trustee provided for in this Section
at least 15 days (or 30 days if a 30-day notice to Holders is required
pursuant to Section 3.3) before the redemption date (unless a shorter
notice period shall be satisfactory to the Trustee).
3.2 No Partial Redemption of a Class. The Timber Notes of any
Class may be redeemed in whole, but not in part, at the option of the
Issuer, on any day after the date of this Indenture. The Class A-3 Timber
Notes may not be redeemed unless after giving effect to all principal
payments (including payments of principal in the redemption) occurring on
the redemption date, the Class A-1 and Class A-2 Timber Notes shall no
longer be outstanding. The Class A-2 Timber Notes may not be redeemed
unless, after giving effect to all principal payments (including payments
of principal in the redemption) occurring on the redemption date, the Class
A-1 Timber Notes shall no longer be outstanding.
3.3 Notice of Redemption. At least 15 days (or 30 days if
legally required by DTC) but not more than 60 days before a date for
redemption of any Class of Timber Notes, the Issuer shall mail a notice of
redemption by first-class mail to each Holder of Timber Notes to be
redeemed.
The notice shall identify the Class or Classes of Timber Notes to
be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Timber Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price; and
(5) that, unless the Issuer defaults in making such redemption
payment, interest on Timber Notes called for redemption ceases to
accrue on and after the redemption date.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such
event, the Issuer shall provide the Trustee with the information required
by clauses (1) through (3) at least 15 days prior to the date on which such
a notice of redemption is to be given by the Trustee (unless a shorter
notice period shall be satisfactory to the Trustee).
3.4 Effect of Notice of Redemption. Once notice of redemption
is mailed, Timber Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Timber Notes shall be paid at the
redemption price stated in the notice, computed as provided in Section 3.6.
3.5 Deposit of Redemption Price. On or prior to Noon, New York
City time, on the redemption date, the Issuer shall deposit with the Paying
Agent an amount of money which, when added to all amounts deposited on such
redemption date pursuant to Section 5.7(a) and all other amounts on deposit
in the Payment Account (if all outstanding Timber Notes and any Additional
Timber Notes are to be redeemed on the redemption date), would be
sufficient to pay the redemption price of and all other amounts payable in
respect of all Timber Notes to be redeemed on that date. All money earned
on such funds held in trust by the Trustee shall be remitted to the Issuer.
3.6 Redemption Price. The Timber Notes of any Class shall be
redeemed at a redemption price equal to (i) all unpaid principal amounts
thereof as of the redemption date, (ii) all accrued and unpaid Premium
thereon as of the redemption date (prior to taking into account the
redemption), (iii) all accrued and unpaid Regular Interest, Default
Interest and interest on Premium thereon as of the redemption date and (iv)
a redemption premium computed as provided in the definition of Prepayment
Premium Amount, as if the excess of (a) the aggregate principal amount of
the Timber Notes of such Class to be redeemed over (b) the Scheduled
Amortization Amount for such Class of Timber Notes as of the redemption
date, constituted an "Excess Payment" as set forth in such definition.
3.7 Optional Prepayment. The Issuer may, at its option, prepay
the Timber Notes, in whole or in part, on any Note Payment Date as provided
in Section 5.7.
ARTICLE 4
COVENANTS
4.1 Payment of Notes. The Issuer shall promptly pay the
principal of, Premium, if any, and interest on the Timber Notes on the
dates and in the manner provided in the Timber Notes and in this Indenture.
Principal and interest shall be considered paid on the date due to the
extent on such date the Trustee holds in accordance with this Indenture
money sufficient to pay all principal and interest then due, and the
Trustee is not prohibited from paying such money to the Noteholders on that
date pursuant to the terms of this Indenture or otherwise.
The Issuer shall pay Default Interest on overdue principal at the
Default Rate, and it shall pay interest on overdue installments of Regular
Interest at the Default Rate to the extent lawful.
4.2 Money for Timber Note Payments to Be Held in Trust. The
Issuer shall, on or prior to each Note Payment Date, deposit or cause to be
deposited in the Payment Account such amount, if any, as is required under
the terms of this Indenture to be so deposited to pay principal, Regular
Interest, Default Interest, Premium or interest on Premium then owing on
the Timber Notes and interest and principal then owing to the Liquidity
Providers, such amount to be held in trust by the Trustee for the benefit
of the Noteholders of outstanding Timber Notes and the Liquidity Providers
entitled thereto.
4.3 SEC Reports. The Issuer shall file with the Trustee, and
provide each Rating Agency and Noteholders, within 15 days after it files
them with the SEC, copies of its annual report and of the information,
documents and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which the
Issuer is required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act. Notwithstanding that the Issuer may not be subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Issuer shall provide the Trustee, each Rating Agency and Noteholders with
information which is substantially equivalent to that which would be
included in such annual reports and information which is substantially
equivalent to such information, documents and other reports which are
specified in Sections 13 and 15(d) of the Exchange Act. The Issuer also
shall comply with the provisions of TIA Section 314(a).
4.4 Maintenance of Office or Agency; Existence; Payment of Taxes
and Other Claims, Etc.
(a) Maintenance of Office or Agency. The Issuer hereby
irrevocably appoints the Trustee to be the agent of the Issuer and hereby
irrevocably designates the Corporate Trust Office to be the office of the
Issuer where notices and demands to or upon the Issuer in respect of the
Timber Notes and this Indenture may be served. The Trustee shall promptly
notify the Issuer of the Trustee's receipt of any notices or demands with
respect to the Timber Notes or this Indenture.
(b) Existence. The Issuer shall do or cause to be done all
things necessary to preserve and keep in full force and effect its
existence, rights and franchises as a limited liability company (except as
permitted by Section 4.13) under the laws of the State of Delaware and to
preserve and keep in full force and effect all other rights and franchises
material to the conduct of its business or to its ability to perform its
obligations under the Timber Notes and shall obtain and preserve its
qualification to do business as a limited liability company (except as
permitted by Section 4.13) in each jurisdiction in which such qualification
is necessary to protect the validity and enforceability of, or the ability
of the Issuer to perform its obligations under, this Indenture and the
other Operative Documents and all certificates, agreements, documents and
other writings then in effect referred to herein or therein or contemplated
hereby or thereby.
(c) Compliance With Laws and Regulations. The Issuer shall
comply with the requirements of all applicable laws and regulations, the
non-compliance with which would have a Material Adverse Effect.
(d) Payment of Taxes and Other Claims. The Issuer shall pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent, all taxes (including, without limitation, Yield Taxes),
assessments and governmental charges levied or imposed upon it or upon its
income, profits or property, and all lawful claims for labor, materials and
supplies that, if unpaid, would by law become a Lien upon its property;
provided that the Issuer shall not be required to pay or discharge or cause
to be paid or discharged any such tax, assessment, charge or claim so long
as (i) the amount, applicability or validity thereof is being diligently
contested in good faith by appropriate judicial or administrative
proceedings and against which adequate reserves are being maintained or
(ii) such proceedings or any bond delivered in connection therewith shall
effectively suspend or stay the collection of such tax, assessment, charge
or claim and against which adequate reserves are being maintained.
(e) Employees. The Issuer shall at all times employ such
officers and employees and have in effect such other arrangements as may be
necessary to ensure the continuity of the Issuer's operations.
(f) Independent Accountants. The Issuer's independent certified
public accountants at all times shall be a firm of independent certified
public accountants of recognized national reputation reasonably
satisfactory to the Trustee for purposes of preparing and delivering the
reports or certificates of such accountants required by this Indenture.
Such accountants may be the independent certified public accountants for
Pacific Lumber if they otherwise satisfy the criteria in this Section
4.4(f). Upon any resignation by, or change of, the Issuer's independent
certified public accountants, the Issuer shall promptly appoint a successor
thereto that shall also be a firm of independent certified public
accountants of recognized national reputation. If the Issuer shall fail to
appoint a successor to a firm of independent certified public accountants
that has ceased to act as the Issuer's independent certified public
accountants within 130 days after such cessation, the Trustee shall
promptly appoint a successor firm of independent certified public
accountants of recognized national reputation. The reasonable fees of such
firm of independent certified public accountants and any successor thereto
shall be payable by the Issuer.
4.5 Separate Existence and Formalities. The Issuer hereby
covenants and agrees that:
(1) the Issuer's funds and other assets will not be
commingled with those of Pacific Lumber;
(2) all actions taken by the Issuer will be taken pursuant
to authority granted by the Board of Managers of the Issuer, to the
extent required by law or the Issuer's Operating Agreement;
(3) the Issuer will maintain records and books of account
separate from those of Pacific Lumber in accordance with generally
accepted accounting principles;
(4) the Issuer will conduct its business at an office or
offices that are identifiably segregated from the offices of Pacific
Lumber and will have telephone numbers, a mailing address, stationery
and other business forms separate from Pacific Lumber;
(5) the Issuer will conduct its business solely in its own
name (except to the extent required for federal, state or local tax
purposes) and will not knowingly or negligently mislead any other
Person as to the identity or authority of the Issuer;
(6) all oral and written communications of the Issuer,
including, without limitation, letters, invoices, purchase orders,
contracts, statements and applications, will (except to the extent
required for federal, state or local tax purposes) be made solely in
the name of the Issuer;
(7) the Issuer will provide for all of its operating
expenses and liabilities from its own separate funds;
(8) the Issuer will maintain correct minutes of the
meetings and other proceedings of its members and the Board of
Managers and otherwise comply with the formalities required by law;
(9) the Issuer will not hold itself out or knowingly permit
itself to be held out as having agreed to pay or as being liable for
any indebtedness of Pacific Lumber; and
(10) the Issuer shall at all times maintain at least two
Independent Managers; provided, however, that the failure to maintain
such Independent Managers shall not constitute a "Default" hereunder
until the expiration of the applicable time period specified in
Section 7.1(8).
4.6 Reports, Notices and Certificates. The Issuer will furnish
to the Trustee and mail to each Rating Agency:
(a) not later than April 30 of each year, commencing April 30,
1999, written statements of the Issuer's independent certified public
accountants substantially in the forms of Exhibits B-1 and B-2 hereto;
(b) not later than April 30 of each year, commencing April 30,
1999, an Officer's Certificate to the effect that, to such person's
knowledge, (i) the Issuer has complied with all of the conditions and
covenants under the Indenture (determined without regard to any period of
grace or requirement of notice under this Indenture) during the preceding
year and during the current year to the date of such Certificate and (ii)
no Event of Default existed at any time during such preceding year or
during the current year to the date of such Certificate, in each of clause
(i) and (ii), except for those, if any, described in such Certificate in
reasonable detail;
(c) Monthly Trustee Certificates in accordance with Section
5.3(b) and Note Payment Trustee Certificates in accordance with Section
5.7(e); and
(d) if a Default or Event of Default continues for 5 Business
Days after a Responsible Officer of the Issuer becomes aware of the
existence of such Default or Event of Default, an Officer's Certificate
describing such Default or Event of Default in reasonable detail and
specifying what action the Issuer has taken or proposes to take with
respect to such Default or Event of Default.
The Issuer will mail to each Holder of Timber Notes:
(x) not later than each Monthly Deposit Date, the Monthly
Noteholder Certificate; and
(y) not later than each Note Payment Date, the Note Payment
Noteholder Certificate.
The Issuer will, to the extent provided and specified in any
supplemental indenture in connection with the issuance of any Additional
Timber Notes, mail to each Holder of any Additional Timber Notes:
(x) not later than each Monthly Deposit Date, specified
information in respect of such Monthly Deposit Date; and
(y) not later than each Note Payment Date, specified information
in respect of such Note Payment Date.
4.7 Access to Records. The Issuer shall, upon reasonable
notice, permit the Trustee, at reasonable times:
(a) to inspect and make or be provided with copies and extracts
from such books and records of the Issuer as may relate to the Timber Notes
and/or any of its rights or obligations under this Indenture or any other
Operative Document; and
(b) to visit and inspect any of the properties of the Issuer.
4.8 Limitation on Liens on Company Owned Timberlands or Company
Timber Rights. The Issuer shall not create, incur, assume, suffer or
permit to exist any Lien on the Company Owned Timberlands or Company Timber
Rights or any portion thereof or any interest therein other than (x) the
Lien of the Deed of Trust or (y) other Permitted Encumbrances.
4.9 Limitation on Indebtedness. The Issuer shall not issue,
assume, incur, create, guarantee or otherwise become liable for, directly
or indirectly, any Indebtedness other than (u) nonrecourse Indebtedness
outstanding on the Closing Date in a principal amount not exceeding
$510,000, provided that an amount equal to the principal amount of such
Indebtedness from time to time outstanding is held by the Trustee in a
separate cash collateral account so long as such Indebtedness is
outstanding, (v) Indebtedness represented by the Timber Notes, (w)
Indebtedness represented by any Additional Timber Notes, (x) Nonrecourse
Timber Acquisition Indebtedness in an aggregate principal amount not
exceeding $75 million outstanding at any one time, (y) Indebtedness under
the Line of Credit Agreement or any other liquidity arrangement in
connection with payment of interest (excluding interest on premiums) but
not in connection with the payment of principal or any premiums on the
Timber Notes or any Additional Timber Notes and (z) Indebtedness for
capital leases; provided, however, that (i) the aggregate amount of such
obligations under all such leases accruing during any consecutive 12 month
period does not exceed $100,000 multiplied by the Producer Price Index
Inflation Factor then applicable and (ii) the aggregate amount of such
obligations under all such leases accruing over the terms of such leases
does not exceed $500,000 multiplied by the Producer Price Index Inflation
Factor then applicable.
4.10 Investments, Loans and Advances. Except for Permitted
Investments or as otherwise contemplated by or provided in this Indenture,
the Deed of Trust or any other Operative Document, the Issuer shall not
make any loan or advance or extend any credit to (excluding (i) the
extension of trade credit in the ordinary course of business or (ii)
advances to employees or Managers, in the ordinary course of business, for
reasonable business expenses or salary, not to exceed $100,000 in the
aggregate at any one time), or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations or securities of, or
any other ownership interest in, or all or substantially all of the assets
of, or make any capital contribution to or any other investment in, any
Affiliate or other Person.
4.11 Limitation on Restricted Payments. The Issuer shall not,
directly or indirectly, declare, make or pay any distribution or other
payment (whether in cash, property or obligations) in respect of any equity
interest in the Issuer, or, directly or indirectly, purchase, redeem,
retire or otherwise acquire for value any equity interest in the Issuer (a
"Restricted Payment"), except for any such Restricted Payment made solely
with funds or other assets that are free of the Lien of the Deed of Trust;
provided, however, that if an Event of Default described in Section 7.1(12)
(without regard to the grace period set forth therein) shall have occurred
and be continuing, the Issuer shall not make any Restricted Payment.
4.12 Certain Consents. The Issuer shall not give consent to any
amendment to the New Master Purchase Agreement, the New Services Agreement,
any Conveyance Document, or the Escrow Agreement referred to in the
definitions of Pacific Lumber Timber Rights Property and Company Timber
Rights Property unless (i) such amendment has been approved by a resolution
of the Board of Managers, including all Independent Managers and (ii)
either (A) such amendment is to cure any ambiguity, omission, defect or
inconsistency, or to add to the covenants of the other party thereto for
the benefit of the Issuer, the Noteholders or the holders of Additional
Timber Notes, or to surrender any right or power conferred therein on the
other party thereto, or in respect of any action to be taken by the Issuer
pursuant to Section 10 of the New Reciprocal Rights Agreement; provided,
that no such amendment may adversely affect in any material respect the
interests of the Holders of the Timber Notes or of any Additional Timber
Notes or (B) such amendment has received Rating Agency Confirmation or (C)
such amendment has received Rating Agency Evaluation and been approved by
the Supermajority Holders (after prior notice of such Rating Agency
Evaluation) or (D) such amendment is in connection with the issuance of
Additional Timber Notes, subject to the limitations set forth in Section
2.14. The Issuer will exercise its rights to require Pacific Lumber to
utilize the Net Short Log Scribner Scale methodology of scaling, or to
utilize third party scalers, under Sections 6.2 and 6.3, respectively, of
the New Master Purchase Agreement, upon receipt of notice from the Trustee,
or from the Holders of 25% in aggregate outstanding principal amount of the
Timber Notes and any Additional Timber Notes (to the extent specified in
such notice).
4.13 Restrictions on Consolidation, Etc. Except as set forth
below, the Issuer shall not consolidate with or merge with or into any
other Person; or lease any of its assets to any other Person (other than
leases constituting Permitted Encumbrances); or make any amendment to
Section 2.5, 3.2 or 3.3 of the Operating Agreement. The Issuer shall not
sell or convey all or substantially all of its assets to any other Person
unless the Issuer, as a condition precedent to any such sale or conveyance,
shall pay in full or defease pursuant to Article 8 all principal of,
Premium, if any, interest on and other amounts payable with respect to the
Timber Notes and any Additional Timber Notes or under this Indenture or
the Line of Credit Agreement.
Notwithstanding the foregoing, the Issuer may consolidate with or
merge into any newly formed wholly-owned subsidiary of Pacific Lumber (or
any successor to Pacific Lumber) that has no material assets or liabilities
immediately prior to such consolidation or merger if (a) the Person formed
by such consolidation or into which the Issuer is merged is a corporation,
limited liability company or other entity organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture in form
and substance satisfactory to the Trustee, the due and punctual payment of
the principal of (and premiums, if any) and interest on all the Timber
Notes and any Additional Timber Notes then outstanding and the performance
of every covenant of this Indenture and the other Operative Documents on
the part of the Issuer to be performed or observed; (b) immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default,
shall have occurred and be continuing; (c) such consolidation or merger is
approved by a Board Resolution, including the affirmative vote of both
Independent Managers; (d) such consolidation or merger has obtained Rating
Agency Confirmation; and (e) the Issuer has delivered to the Trustee an
Officer's Certificate (with the Rating Agency Confirmation attached
thereto) and an Opinion of Counsel, each stating that such consolidation or
merger and such supplemental indenture comply with this Indenture and the
Line of Credit Agreement.
4.14 No Other Business. Except for sales of Company Owned
Timberlands, Company Timber Rights or Company Timber or transfers of
Company Owned Timberlands or Company Timber Rights in exchange for
Substitute Timber Property in accordance with the procedures set forth in
Article 6 of this Indenture, the Issuer will not engage in any business
that is not related directly to (i) the operation, management, sale or
maintenance of the Company Owned Timberlands, the Company Timber Rights and
the Company Timber as provided by the Operative Documents, (ii) the
execution, delivery and performance of the Operative Documents, the Line of
Credit Agreement and the New Additional Services Agreement, (iii) issuing
and selling Timber Notes and any Additional Timber Notes pursuant to this
Indenture, (iv) issuing any Nonrecourse Timber Acquisition Indebtedness
and acquiring property secured by such Nonrecourse Timber Acquisition
Indebtedness, (v) acquiring Additional Timber Property or (vi) actions
reasonably incidental to the foregoing which do not, individually or in the
aggregate, have a Material Adverse Effect.
4.15 Transactions with Affiliates. Except for sales of Company
Owned Timberlands, Company Timber Rights or Company Timber or transfers of
Company Owned Timberlands or Company Timber Rights in exchange for
Substitute Timber Property in accordance with the procedures set forth in
Article 6 of this Indenture, the Issuer will not enter into any
transaction, arrangement or understanding, formal or informal, written or
oral (collectively, a "Transaction") with any Affiliate of the Issuer
unless (a) such Transaction has received Rating Agency Confirmation if the
amount involved in such Transaction and in all prior Transactions not
excepted by the following proviso in any fiscal year shall exceed
$2,000,000 and (b) either (x) such Transaction is on terms that are at
least as favorable to the Issuer as would be available to the Issuer in a
comparable Transaction with a Person that is not an Affiliate of the Issuer
or (y) in the event no comparable Transaction between the Issuer and an
unaffiliated third party is available, such Transaction is on terms that
are fair from a financial point of view to the Issuer; provided, that this
Section 4.15 shall not prohibit or otherwise restrict (i) compensation (in
the form of reasonable Manager's fees and reimbursement or advancement of
reasonable out-of-pocket expenses) paid to any Independent Manager of the
Issuer for services rendered in such person's capacity as a Manager, (ii)
indemnification of officers, Managers, and employees, and the obtaining of
liability insurance for the Issuer's Managers, officers and employees,
(iii) compensation and other benefits paid or made available to officers
and employees of the Issuer (who are not also officers or employees of
Pacific Lumber) for services actually rendered, comparable to those
generally paid or made available by entities engaged in the same or similar
businesses (including reimbursement or advancement of reasonable
out-of-pocket expenses), (iv) participation by employees of the Issuer in
employee benefit plans of Pacific Lumber or other Affiliates of the Issuer,
(v) lease of office space by the Issuer from Pacific Lumber in an annual
amount not to exceed $60,000 per year, (vi) coverage for the Issuer under
blanket insurance policies of Affiliates of the Issuer, (vii) the leasing
of vehicles or other equipment by the Issuer from Pacific Lumber in an
annual amount not to exceed $250,000 per year multiplied by the Producer
Price Index Inflation Factor then applicable, (viii) leases of portions of
Company Owned Timberlands to Pacific Lumber, provided that (A) such leases
are Permitted Encumbrances pursuant to clause (g) of the definition of such
term, (B) Pacific Lumber subleases, in the ordinary course of business, the
portions of Company Owned Timberlands that it leases from the Issuer and
(C) the rent paid by Pacific Lumber under such leases shall not be less
than 80% of the rent received by Pacific Lumber under such subleases, (ix)
participation by the Issuer with one or more of its Affiliates in the
Takings Litigation, provided that any recovery in such litigation shall be
allocated between the Issuer and its Affiliates on a pro rata basis so that
the Issuer will receive as its share of such recovery a percentage of such
recovery equal to the ratio of (A) the number of acres of the Company
Timber Property which is the subject of such litigation to (B) the total
number of acres of timberlands of the Issuer and its Affiliates that is the
subject of such litigation, or (x) any other Transaction with an Affiliate
of the Issuer to the extent such Transaction with such Affiliate is
contemplated by, and conducted in all material respects in accordance with
the terms of, the Operative Documents; and provided, further, that in the
case of clauses (i), (ii), (iii) and (v), such amounts shall be paid solely
from amounts on deposit in the Expense Reserve, from Excess Funds or from
other available funds of the Issuer that are free and clear of the Lien of
the Deed of Trust.
The Issuer shall provide each Rating Agency with a notice, on or
about June 30 and December 31 of each year, of all Transactions with any
Affiliate of the Issuer (other than sales of Company Timber or Transactions
excepted by the first proviso in the preceding paragraph) entered into
during the preceding six-month period which do not require Rating Agency
Confirmation under clause (a) of the preceding paragraph.
A Transaction permitted by Section 6.1, 6.3 or 6.4 between the
Issuer and a Person, and a Transaction between an Affiliate of the Issuer
and such Person (or an Affiliate of such Person), shall not be deemed a
Transaction between the Issuer and an Affiliate of the Issuer for the
purposes of this Section 4.15.
4.16 Insurance. The Issuer shall maintain or cause to be
maintained with respect to the Mortgaged Property such insurance as is
required by Section 7.1(i) of the Deed of Trust.
4.17 Company Timber Sales. All sales of Company Timber which are
made by the Issuer to Pacific Lumber shall be made pursuant to the New
Master Purchase Agreement and related log purchase agreements. All sales
of Company Timber which are made by the Issuer to any other Person (other
than Lump Sum Sales pursuant to Section 6.1 and 6.5) shall be made pursuant
to written Purchase Agreements satisfying the criteria specified in Section
7.1(h)(1) of the Deed of Trust.
4.18 Opinion as to Mortgaged Property. Promptly after the
execution and delivery of this Indenture, and on or before June 30 of each
calendar year, commencing June 30, 1999, the Issuer shall furnish to the
Trustee and the Rating Agencies an Opinion of Counsel stating that, in the
opinion of such counsel, either (a) such action has been taken with respect
to the recording, filing, rerecording and refiling of the Deed of Trust
(including, without limitation, the recordation of the real property
assignments referred to therein), any supplements and any other requisite
documents and with respect to the execution and filing of any UCC financing
statements and continuation statements as is necessary to maintain the
validity and perfection of the Lien of the Deed of Trust and reciting the
details of such action or (b) as of the date of such opinion, no such
action is necessary to maintain the validity and perfection of the Lien of
the Deed of Trust. Such Opinion of Counsel shall also describe the
recording, filing, rerecording and refiling of the Deed of Trust, any
supplements and any other requisite documents and the execution and filing
of any UCC financing statements and continuation statements that will, in
the opinion of such counsel, be required to maintain the validity and
perfection of the Lien of the Deed of Trust with respect to the Mortgaged
Property in existence as of the date of such opinion until September 1 in
the following calendar year.
4.19 Performance of Obligations.
(a) Except as expressly contemplated herein or in another
Operative Document, the Issuer will not take any action, and will use all
reasonable efforts not to permit any action to be taken by any other
Person, that would release any Person from any of such Person's material
covenants or obligations to the Issuer under any Operative Document or that
would result in the amendment, modification, hypothecation, subordination,
termination or discharge of, or impair the validity, enforceability or
effectiveness of, any such Operative Document.
(b) The Issuer shall punctually perform and observe in all
material respects all of its obligations and agreements contained in the
New Services Agreement and the New Master Purchase Agreement and the other
Operative Documents.
(c) The Issuer will make all deposits into the Collection
Account that the Issuer is required to make under the Operative Documents.
4.20 New Services Agreement; Operating Default; Termination of
New Services Agreement.
(a) If an Operating Default shall have occurred and be
continuing, the Trustee may, and, upon receipt of written instructions from
the Majority Holders directing the Trustee to take such action, shall, give
notice to Pacific Lumber or any other entity which is then the Services
Provider of its intention to terminate the New Services Agreement in
accordance with the terms thereof; provided that any such termination of
the New Services Agreement will not become effective, and the Services
Provider will not be relieved of its obligations under the New Services
Agreement and will continue (so long as the Services Provider continues to
perform in all material respects the services as contemplated by the New
Services Agreement with the same standard of care and diligence as were
observed before such Operating Default) to receive compensation for the
services performed by the Services Provider thereunder (as provided in
Section 7.2 of the New Services Agreement), unless and until a replacement
Services Provider shall have entered into a New Services Agreement.
(b) Upon any termination of the New Services Agreement as
contemplated by Section 4.20(a), the Issuer shall promptly solicit bids
from not fewer than three Persons to serve as a replacement Services
Provider or Services Providers.
4.21 New Master Purchase Agreement; Purchase Agreement Default;
Termination of New Master Purchase Agreement.
(a) If a Purchase Agreement Default shall have occurred and be
continuing, the Trustee may, and, upon receipt of written instructions from
the Majority Holders directing the Trustee to take such action, shall, give
notice to Pacific Lumber of its intention to terminate the New Master
Purchase Agreement in accordance with the terms thereof.
(b) Upon any termination of the New Master Purchase Agreement as
contemplated by Section 4.21(a), the Issuer shall promptly solicit new
purchasers on such terms as it deems appropriate, consistent with Section
4.17 (as provided in Section 10.2 of the New Master Purchase Agreement).
4.22 Distributions from Accounts. The Issuer shall not, directly
or indirectly, instruct the Trustee to make payments or distributions from
the Accounts except in accordance with this Indenture and the Deed of
Trust.
4.23 Status of the Deed of Trust. At all times (a) the Deed of
Trust shall be a valid and binding obligation of the Issuer; and (b) the
Lien of the Deed of Trust shall be a valid and perfected mortgage lien on
or a valid and perfected security interest in the Mortgaged Property,
subject to no Liens other than Permitted Encumbrances. The Issuer shall
cause to be delivered to the Collateral Agent a Title Insurance Policy (and
such endorsements or additional policies as may from time to time be
required pursuant to the terms and provisions of Sections 6.1, 6.3 and 6.4
of this Indenture or in connection with the issuance of Additional Timber
Notes) insuring the Collateral Agent in the principal amount of the Timber
Notes and the Commitments under the Line of Credit Agreement that the Deed
of Trust is a valid Lien against the Company Owned Timberlands and Company
Timber Rights, subject only to Permitted Encumbrances.
4.24 No Other Agreements. The Issuer shall not enter into any
agreements other than (i) the Operative Documents, the New Additional
Services Agreement, the Operating Agreement or the Line of Credit Agreement
or as contemplated by the Operative Documents, the New Additional Services
Agreement, the Operating Agreement or the Line of Credit Agreement, (ii)
agreements for or in connection with the sale of Company Timber, Company
Owned Timberlands or Company Timber Rights as permitted by this Indenture
and the Deed of Trust, (iii) trade accounts payable in the ordinary course
of business, (iv) agreements for expenditures expressly contemplated by the
Operative Documents or the New Additional Services Agreement, the
Operating Agreement or the Line of Credit Agreement, (v) agreements
required by this Indenture or the Deed of Trust, (vi) if Pacific Lumber is
no longer the Services Provider under the New Services Agreement, such
agreements as may be necessary or appropriate to obtain the Services, (vii)
agreements in the ordinary course of business related to actions permitted
by Section 4.14 and not otherwise prohibited by this Indenture, (viii)
agreements in respect of the issuance of Additional Timber Notes or in
respect of the issuance of Nonrecourse Timber Acquisition Indebtedness,
(ix) agreements in respect of the acquisition of Additional Timber
Properties or property that secures Nonrecourse Timber Acquisition
Indebtedness and (x) such other agreements as are not, individually or in
the aggregate, material to the business, financial condition or results of
operations of the Issuer.
4.25 Relocation of Chief Executive Office, Etc. The Issuer shall
not (a) relocate its chief executive office or principal place of business
from the address indicated in the preamble to this Indenture or (b)
maintain any of its books and records with respect to the Mortgaged
Property at any location other than such office or 5847 San Felipe, Suite
2610, Houston, Texas 77057 unless (i) the Trustee shall have been provided
with notice 30 days prior to such relocation and (ii) the Issuer shall have
delivered an Opinion of Counsel to the Trustee that any filings necessary
to continue the perfection of the Lien of the Deed of Trust have been
accomplished. Except in connection with a merger or consolidation
permitted under Section 4.13, the Issuer shall not change its name, or the
name under which it does business, from "Scotia Pacific Company LLC."
4.26 Timber Harvesting Plans, Etc. The Issuer shall (i) prepare
and file, and use its best efforts to obtain approval of, Timber Harvesting
Plans with respect to all Company Timber to be sold pursuant to the
Purchase Agreements, (ii) not enter into any Purchase Agreement (other than
the New Master Purchase Agreement) for the sale of stumpage unless the
Company Timber to be cut pursuant thereto is subject to a valid and
subsisting Timber Harvesting Plan or the Issuer reasonably believes that
the purchaser thereunder (or the Issuer) has the capacity to obtain a
Timber Harvesting Plan with respect thereto, (iii) at all times retain
sufficient persons with requisite professional qualifications to prepare
and file Timber Harvesting Plans, (iv) comply in all material respects with
all applicable federal, state or local regulations or statutes relating to
the Timber Harvesting Plans and the harvesting, cutting or severing of
Timber, including laws relating to wildlife habitat and endangered species,
(v) use its best efforts (consistent with prudent business practices) to
maintain a number of pending applications for Timber Harvesting Plans
which, if approved, would, together with Timber Harvesting Plans already
approved, cover sales of Company Timber adequate to pay, on any date, an
amount equal to the sum of (a) the excess, if any, of (i) the sum of (A)
all amounts specified as Minimum Principal Amortization for all Classes of
Timber Notes in the Structuring Schedule (Column L) (as such amount may be
modified as provided in Section 2.14) from the date of this Indenture
through a date which is 12 months subsequent to such date and (B) any
amount as provided in respect of this Section 4.26 in any supplement to
this Indenture executed in connection with the issuance of any Additional
Timber Notes over (ii) the aggregate principal amount of the Timber Notes
previously paid plus (b) Regular Interest to be accrued on the Timber Notes
and interest (not including any interest on premiums) to be accrued on any
Additional Timber Notes for such 12 month period and (vi) prepare and file
any 10 year plan, master plan, or any other development or strategic plan
required to be prepared in respect of the Company Timber Property by any
Governmental Authority.
4.27 [Intentionally Omitted]
4.28 Sale of Company Timber or Logs. The Issuer shall use its
best efforts (consistent with prudent business practices) to sell Company
Timber or logs in an amount sufficient to pay, as and when due, an amount
equal to (a) the excess, if any, of (i) the sum (A) of all amounts
specified as Minimum Principal Amortization in the Structuring Schedule
(column L) (as such amount may be modified as provided in Section 2.14)
from the date of the Indenture through the next Note Payment Date and (B)
any amount as provided in respect of this Section 4.28 in any supplement to
this Indenture executed in connection with the issuance of any Additional
Timber Notes over (ii) the aggregate principal amount of the Timber Notes
previously paid plus (b) Regular Interest and Default Interest to be
accrued on the Timber Notes and interest (not including any interest on
premiums) to be accrued on any Additional Timber Notes to such Note Payment
Date.
4.29 GIS. The Issuer shall maintain the GIS (including updates
thereto) in accordance with the past practices of the Issuer and Pacific
Lumber.
4.30 [Intentionally Omitted]
4.31 Liquidity Reserve. If at any time the Issuer reasonably
determines that amounts will be required to be borrowed under the Line of
Credit Agreement or withdrawn from the Liquidity Account pursuant to
Section 5.7(a)(i) (or drawn upon or withdrawn from any similar facility or
account that supports interest payable on any Additional Timber Notes) on
the next succeeding Note Payment Date, and funds to be so borrowed or on
deposit in the Liquidity Account (or available from any similar facility or
account that supports interest on any Additional Timber Notes) are for any
reason unavailable, during the continuance of such unavailability, the
Issuer shall use its best efforts (consistent with prudent business
practices) to obtain funds in the amount of such shortfall from third
parties, by offering logs for sale to third parties or otherwise.
4.32 Deed of Trust Covenants. The Issuer shall perform each of
the covenants and agreements made by the Issuer in the Deed of Trust.
ARTICLE 5
ACCOUNTS
5.1 Establishment of Accounts.
(a) There are hereby established with the Securities
Intermediary segregated trust accounts to be maintained at the Corporate
Trust Office of the Securities Intermediary (collectively, the "Accounts"),
as follows: the Collection Account, the Liquidity Account, the Expense
Reserve, the Prefunding Account, the Indebtedness Reserve Account and the
Payment Account. The funds in each of the Accounts shall be held subject
to a Lien in favor of the Collateral Agent for the benefit of the
Noteholders and the Liquidity Providers.
(b) Amounts on deposit in the Accounts shall be under the
exclusive dominion and control of the Collateral Agent and shall be subject
to withdrawal only as expressly provided herein.
5.2 Initial Deposits.
(a) On the Closing Date, the Issuer shall deposit in the
Prefunding Account an amount equal to $25,000,000 from the net proceeds
from the sale of the Timber Notes.
(b) On the Closing Date, the Issuer shall deposit in the Expense
Reserve an amount equal to $1,100,000 from the net proceeds from the sale
of the Timber Notes.
(c) On the Closing Date, the Issuer shall deposit in the
Indebtedness Reserve Account an amount equal to $510,000 from the net
proceeds of the sale of the Timber Notes.
5.3 Collection Account.
(a) Except for De Minimis Receipts, all payments received by the
Issuer in connection with the harvesting, severing, cutting or sale of
Company Timber and all other cash Proceeds received by the Issuer of or
from the Mortgaged Property (including, without limitation, insurance
proceeds, condemnation awards, proceeds from sales of Company Timber,
including Pay-as-You-Harvest Sales, Lump Sum Sales and Unallocated
Payments, whether pursuant to the New Master Purchase Agreement or
otherwise, proceeds from the sales of Company Owned Timberlands or Company
Timber Rights, and proceeds in respect of any Agreement Not to Cut, but
excluding proceeds of any Title Insurance Policy) shall be deposited in the
Collection Account, together with all other amounts required to be
deposited in the Collection Account under this Indenture or the Deed of
Trust. The Issuer shall forward all De Minimis Receipts to the Collection
Account at least monthly. Funds from time to time in the Collection
Account, including income on Eligible Investments with respect to amounts
held in the Collection Account, will be withdrawn from the Collection
Account on each Monthly Deposit Date as provided in Section 5.3(c).
(b) Not later than each Monthly Certificate Delivery Date, the
Issuer shall prepare and submit or cause to be prepared and submitted to
the Collateral Agent and the Trustee (with a copy mailed to each Rating
Agency), a Certificate in substantially the form of Exhibit C hereto (a
"Monthly Trustee Certificate"), containing information (except as otherwise
provided herein) as of the Monthly Calculation Date next preceding such
Monthly Certificate Delivery Date (which certificate shall give effect, on
a pro forma basis, to deposits to be made to, and interest to be earned on,
the Accounts to 11:00 A.M. New York City time on the next succeeding
Monthly Deposit Date) and signed by a Responsible Officer of the Issuer,
setting forth (among other things):
(i) the balance in the Collection Account, including
interest earned on investments from the prior Monthly Deposit
Date, and the balance in the Expense Reserve, indicating
separately for each item (A) the actual amount as of the opening
of business on such Monthly Certificate Delivery Date and (B) an
estimated pro forma amount as of 11:00 A.M. New York City time on
the next succeeding Monthly Deposit Date; and
(ii) the amount (if any), stated separately as to each Item
(and as to each applicable provision of Sections 5.3(d) and
5.3(e)), that in accordance with this Indenture is to be
deposited in or withdrawn from the Collection Account, the
Expense Reserve, the Prefunding Account, the Liquidity Account
and the Payment Account, or borrowed under the Line of Credit
Agreement or paid to the Liquidity Providers, as applicable, on
such Monthly Deposit Date pursuant to each of Items (i) through
(x), inclusive, of Section 5.3(c). Withdrawals from the
Collection Account on a Monthly Deposit Date pursuant to Items
(i) through (x), inclusive, of Section 5.3(c) (and the applicable
provisions of Sections 5.3(d) and 5.3(e)) are called the
"Collection Account Disbursement" for such Monthly Deposit Date,
and the amounts to be deposited or withdrawn, as part of the
Collection Account Disbursement for such Monthly Deposit Date,
are called "Collection Account Disbursement Funds" for such
Monthly Deposit Date.
In preparing the Monthly Trustee Certificate to be delivered on a Monthly
Certificate Delivery Date, the Issuer shall, with respect to the
information referred to in Section 5.3(b)(i), be entitled to rely in good
faith on information provided by the Trustee or the Collateral Agent and on
reasonable estimates of interest to be earned on the Accounts.
(c) On each Monthly Deposit Date, from amounts on deposit as of
11:00 A.M. New York City time on such Monthly Deposit Date (after giving
effect to deposits to the Collection Account on such Monthly Deposit Date),
and in accordance with the Monthly Trustee Certificate delivered in respect
of such Monthly Deposit Date, on which Monthly Trustee Certificate the
Trustee and the Collateral Agent may rely without inquiry, the Collateral
Agent shall make deposits in and withdrawals from the Accounts as set forth
below (said deposits and withdrawals to be made in the order and priority
set forth below):
(i) any amount necessary to cause the balance in the
Expense Reserve to equal the greater of (I) the sum of (a) all accrued
and unpaid Yield Taxes attributable to Company Timber which was cut,
harvested, severed or sold during the month to which such Monthly
Deposit Date relates and all prior Monthly Periods and (b) an amount
equal to all expenses of a nature permitted to be paid from the
Expense Reserve (including capital expenditures, personnel costs, the
Services Fee and other amounts payable under the New Services
Agreement) known or estimated by the Issuer to be payable prior to the
next Monthly Deposit Date and (II) $1.1 million shall, to the extent
of the balance in the Collection Account, be withdrawn from the
Collection Account and deposited in the Expense Reserve;
(ii) all unpaid Trustee's Expenses, Collateral Agent
Expenses and Liquidity Providers' Expenses incurred during or prior to
the Monthly Period to which such Monthly Deposit Date relates shall,
to the extent of the balance in the Collection Account not theretofore
withdrawn, be withdrawn from the Collection Account and, at the
direction of the Issuer, be paid to the Trustee, the Collateral Agent,
or the Liquidity Providers, as the case may be, by the Collateral
Agent or, if the Issuer shall have previously paid such expenses, such
amounts shall be withdrawn by the Collateral Agent from the Collection
Account and disbursed at the direction of the Issuer to reimburse
itself for such expenses;
(iii) if there has not been a Termination Advance under a
Line of Credit or there has been a Termination Advance under a Line of
Credit Agreement that has been replaced in accordance with the terms
of Section 11.4, an amount equal to all accrued and unpaid interest
(other than any Supplemental Liquidity Provider Interest) on, plus the
outstanding principal amount of, any outstanding Advances (other than
Advances made on, or within three Business Days preceding, such
Monthly Deposit Date) under the Line of Credit Agreement shall, to the
extent of the balance in the Collection Account not theretofore
withdrawn, be withdrawn by the Collateral Agent from the Collection
Account and disbursed to the Liquidity Providers in payment, first, of
such accrued and unpaid interest and, second, of such outstanding
principal amount;
(iv) the balance of funds in the Liquidity Account (if any) in
excess of the Required Liquidity Amount as of such Monthly Deposit
Date shall be withdrawn by the Collateral Agent from the Liquidity
Account and deposited in the Collection Account and shall be included
together with other funds to be withdrawn from the Collection Account
on such Monthly Deposit Date;
(v) an amount equal to (a) the product of (i) the Targeted
Monthly Deposit Amount for such Monthly Deposit Date and (ii) the
Reinvestment Factor for such Monthly Deposit Date less (b), if such
Monthly Deposit Date is neither a Note Payment Date nor the first
Monthly Deposit Date following a Note Payment Date, the Premium
Provision Refundable Amount for such Monthly Deposit Date shall, to
the extent of the balance in the Collection Account not theretofore
withdrawn, be withdrawn by the Collateral Agent from the Collection
Account and deposited in the Payment Account;
(vi) if there has been a Termination Advance under a Line of
Credit Agreement that has not been replaced in accordance with the
terms of Section 11.4, an amount equal to the excess of (a) the sum of
(i) all accrued and unpaid interest on all outstanding Advances (other
than any Supplemental Liquidity Provider Interest) under the Line of
Credit Agreement as of such Monthly Deposit Date and (ii) the product
obtained by multiplying the Line of Credit Amortization Amount, if
any, for the next Note Payment Date, by a fraction, the numerator of
which is the number of months from the immediately preceding Note
Payment Date and the denominator of which is six, over (b) the amount,
if any, of all amounts deposited pursuant to this clause (vi) in the
Payment Account after the immediately preceding Note Payment Date (or,
if the first Note Payment Date has not yet occurred, after the Closing
Date) shall, to the extent of the balance in the Collection Account
not theretofore withdrawn, be withdrawn by the Collateral Agent from
the Collection Account and deposited in the Payment Account;
(vii) if there has been a Termination Advance under a Line of
Credit Agreement that has not been replaced in accordance with the
terms of Section 11.4, any amount necessary to cause the balance in
the Liquidity Account to equal the Required Liquidity Amount as of
such Monthly Deposit Date shall, to the extent of the balance in the
Collection Account not theretofore withdrawn, be withdrawn by the
Collateral Agent from the Collection Account and deposited in the
Liquidity Account;
(viii) an amount equal to the Premium Provision for such Monthly
Deposit Date shall, to the extent of the balance in the Collection
Account not theretofore withdrawn, be withdrawn by the Collateral
Agent from the Collection Account and deposited in the Payment
Account;
(ix) if (a) the aggregate expenses of a nature permitted to be
paid from the Expense Reserve known or estimated by the Issuer to be
payable through any date within the following six months exceeds (b)
the sum of (I) the amount in the Expense Reserve and (II) the amounts
that the Issuer estimates will become available to the Issuer through
such date for the payment of the expenses referred to in the preceding
clause (a), an amount equal to the amount of such excess shall, to the
extent of the balance in the Collection Account not theretofore
withdrawn, be withdrawn from the Collection Account and deposited in
the Expense Reserve; and
(x) all unreserved funds in the Collection Account as of such
Monthly Deposit Date, after giving effect to all deposits and
withdrawals pursuant to the preceding Items (i) through (ix),
inclusive, on such Monthly Deposit Date (collectively, "Excess
Funds"), shall be paid, first, to the payment of any unpaid Additional
Liquidity Provider Fees incurred during or prior to the Monthly Period
to which such Monthly Deposit Date relates and to the payment of any
accrued and unpaid Supplemental Liquidity Provider Interest as of such
Monthly Date and, second, to or as directed by the Issuer in the
Monthly Trustee Certificate delivered with respect to such Monthly
Deposit Date, free and clear of the Lien of the Deed of Trust, except
as otherwise provided in Section 5.3(d) or Section 5.3(e).
(d) Notwithstanding the foregoing:
(i) if a Cash Retention Event shall have occurred and be
continuing on such Monthly Deposit Date, 75% of the Excess Funds (up
to the amount necessary to pay in full any Timber Notes remaining
outstanding) shall be deposited in the Payment Account on such Monthly
Deposit Date and the remainder shall be applied as set forth in
Section 5.3(c)(x);
(ii) if an Event of Default described in clauses (1), (2), (3),
(4), (5), (6), (7) (but, in the case of clause (7), only (A) with
respect to Sections 4.5, 4.8, 4.9, 4.11, 4.13, 4.23 and 4.25 of this
Indenture and Sections 7.1(c), (d) and (e) and 7.2(a) and (b) of the
Deed of Trust and (B) if the default giving rise to such Event of
Default has, or, with the passage of time, would have, a Material
Adverse Effect) and (11) of Section 7.1 has occurred and is continuing
on such Monthly Deposit Date, all Excess Funds shall be deposited in
the Payment Account on such Monthly Deposit Date;
(iii) if (A) the Trustee or the Noteholders shall have caused the
acceleration of the Timber Notes as provided in Section 7.2(b) or
7.2(c) of this Indenture and such acceleration shall not have been
rescinded pursuant to Section 7.2(d) or (B) an Event of Default under
Sections 7.1(6), (7), (8), (9), (10) or (12) has occurred and is
continuing, and the Trustee, within the previous 60 days, has
commenced a consent solicitation for an election to accelerate the
Timber Notes or any Additional Timber Notes by reason of such Event of
Default, all Excess Funds shall be deposited in the Payment Account on
such Monthly Deposit Date (either of the events described in the
preceding clause (ii) or this clause (iii), a "Trapping Event"); and
(iv) if the Collateral Agent holds any Section 6.1 Notes as of
such Monthly Deposit Date, (x) if the amount of Excess Funds (computed
as if such Section 6.1 Notes were cash), reduced by any amount
required to be deposited in the Payment Account pursuant to Section
5.3(d)(i) or to be paid pursuant to clause "first" of Section
5.3(c)(x), equals or exceeds the amount of such Section 6.1 Notes, so
long as no Trapping Event shall have occurred and be continuing, the
Section 6.1 Notes shall be released to or as directed by the Issuer,
free and clear of the Lien of the Deed of Trust, (y) if the amount of
Excess Funds (computed as if the Section 6.1 Notes were cash), reduced
by any amount required to be deposited in the Payment Account pursuant
to Section 5.3(d)(i) or to be paid pursuant to clause "first" of
Section 5.3(c)(x), is less than the amount of such Section 6.1 Notes,
so long as no Trapping Event has occurred and is continuing, a portion
of Section 6.1 Notes, in an amount up to the amount of Excess Funds
(computed on such basis), reduced by any amount required to be
deposited in the Payment Account pursuant to Section 5.3(d)(i) or to
be paid pursuant to clause "first" of Section 5.3(c)(x), shall be
released to or as directed by the Issuer, free and clear of the Lien
of the Deed of Trust, and the balance of such Section 6.1 Notes shall
be sold by the Issuer to Pacific Lumber for a cash purchase price
equal to the aggregate principal balance thereof plus accrued interest
thereon and (z) if any Trapping Event has occurred and is continuing,
the Issuer shall sell to Pacific Lumber all Section 6.1 Notes then
held by the Collateral Agent, for a cash purchase price equal to the
aggregate principal amount of such Section 6.1 Notes plus accrued
interest thereon. Section 6.1 Notes shall not be included in any
calculation pursuant to Section 5.7 and, except for the calculation
made pursuant to this Section 5.3(d)(iv), shall not be included in any
calculation of Excess Funds. All proceeds received by the Collateral
Agent from any sale of some or all of the Section 6.1 Notes to Pacific
Lumber pursuant to this Section 5.3(d)(iv) shall be deposited into the
Collection Account on such Monthly Deposit Date, for application as
provided in Section 5.3.
For purposes of this Section 5.3(d) and of Sections 5.3(e) and 5.7,
the Trustee and the Collateral Agent may rely, without further inquiry, on
statements contained in the Monthly Trustee Certificate in respect of any
Monthly Deposit Date as to whether a Cash Retention Event, a Trapping Event
or an Acceleration Event has occurred and is continuing on such Monthly
Deposit Date or a Line of Credit Acceleration has occurred.
(e) Notwithstanding the foregoing provisions of this Section 5.3, in
the event that a Line of Credit Acceleration has occurred or an
Acceleration Event shall have occurred and be continuing, all interest,
principal and other amounts (other than Additional Liquidity Provider Fees
and Supplemental Liquidity Provider Interest) then owing by the Issuer
under the Line of Credit Agreement shall be paid on each Monthly Deposit
Date, immediately after the transfers and payments pursuant to Sections
5.3(c)(i) and 5.3(c)(ii), and no amounts shall be deposited in the Payment
Account on such Monthly Deposit Date until such interest, principal and
other amounts are paid in full. Payments to the Liquidity Providers
pursuant to this Section 5.3(e) shall be applied, first, to Liquidity
Providers' Expenses, second, to interest (other than any Supplemental
Liquidity Provider Interest) and, third, to principal.
(f) The Issuer shall clearly indicate on each page of the Monthly
Trustee Certificate that such material is to be maintained as confidential.
The Trustee and the Collateral Agent shall treat any Monthly Trustee
Certificate designated as confidential material as confidential, and any
Monthly Trustee Certificate so designated shall not be available to
Noteholders. Notwithstanding the foregoing, nothing in this Section 5.3(f)
shall prohibit the Trustee and the Collateral Agent from disclosing such
Monthly Trustee Certificate to bank regulatory authorities (or otherwise as
required by law), auditors, attorneys or other agents of the Trustee within
the scope of their engagement.
(g) All payments of Liquidity Providers' Expenses and all other
payments to the Liquidity Providers or the Line of Credit Agent under this
Indenture or any other Operative Document shall be disbursed to the Line of
Credit Agent. The Line of Credit Agent shall be solely responsible for
disbursing all such payments that it receives to the Persons entitled to
such payments. If, on or prior to the date that is eight Business Days
prior to any Monthly Deposit Date, the Line of Credit Agent delivers
written notice to the Trustee and the Collateral Agent (with a copy to the
Issuer) stating that the amount set forth in the Monthly Trustee
Certificate delivered in respect of the preceding Monthly Deposit Date
understated the amount of Liquidity Providers' Expenses referred to in
Section 5.3(c)(ii), the amount of accrued and unpaid interest (other than
any Supplemental Liquidity Provider Interest) on, or the outstanding
principal amount of, Advances (other than Advances made on, or within three
Business Days preceding, such Monthly Deposit Date) under the Line of
Credit Agreement referred to in Section 5.3(c)(iii) or the amount of unpaid
Additional Liquidity Provider Fees or accrued and unpaid Supplemental
Liquidity Provider Interest referred to in clause "first" of Section
5.3(c)(x), the Collateral Agent may rely on such notice and shall include
the amount(s) of the understatement(s) set forth in such written notice in
the amounts to be disbursed, to the extent of cash available therefor,
pursuant to Section 5.3(c)(ii), 5.3(c)(iii) and/or clause "first" of
Section 5.3(c)(x), as applicable, on the next Monthly Deposit Date.
5.4 Expense Reserve; Payment of Expenses.
(a) The Issuer may cause the Collateral Agent to withdraw from
the Expense Reserve (to the extent of amounts then on deposit in said
Expense Reserve), at any time or from time to time (so long as the Timber
Notes shall not have been accelerated pursuant to Section 7.2(a) of this
Indenture), amounts which the Issuer certifies to the Collateral Agent are
required to pay (i) capital costs or expenses, including the Services Fee
and other amounts payable pursuant to the New Services Agreement, with
respect to the Mortgaged Property, (ii) Taxes, (iii) Personnel Costs and
(iv) other reasonable and necessary expenses related to the business
operations of the Issuer or as contemplated by the Operative Documents;
provided, however, that no withdrawals from the Expense Reserve may be
effected pursuant to this Section 5.4 at any time when (x) the Timber Notes
have been accelerated pursuant to Section 7.2(b) of this Indenture, (y)
such acceleration has not been rescinded pursuant to Section 7.2(c) of this
Indenture, and (z) there shall be in effect a written notice delivered by
the Trustee to the Issuer, or by the Majority Holders to the Issuer and the
Trustee, stating that withdrawals from the Expense Reserve pursuant to this
Section 5.4 are prohibited. The Collateral Agent may rely on the Issuer's
certification without inquiry.
(b) The Issuer shall be permitted to issue checks, drafts, or
other instruments to third party payees against, and to request wire
transfers to a payroll account from, the funds on deposit in the Expense
Reserve for purposes permitted by paragraph (a) without the need for
additional certifications; provided that the presentment for payment to the
Trustee of any such check, draft or instrument, and any request for such a
wire transfer, shall be deemed a representation and warranty by the Issuer
that such expenditure is for such purpose (upon which the Collateral Agent
may rely without inquiry).
5.5 Deemed Production. Upon receipt by the Issuer of (i) any
proceeds in respect of a Lump Sum Sale pursuant to Section 6.1, (ii) any
proceeds in respect of any sale of Company Owned Timberlands or Company
Timber Rights pursuant to Section 6.1, (iii) any payments in respect of any
condemnation or taking for public use under the power of eminent domain of
any of the Mortgaged Property (including any recovery in the Takings
Litigation), (iv) any insurance proceeds in respect of any damage to or
loss or diminution in value of or income from any of the Mortgaged
Property, (v) any proceeds of any Agreement Not to Cut or (vi) any Up Front
Payment in respect of a Pay-As-You-Harvest-Sale (an "Unallocated Payment"),
the Issuer shall recognize Deemed Production in the Monthly Period in which
such amount is received (or, if received prior to the Monthly Deposit Date
or prior to 11:00 a.m. New York City time on the Monthly Deposit Date, in
the next preceding Monthly Period). In the case of the preceding clauses
(i) to (iv) (other than a recovery in the Takings Litigation), Deemed
Production shall be in respect of the number of Mbfe (as set forth in an
Officer's Certificate delivered to the Trustee) of Company Timber (or
Company Timber located on the Company Owned Timberlands or on the Company
Timber Rights Property that is subject to the Company Timber Rights, as
applicable) sold, condemned, taken, damaged or destroyed. In the case of
clause (v), Deemed Production shall be in respect of the number of Mbfe (as
set forth in an Officer's Certificate delivered to the Trustee) of Company
Timber to which such Agreement Not to Cut relates. In the case of a
recovery in the Takings Litigation, Deemed Production shall be in respect
of the number of Mbfe (as set forth in an Officer's Certificate delivered
to the Trustee) of Company Timber equal to the amount of such recovery
divided by the then applicable SBE price per Mbf of old growth redwood,
size quality code 2, for tractor logging. In the case of the preceding
clause (vi), Deemed Production shall be in respect of the number of Mbfe
(as set forth in an Officer's Certificate delivered to the Trustee) of
Company Timber to which such Pay-As-You Harvest Sale relates, multiplied by
the percentage that such Up Front Payment represents of the entire
contract. Each Officer's Certificate delivered pursuant to this Section
5.5 (other than in the case of a recovery in the Takings Litigation) shall
be based upon the information in the GIS (in the case of clauses (iv), (v)
and (vi), to the extent practicable) and such Certificate shall so state.
Upon the occurrence of any transaction which results in the
Issuer's election to recognize Deemed Production pursuant to Section
6.4(iii)(B), the Issuer shall recognize Deemed Production in the Monthly
Period in which such transaction occurs (or, if such transaction occurs on
or prior to the Monthly Deposit Date, in the next preceding Monthly
Period). Such Deemed Production shall be computed as set forth in Section
6.4(iii)(B).
5.6 Investment of Accounts, Etc. Amounts on deposit in the
Collection Account and the Expense Reserve shall be invested by the
Collateral Agent in such Eligible Investments specified in writing (or by
oral instructions confirmed promptly thereafter in writing) by the Issuer
that are consistent with the need to make withdrawals therefrom; provided,
however, that the Expense Reserve may be maintained as a non-interest
bearing account if the Collateral Agent shall reasonably determine that
maintaining the Expense Reserve as an interest bearing account is
administratively burdensome. Amounts deposited in the Payment Account
pursuant to clauses (v), (vi) or (viii) of Section 5.3(c) or otherwise
shall be invested by the Collateral Agent in such Eligible Investments
specified in writing (or by oral instructions confirmed promptly thereafter
in writing) by the Issuer that are consistent with the need to make
withdrawals therefrom pursuant to Section 5.7. Amounts, if any, on deposit
in the Liquidity Account shall be invested by the Collateral Agent in such
Eligible Investments specified in writing (or by oral instructions
confirmed promptly thereafter in writing) by the Issuer that are consistent
with the need to make withdrawals therefrom pursuant to clause (iv) of
Section 5.3(c) and Section 5.7. Amounts on deposit in the Prefunding
Account or the Indebtedness Reserve Account shall be invested by the
Collateral Agent in such Eligible Investments specified in writing (or by
oral instructions confirmed promptly in writing) by the Issuer that are
consistent with the Issuer's judgment as to the need to make withdrawals
therefrom pursuant to Section 5.10 or 5.11, as the case may be. Amounts
earned on funds in the Payment Account shall be deposited in the Payment
Account, amounts earned on funds in the Expense Reserve shall be deposited
in the Expense Reserve, amounts earned on funds in the Collection Account
shall be deposited in the Collection Account, amounts earned on funds in
the Liquidity Account shall be deposited in the Liquidity Account, amounts
earned on funds in the Prefunding Account shall be deposited in the
Prefunding Account and amounts earned on funds in the Indebtedness Reserve
Account shall be deposited in the Indebtedness Reserve Account.
5.7 Withdrawals and Deposits on Note Payment Dates.
(a) Prior to 1:00 p.m., New York City time, on each Note Payment
Date (after giving effect to any deposits on such date from the Liquidity
Account to the Collection Account and from the Collection Account to the
Liquidity Account), the Collateral Agent shall deposit the amounts
indicated below in the Payment Account in the order listed below:
(i) unless a Line of Credit Acceleration has occurred or an
Acceleration Event has occurred and is continuing on such Note
Payment Date, from a borrowing under the Line of Credit Agreement or
from the Liquidity Account, any amounts available under the Line of
Credit Agreement or on deposit in the Liquidity Account, up to an
amount equal to the excess, if any, of (A) the amount required to pay
accrued and unpaid interest (excluding interest on premiums) on the
Timber Notes and, if so provided in connection with the issuance of
any Additional Timber Notes, such Additional Timber Notes on such Note
Payment Date over (B) the amount available in the Payment Account to
be paid to the Holders of Timber Notes and such Additional Timber
Notes pursuant to Section 5.7(b)(i) below (after giving effect to any
transfer on such date pursuant to clauses (v), (vi) or (viii) of
Section 5.3(c) or Section 5.3(d)); and
(ii) from any funds available to the Issuer, any amounts that the
Issuer, at its option, elects to deposit therein to pay or prepay
interest or principal on the Timber Notes or any Premium or interest
on Premium then due and payable or becoming due and payable on such
Note Payment Date.
(b) On each Note Payment Date (after giving effect to the
deposits to the Payment Account on such date pursuant to Section 5.7(a)),
the Collateral Agent shall withdraw from the Payment Account all amounts
then on deposit in the Payment Account and apply such funds in the
following order of priority:
(i) from amounts on deposit in the Payment Account (exclusive of
amounts borrowed under the Line of Credit Agreement or withdrawn from
the Liquidity Account pursuant to Section 5.7(a)(i) above for the
payment of interest on such Note Payment Date), to the Holders of the
Timber Notes and any Additional Timber Notes, an amount equal to all
interest accrued and unpaid on the Timber Notes and any Additional
Timber Notes as of such date, computed on the basis of a 360-day year
of twelve 30-day months (including interest on past due principal and
interest, but not including interest on premium) and, if there has
been a Termination Advance under a Line of Credit Agreement that has
not been replaced in accordance with the terms of Section 11.4, to the
Liquidity Providers, an amount equal to all accrued and unpaid
interest (other than any Supplemental Liquidity Provider Interest) on
all outstanding Advances under the Line of Credit Agreement, as of
such date, provided, that, if the amount on deposit in the Payment
Account (exclusive of amounts borrowed under the Line of Credit
Agreement or withdrawn from the Liquidity Account pursuant to Section
5.7(a)(i) for the payment of interest on such Note Payment Date) is
insufficient to make such payment in full on all Classes of Timber
Notes and any Additional Timber Notes and to the Liquidity Providers,
such payments shall be made on each Class of Timber Notes and any
Additional Timber Notes and to the Liquidity Providers pro rata in
proportion to the interest (other than any Supplemental Liquidity
Provider Interest) due on each such Class and to the Liquidity
Providers;
(ii) to the Holders of the Timber Notes and, if so provided in
connection with the issuance of any Additional Timber Notes, such
Additional Timber Notes, the amount borrowed under the Line of Credit
Agreement or withdrawn from the Liquidity Account for the payment of
interest on such Note Payment Date in payment of accrued and unpaid
interest as of such date (including interest on past due principal and
interest, but not including interest on premium) on the Timber Notes
and such Additional Timber Notes, to the extent that the payments to
such Holders pursuant to the immediately preceding clause (i) are
insufficient to make payment in full of such accrued and unpaid
interest, provided that, if the amount on deposit in the Payment
Account is insufficient to make such payments in full on all Classes
of Timber Notes and Additional Timber Notes, such payments shall be
made on each Class of Timber Notes and Additional Timber Notes pro
rata in proportion to the amounts payable to each such Class pursuant
to this clause (ii);
(iii) if there has been a Termination Advance under a Line of
Credit Agreement that has not been replaced in accordance with the
terms of Section 11.4, to the Liquidity Account, to the extent, if
any, necessary to cause the amount on deposit in the Liquidity Account
to equal the Required Liquidity Amount;
(iv) to the Holders of each Class of Timber Notes, an amount
equal to any Minimum Principal Amortization Amount due on such Class
of Timber Notes as of such date, provided that, if the amount on
deposit in the Payment Account is insufficient to make such payments
in full on all Classes of Timber Notes, such payments shall be made,
first, on the Class A-1 Timber Notes, second, on the Class A-2 Timber
Notes, and, third, on the Class A-3 Timber Notes;
(v) if there has been a Termination Advance under a Line of
Credit Agreement that has not been replaced in accordance with the
terms of Section 11.4, to the Liquidity Providers, an amount equal to
the Line of Credit Amortization Amount, if any, due as of such Note
Payment Date;
(vi) to the Holders of Timber Notes, an amount equal to any
Depletion Amortization Amount due as of such Note Payment Date;
(vii) to the Holders of each Class of Timber Notes, an amount
equal to any interest on Premium then due and owing on such Class of
Timber Notes, provided that, if the amount on deposit in the Payment
Account is insufficient to make such payment in full on all Classes of
Timber Notes, such payment shall be made on each Class of Timber Notes
pro rata in proportion to the interest on Premium due on each such
Class;
(viii) to the Holders of each Class of Timber Notes, an amount
equal to any Premium then due and owing on such Class of Timber Notes,
provided that, if the amount on deposit in the Payment Account is
insufficient to make such payments in full on all Classes of Timber
Notes, such payments shall be made pro rata in proportion to the
Premium then due on each such Class;
(ix) (A) if a Trapping Event or a Cash Retention Event shall have
occurred and be continuing, or (B) to the extent directed by the
Issuer, or (C) to the extent of amounts otherwise deposited to the
Payment Account pursuant to Section 5.8 or Section 5.10, to the
Holders of the Timber Notes, to prepay principal of, and any
Prepayment Premium on, the Timber Notes; and
(x) unless a Trapping Event or a Cash Retention Event shall have
occurred and be continuing, to the Issuer, free and clear of the Lien
of the Deed of Trust.
(c) Principal payments payable pursuant to clauses (vi) and (ix)
of Section 5.7(b) shall be paid, first, to the holders of the Class A-1
Timber Notes until the Class A-1 Timber Notes have been paid in full,
second, to the holders of the Class A-2 Timber Notes until the Class A-2
Timber Notes have been paid in full and, third, to the holders of the Class
A-3 Timber Notes.
(d) If, on any Note Payment Date, there are insufficient funds
in the Payment Account to pay to the Holders of any Class of Timber Notes
all amounts pursuant to clauses (i), (ii), (iv), (vi), (vii), (viii) or
(ix) of Section 5.7(b), any partial payment on such Class with respect to
any such clause shall be made to the Holders of such Class pro rata in
proportion to the unpaid principal amount of the outstanding Timber Notes
of such Class (or, in the case of Non-Registration Premiums, pro rata in
proportion to the unpaid principal amount of the outstanding Timber Notes
of such Class with respect to which a Registration Default is continuing)
held by such Holders on such date. Notwithstanding the foregoing
provisions of this Section 5.7, in the event that a Line of Credit
Acceleration has occurred or an Acceleration Event shall have occurred and
be continuing, all interest, principal and other amounts (other than
Additional Liquidity Provider Fees and Supplemental Liquidity Provider
Interest) then owing by the Issuer under the Line of Credit Agreement shall
be paid in full from the Payment Account on each Note Payment Date before
any other amounts are paid from the Payment Account on such Note Payment
Date. Payments pursuant to the preceding sentence shall be applied, first,
to Liquidity Providers' Expenses, second, to interest (other than any
Supplemental Liquidity Provider Interest) and, third, to principal.
(e) Not less than two Business Days prior to each Note Payment
Date, the Issuer shall prepare and submit to the Trustee and the Collateral
Agent a certificate substantially in the form of Exhibit E hereto (a "Note
Payment Trustee Certificate"). Each Note Payment Trustee Certificate
shall set forth the following amounts and other information, each
determined as of the Note Payment Date to which such Certificate relates:
(i) the amount of all accrued and unpaid interest (excluding
interest on Premiums) on the Timber Notes on such Note Payment Date;
(ii) the amount, if any, of interest payable to the Liquidity
Providers from the Payment Account on such Note Payment Date;
(iii) the estimated balance, if any, in the Liquidity Account on
a pro forma basis as of such Note Payment Date (after giving effect to
any deposits on such date from the Liquidity Account to the Collection
Account and from the Collection Account to the Liquidity Account, but
prior to giving effect to any deposits on such date from the Liquidity
Account to the Payment Account);
(iv) the estimated amount, if any, available under the Line of
Credit Agreement on such Note Payment Date;
(v) the respective amounts, if any, to be deposited on such Note
Payment Date in the Payment Account pursuant to Sections 5.3(c),
5.3(d) and 5.7(a), in each case identifying the Account or other
source from which each deposit is to be made and the amount of each
deposit from each such Account or other source, together with the
aggregate amount expected to be on deposit in the Payment Account on
such Note Payment Date from such Accounts and other sources; and
(vi) the respective amounts required to be distributed from the
Payment Account pursuant to clauses (i) through (x) of Section 5.7(b).
Each Note Payment Trustee Certificate shall contain calculations
in reasonable detail of the amounts required to be set forth therein and
shall be signed by a Responsible Officer of the Issuer who shall certify as
true and correct all information therein set forth. The Trustee may rely
on such Note Payment Trustee Certificate without inquiry.
(f) The Issuer shall clearly indicate on each page of the Note
Payment Trustee Certificate that such material is to be maintained as
confidential. The Trustee and the Collateral Agent shall treat any Note
Payment Trustee Certificate designated as confidential material as
confidential, and any Note Payment Trustee Certificate so designated shall
not be available to Noteholders. Notwithstanding the foregoing, nothing in
this Section 5.3(f) shall prohibit the Trustee and the Collateral Agent
from disclosing such Note Payment Trustee Certificate to bank regulatory
authorities (or otherwise as required by law) or to auditors, attorneys or
other agents of the Trustee within the scope of their engagement.
5.8 Title Insurance Policy Proceeds. All proceeds of any Title
Insurance Policy received by the Trustee or the Collateral Agent shall be
held in Trust by the Collateral Agent subject to the Lien of the Deed of
Trust for the benefit of the Secured Parties and shall be invested in
Eligible Investments specified in writing (or by oral instructions
confirmed promptly thereafter in writing) by the Issuer until distributed
as provided herein. All such funds shall be held in a segregated trust
account to be established at the Corporate Trust Office of the Securities
Intermediary. Amounts on deposit in such account shall be under the
exclusive dominion and control of the Collateral Agent and shall be subject
to withdrawal only as provided in the following sentence. On the Note
Payment Date next succeeding the receipt of any such proceeds, after
deducting any expenses of the Trustee and the Collateral Agent therefrom,
the Collateral Agent shall deposit such proceeds into the Payment Account
and apply all such proceeds as provided in Section 5.7.
5.9 Release of Liquidity Account. On any Note Payment Date on
which the amounts on deposit in the Liquidity Account and the Payment
Account (after giving effect to transfers pursuant to Section 5.3(c)) equal
or exceed all outstanding principal of, premium, if any, and interest on
the Timber Notes and any Additional Timber Notes (including all Prepayment
Premiums which would be payable on the Timber Notes and any Additional
Timber Notes assuming the Timber Notes and any Additional Timber Notes were
paid in full on such date) plus all outstanding principal and interest then
owing to the Liquidity Providers, the Issuer may instruct the Collateral
Agent to release from the Liquidity Account and transfer to the Payment
Account for distribution pursuant to Section 5.7(b) any amounts on deposit
in the Liquidity Account; provided that such release results in all
outstanding principal of, Premium, if any, and interest on the Timber Notes
and any Additional Timber Notes plus all outstanding principal and interest
then owing to the Liquidity Providers being paid on such Note Payment Date.
5.10 Releases from Prefunding Account. The Issuer shall have the
right, at any time and from time to time, to obtain the release of funds
from the Prefunding Account upon the addition of an Additional Timber
Property or Properties (other than the Elk River Timberlands) to the
Mortgaged Property and compliance with the requirements and conditions of
this Section 5.10, and the Collateral Agent shall release the same to the
Issuer upon receipt by the Collateral Agent of a notice (the "Prefunding
Release Notice") requesting such release, stating the amount of funds to be
released and describing the Additional Timber Property or Properties to be
added to the Mortgaged Property. The Prefunding Release Notice (upon which
the Collateral Agent may rely without inquiry) shall be accompanied by the
following items (unless such item is by its terms required to be provided
simultaneously with such release):
(a) If the amount to be released exceeds $2,500,000, a Board
Resolution requesting such release and authorizing an application to the
Collateral Agent therefor.
(b) An Officer's Certificate, dated not more than 30 days prior
to the date of the application for such release stating substantially as
follows:
(i) that, in the opinion of the signer, after giving effect
to the release and the addition of the Additional Timber Property
or Properties to the Mortgaged Property, the security afforded by
the Indenture and the Deed of Trust will not be impaired by such
release and addition in contravention of the provisions of the
Indenture or the Deed of Trust;
(ii) that no Event of Default has occurred and is
continuing;
(iii) the purchase price of the Additional Timber Property
or Properties to be subjected to the Lien of the Deed of Trust;
(iv) that the amount of funds to be released from the
Prefunding Account does not exceed the lesser of (A) the purchase
price of the Additional Timber Property or Properties to be
subjected to the Lien of the Deed of Trust or (B) the then
remaining amount in the Prefunding Account;
(v) that all conditions precedent and other requirements
provided for in the Indenture and the Deed of Trust relating to
the release have been complied with (or, with respect to
conditions that cannot be satisfied until the time of such
release that such conditions will be satisfied at the time of
such release, and specifying the same); and
(vi) that, in the opinion of the signer, the acquisition of
the Additional Timber Property or Properties does not materially
adversely affect the ability of the Issuer to pay interest and
Minimum Principal Amortization on the Timber Notes.
(c) Simultaneously with such release, all actions necessary to
grant to the Collateral Agent a first priority perfected Lien on the
Additional Timber Property or Properties (subject only to Permitted
Encumbrances) shall have been taken.
(d) Simultaneously with such release, an Opinion of Counsel,
substantially to the effect that all conditions precedent and other
requirements in the Indenture and the Deed of Trust relating to the release
of such funds from the Prefunding Account have been complied with.
(e) Simultaneously with such release, evidence that a title
insurance company shall have committed to insure, by endorsement to the
existing mortgagee's title insurance policy relating the Company Owned
Timberland and the Company Timber Rights or by issuance of a new
mortgagee's title insurance policy in an amount equal to the lesser of (i)
the fair value of the Additional Timber Property or Properties or (ii) the
then outstanding principal balance of the Timber Notes and any Additional
Timber Notes plus the amount of the then existing Commitments under the
Line of Credit Agreement, that the Lien of the Deed of Trust is a first
priority perfected lien upon the Additional Timber Property or Properties,
subject only to Permitted Encumbrances, and that the Additional Timber
Property or Properties are in compliance with the California Subdivision
Map Act
The Issuer may, in any Trustee Note Payment Certificate in
respect of any Note Payment Date, direct that all or any portion of the
funds in the Prefunding Account on such Note Payment Date be transferred to
the Payment Account on such Note Payment Date and used on such Note Payment
Date to prepay principal of the Timber Notes as contemplated by Section
5.7(b)(ix) but not for any other purpose.
To the extent that the amount on deposit in the Prefunding
Account on any Monthly Deposit Date exceeds $25,000,000 less the sum of the
amounts, if any, theretofore released to the Issuer or transferred to the
Payment Account from the Prefunding Account pursuant to the foregoing
provisions of this Section 5.10, the Issuer may , in the Monthly Trustee
Certificate in respect of such Monthly Deposit Date, direct that an amount
up to the amount of such excess be transferred from the Prefunding Account
to the Collection Account on such Monthly Deposit Date and be included in
the Collection Account Disbursement Funds for such Monthly Deposit Date.
Any releases of funds from the Prefunding Account made in
compliance with this Section 5.10 shall be deemed not to impair the Lien of
the Deed of Trust.
5.11 Releases from Indebtedness Reserve Account. The Issuer may
cause the Collateral Agent to withdraw from the Indebtedness Reserve
Account (to the extent of amounts then on deposit in the Indebtedness
Reserve Account), at any time or from time to time (so long as the Timber
Notes shall not have been accelerated pursuant to Section 7.2(a)), amounts
to be used to pay (or to reimburse the Issuer for amounts paid for)
interest and principal on the Indebtedness referred to in clause (u) of
Section 4.9 (the "Indebtedness Reserve Debt") if, after giving effect
thereto and to any principal then being paid on the Indebtedness Reserve
Debt, the amount in the Indebtedness Reserve Account would not be less than
the outstanding principal amount of the Indebtedness Reserve Debt.
Notwithstanding the foregoing, no releases from the Indebtedness Reserve
Account may be effected pursuant to this Section 5.11 at any time when (x)
the Timber Notes have been accelerated pursuant to Section 7.2(b), (y) such
acceleration has not been rescinded pursuant to Section 7.2(c) and (z)
there shall be in effect a written notice delivered by the Trustee to the
Issuer, or by the Holders of a majority of outstanding principal amount of
the Timber Notes and any Additional Timber Notes to the Issuer and the
Trustee, stating that releases from the Indebtedness Reserve Account are
prohibited.
ARTICLE 6
SALE OF COMPANY OWNED TIMBERLANDS
OR COMPANY TIMBER RIGHTS;
CERTAIN TIMBER SALES; SUBSTITUTIONS
6.1 Release of Company Owned Timberlands or Company Timber
Rights. The Issuer shall have the right, at any time and from time to
time, to (i) sell or otherwise dispose of any of the Company Owned
Timberlands or Company Timber Rights or (ii) enter into any Lump Sum Sale,
only upon compliance with the requirements and conditions of this Section
6.1, and the Trustee shall instruct the Collateral Agent to (A) in the case
of clause (i), release the relevant Company Owned Timberlands or Company
Timber Rights from the Lien of the Deed of Trust or (B) in the case of
clause (ii), release the relevant Company Timber from the Lien of the Deed
of Trust or grant the proposed purchaser harvesting rights to the relevant
Company Timber prior to the Lien of the Deed of Trust, upon receipt by the
Trustee and the Collateral Agent of a Release Notice (as hereinafter
defined) requesting such release and describing the property to be so
released, which Release Notice (upon which the Trustee and the Collateral
Agent may rely without inquiry) shall be accompanied by the following items
(unless such item is by its terms required to be provided simultaneously
with such release):
(a) If the fair value of the Company Owned Timberlands, Company
Timber Rights or Company Timber, as the case may be, to be released exceeds
$2,500,000, a Board Resolution requesting such release and authorizing an
application to the Trustee and Collateral Agent therefor.
(b) An Officer's Certificate, dated not more than 30 days prior
to the date of the application for such release, stating substantially as
follows:
(i) that, in the opinion of the signer, the security
afforded by the Deed of Trust will not be impaired by such
release in contravention of the provisions of this Indenture or
the Deed of Trust;
(ii) that the Issuer will dispose of the Company Owned
Timberlands, Company Timber Rights or Company Timber, as the case
may be, so to be released, for a consideration representing, in
the opinion of the signer, its fair value, and that either (A) in
the case of a Lump Sum Sale, that such consideration consists
solely of cash, or (B) in the case of a sale of Company Owned
Timberlands or Company Timber Rights other than as described in
clause (C), that such consideration consists solely of cash or
(C) in the case of a sale of Company Owned Timberlands or Company
Timber Rights, if such consideration does not consist solely of
cash, that (x) the non-cash portion of such consideration
consists of one or more promissory note(s) or other instruments
representing the deferred portion of such sales price which do
not, in the aggregate, exceed the Maximum Non-Cash Consideration
Amount and (y) attached to such Release Notice is a schedule
which sets forth the basis for computation of the Maximum
Non-Cash Consideration Amount which schedule, to the best
knowledge of such signer, represents a true, complete and
accurate computation of such amount and (z) the non-cash portion
of such consideration shall be subjected to the Lien of the Deed
of Trust concurrently with any such release;
(iii) that (A) no Event of Default has occurred and is
continuing and (B) in the case of a sale of Company Owned
Timberlands or Company Timber Rights, if such consideration does
not consist solely of cash, that no event or condition exists
which, with the giving of notice or passage of time, or both,
would constitute a Trapping Event as of the next succeeding
Monthly Deposit Date;
(iv) the fair value, in the opinion of the signer, of the
Company Owned Timberlands, Company Timber Rights or Company
Timber, as the case may be, to be released at the date of such
application for release and, in the case of a sale of Company
Owned Timberlands or Company Timber Rights, if the consideration
does not consist solely of cash, the fair value of the non-cash
portion of such consideration;
(v) if such release relates to Company Owned Timberlands,
that the remaining Company Owned Timberlands have sufficient
access to other portions of the Company Owned Timberlands, public
or private roads and other transportation structures for the
continued use of such remaining Company Owned Timberlands in
substantially the manner carried on by the Issuer prior to such
release;
(vi) if the fair value of the property to be released is in
excess of the greater of (A) 5% of the then-remaining aggregate
principal balance of all outstanding Timber Notes and any
outstanding Additional Timber Notes or (B) $45 million multiplied
by the Lumber PPI Inflation Factor applicable on the date of such
Officer's Certificate, (I) that Rating Agency Confirmation has
been obtained or (II) that (x) such sale is made at a price no
less than the Collateral Release Price and (y) the amount on
deposit in the Payment Account on the next succeeding Note
Payment Date (or, if the date of such release is a Note Payment
Date, on such Note Payment Date) will, in the opinion of the
signer (based on such assumptions as the signer considers to be
reasonable in the circumstances), be sufficient to pay all
Premiums expected to be payable on such Note Payment Date; and
(vii) that all conditions precedent and other requirements
provided for in the Indenture and the Deed of Trust relating to
the release of the Company Owned Timberlands, Company Timber
Rights or Company Timber, as the case may be, in question have
been complied with (or, with respect to conditions that cannot be
satisfied until the time of such release, that such conditions
will be satisfied at the time of such release, and specifying the
same).
(c) If (i) the fair value of the Company Owned Timberlands,
Company Timber Rights or Company Timber, as the case may be, to be released
exceeds $25,000 and 1% of the aggregate principal balance of the Timber
Notes and any Additional Timber Notes or (ii) the fair value of the Company
Owned Timberlands, Company Timber Rights or Company Timber, as the case may
be, to be released, together with the fair value of all Company Owned
Timberlands, Company Timber Rights and Company Timber theretofore released
in such calendar year, exceeds 10% of the aggregate principal balance of
the Timber Notes and any Additional Timber Notes, a certificate of an
Independent Appraiser, stating:
(1) the fair value, in the opinion of the signer, of the Company
Owned Timberlands, Company Timber Rights or Company Timber, as the
case may be, to be released at the date of such application for
release and, in the case of the sale of Company Owned Timberlands or
Company Timber Rights, if such consideration does not consist solely
of cash, the fair value of the non-cash portion of such consideration;
and
(2) that, in the opinion of the signer, the security afforded by
the Deed of Trust will not be impaired by such release in
contravention of the terms of the Deed of Trust or the Indenture.
(d) Simultaneously with such release, all cash proceeds from the
Company Owned Timberlands, Company Timber Rights or Company Timber, as the
case may be, shall have been deposited into the Collection Account and, in
the case of the sale of Company Owned Timberlands or Company Timber Rights,
if such consideration does not consist solely of cash, (i) the non-cash
portion of such consideration shall consist of one or more promissory
note(s) or other instruments representing the deferred portion of such
sales price which do not, in the aggregate, exceed the Maximum Non-Cash
Consideration Amount and (ii) all action necessary to grant to the Trustee
a first priority perfected security interest in the non-cash portion of
such consideration shall have been taken.
(e) Simultaneously with such release, an Opinion of Counsel,
substantially to the effect that all conditions precedent and other
requirements herein and under the Deed of Trust relating to the release of
such Company Owned Timberlands, Company Timber Rights or Company Timber, as
the case may be, have been complied with.
(f) If such release relates to Company Owned Timberlands or
Company Timber Rights, and the Company Owned Timberlands or Company Timber
Rights to be released are less than all of the Company Owned Timberlands
and Company Timber Rights, simultaneously with such release evidence that a
title insurance company shall have committed to issue an endorsement to the
Title Insurance Policy relating to the remaining Company Owned Timberlands
and Company Timber Rights confirming that after such release such
mortgagee's Title Insurance Policy insures against any loss that may be
sustained by the Trustee or the Collateral Agent by reason of any loss of
priority of the Lien of the Deed of Trust on the remaining Company Owned
Timberlands and Company Timber Rights occasioned by the release of the
Company Owned Timberlands or Company Timber Rights being released.
(g) If required by Section 6.1(b)(vi), a copy of the Rating
Agency Confirmation.
In connection with any such release, the Issuer shall execute,
deliver and record or file and obtain such instruments as the Collateral
Agent and the Trustee may reasonably require.
The Issuer shall exercise its rights under this Section by
delivery to the Collateral Agent and the Trustee of a notice (each, a
"Release Notice"), which shall refer to this Section, describe with
particularity the items of property proposed to be covered by the release
and be accompanied by a form of the instruments proposed to give effect to
the release in form for execution by the Collateral Agent and/or the Deed
of Trust Trustee (the "Release Documents"). Upon compliance with this
Section 6.1, the Issuer shall direct the Collateral Agent and/or the Deed
of Trust Trustee to execute, acknowledge (if applicable) and deliver to the
Issuer a counterpart of the Release Documents within two Business Days
after receipt by the Collateral Agent and the Trustee of a Release Notice
and the satisfaction of the requirements of this Section.
Any promissory notes or instruments representing the deferred
portion of the sales price of Company Owned Timberlands or Company Timber
Rights sold pursuant to this Section 6.1 (the "Section 6.1 Notes") shall be
registered in the name of, or be payable to the order of, or be assigned to
or endorsed to the order of the Collateral Agent, as collateral agent for
the benefit of the Secured Parties, and shall be held by the Collateral
Agent subject to the Lien of the Deed of Trust, until the next succeeding
Monthly Deposit Date. On such Monthly Deposit Date, the Section 6.1 Notes
shall be disposed of by the Collateral Agent in the manner provided in
Section 5.3(d)(iv). All payments of principal of, interest on, or other
amounts payable with respect to any Section 6.1 Notes received by the
Collateral Agent shall be deposited into the Collection Account to be
included in Collection Account Disbursement Funds to be withdrawn from the
Collection Account as part of the Collection Account Disbursement on the
next succeeding Monthly Deposit Date, and all proceeds of the sale of the
Section 6.1 Notes shall be applied as provided in Section 5.3(d)(iv). The
Collateral Agent is authorized to take such actions as are necessary and
appropriate to transfer the Section 6.1 Notes as provided in Section
5.3(d)(iv).
Any releases of Company Owned Timberlands, Company Timber Rights
or Company Timber, as the case may be, made in compliance with the
provisions of this Section 6.1 shall be deemed not to impair the Lien of
the Deed of Trust.
If any of the non-cash portion of any consideration received for
the release of Company Owned Timberlands or Company Timber Rights consists
of real property, then such release shall be governed by Section 6.4 and
not this Section 6.1.
6.2 Sale of Company Timber. Nothing in Section 6.1 or in the
Deed of Trust shall be deemed to prohibit the Issuer from selling Company
Timber pursuant to Pay-as-You-Harvest Sales in the manner and to the extent
contemplated by this Indenture and the Deed of Trust (including, without
limitation, pursuant to the New Master Purchase Agreement), which sales may
be conducted without any release or consent by the Collateral Agent or
Trustee.
6.3 Sale of Pacific Lumber Timber Rights Property. Nothing in
this Indenture or the Deed of Trust shall be deemed to prohibit the Issuer
from selling or otherwise disposing of any Pacific Lumber Timber Rights
Property, and the Trustee shall instruct the Collateral Agent to release
the relevant Pacific Lumber Timber Rights Property from the Lien of the
Deed of Trust upon receipt by the Trustee and the Collateral Agent of a
Pacific Lumber Timber Rights Property Release Notice (as hereinafter
defined) requesting such release and describing the property to be so
released, which Pacific Lumber Timber Rights Property Release Notice (upon
which the Trustee and the Collateral Agent may rely without inquiry) shall
be accompanied by the following items (unless such item is by its terms
required to be provided simultaneously with such release):
(i) An Officer's Certificate, dated not more than 30 days
prior to the date of the application for such release, stating
substantially as follows:
(1) that the remaining Company Owned Timberlands have sufficient
access to other portions of the Company Owned Timberlands, public or
private roads and other transportation structures for the continued
use of such remaining Company Owned Timberlands in substantially the
manner carried on by the Issuer prior to such release;
(2) that the Company Owned Timberlands to be released consist
solely of Pacific Lumber Timber Rights Property (or, if such Company
Owned Timberlands consist partially of Pacific Lumber Timber Rights
Property, that the conditions set forth in Section 6.1 or 6.4 with
respect to the portion of such Company Owned Timberlands which is not
Pacific Lumber Timber Rights Property have been satisfied) (or, with
respect to conditions that cannot be satisfied until the time of such
release, that such conditions will be satisfied at the time of such
release, and specifying the same); and
(3) that all conditions precedent and other requirements
provided for in the Indenture and the Deed of Trust relating to the
release of such Pacific Lumber Timber Rights Property have been
complied with (or, with respect to conditions that cannot be satisfied
until the time of such release, that such conditions will be satisfied
at the time of such release, and specifying the same).
(ii) Simultaneously with such release, evidence that a title
insurance company shall have committed to issue an endorsement to
the Title Insurance Policy relating to the remaining Company
Owned Timberlands and Company Timber Rights confirming that after
such release such Title Insurance Policy insures against any loss
that may be sustained by the Trustee or the Collateral Agent by
reason of any loss of priority of the Lien of the Deed of Trust
on any of the remaining Company Owned Timberlands and Company
Timber Rights occasioned by the release of the Company Owned
Timberlands being released.
The Issuer shall exercise its rights under this Section by
delivery to the Collateral Agent and the Trustee of a notice (each a
"Pacific Lumber Timber Rights Property Release Notice"), which shall refer
to this Section, describe with particularity the items of property proposed
to be covered by the release and be accompanied by a form of the
instruments proposed to give effect to the release in form for execution by
the Collateral Agent and/or the Deed of Trust Trustee (the "Pacific Lumber
Timber Rights Property Release Documents"). Upon compliance with this
Section 6.3, the Issuer shall direct the Collateral Agent and/or the Deed
of Trust Trustee to execute, acknowledge (if applicable) and deliver to the
Issuer a counterpart of the Pacific Lumber Timber Rights Property Release
Documents within two Business Days after receipt by the Collateral Agent
and the Trustee of a Pacific Lumber Timber Rights Property Release Notice
and the satisfaction of the requirements of this Section.
Any releases of Pacific Lumber Timber Rights Property made in
compliance with the provisions of this Section 6.3 shall be deemed not to
impair the Lien of the Deed of Trust.
The proceeds of a sale or other disposition of Pacific Lumber
Timber Rights Property conducted in accordance with the provisions of this
Section 6.3 shall be payable to the Issuer or as the Issuer may direct,
free and clear of the Lien of the Deed of Trust.
6.4 Release of Company Owned Timberlands or Company Timber
Rights Upon Substitution of Property. The Issuer shall have the right, at
any time and from time to time, to obtain the release of Company Owned
Timberlands (or timber rights thereon) or Company Timber Rights from the
Lien of the Deed of Trust upon the addition of Substitute Timber Property
and compliance with the requirements and conditions of this Section 6.4,
and the Trustee shall instruct the Collateral Agent to release the same
from the Lien of the Deed of Trust upon receipt by the Trustee and the
Collateral Agent of a Release and Substitution Notice (as hereinafter
defined) requesting such release and describing the property to be released
and the Substitute Timber Property, which Release and Substitution Notice
(upon which the Trustee and the Collateral Agent may rely without inquiry)
shall be accompanied by the following items (unless such item is by its
terms required to be provided simultaneously with such release):
(a) If the fair value of the Company Owned Timberlands (or
timber rights thereon) or Company Timber Rights, as the case may be, to be
released exceeds $2,500,000, a Board Resolution requesting such release and
substitution and authorizing an application to the Trustee and the
Collateral Agent therefor.
(b) An Officer's Certificate, dated not more than 30 days prior
to the date of the application for such release and substitution, stating
substantially as follows:
(i) that, in the opinion of the signer, after giving effect
to the release and substitution, the security afforded by the
Deed of Trust will not be impaired by such release and
substitution in contravention of the provisions of this Indenture
or the Deed of Trust;
(ii) that no Event of Default has occurred and is
continuing;
(iii) the fair value, in the opinion of the signer, of the
Company Owned Timberlands (or timber rights thereon) or Company
Timber Rights to be released at the date of such application for
release;
(iv) the fair value, in the opinion of the signer, of the
Substitute Timber Property to be subjected to the Lien of the
Deed of Trust;
(v) that the consideration to be received by the Issuer
consists solely of Substitute Timber Property, or a combination
of cash and Substitute Timber Property;
(vi) that the remaining Company Owned Timberlands (after
giving effect to the addition of the Substitute Timber Property)
have sufficient access to other Company Owned Timberlands, public
or private roads and other transportation structures for the
continued use of such remaining Company Owned Timberlands in
substantially the manner carried on by the Issuer prior to such
release;
(vii) if the fair value of the Company Owned Timberlands (or
timber rights thereon) or Company Timber Rights to be released is
in excess of the greater of (A) 5% of the then-remaining
aggregate principal balance of all outstanding Timber Notes and
any outstanding Additional Timber Notes or (B) $45 million
multiplied by the Lumber PPI Inflation Factor applicable on the
date of such Officer's Certificate, that Rating Agency
Confirmation has been obtained;
(viii) that the signer knows of no reason why a Timber
Harvesting Plan with respect to the Substitute Timber Property
should not be available on terms not materially more onerous than
would have been the case with respect to the released property;
(ix) that all conditions precedent and other requirements
provided for in this Indenture and the Deed of Trust relating to
the release of the Company Owned Timberlands (or timber rights
thereon) or Company Timber Rights and substitution of the
Substitute Timber Property in question have been complied with
(or, with respect to conditions that cannot be satisfied until
the time of such release and substitution, that such conditions
will be satisfied at the time of such release and substitution,
and specifying the same); and
(x) in the event that any of the Substitute Timber Property
consists of timber rights, that such timber rights consist of the
ownership of, and (subject to compliance with applicable law) the
right, in perpetuity or until at least December 31, 2048, to
harvest, all trees and timber (including standing timber) then
located or thereafter growing in the soil of the timberlands
which are subject to such timber rights.
(c) If (i) the fair value of the Company Owned Timberlands (or
timber rights thereon) or Company Timber Rights to be released exceeds
$25,000 and 1% of the aggregate principal balance of the Timber Notes and
any Additional Timber Notes or (ii) the fair value of the Company Owned
Timberlands (or timber rights thereon) or Company Timber Rights to be
released, together with the fair value of all Company Owned Timberlands (or
timber rights thereon), Company Timber Rights and Company Timber
theretofore released in such calendar year, exceeds 10% of the aggregate
principal balance of the Timber Notes and any Additional Timber Notes, a
certificate of an Independent Appraiser, stating:
(1) the fair value, in the opinion of the signer, of (x) the
Company Owned Timberlands (or timber rights thereon) or Company Timber
Rights to be released and (y) the Substitute Timber Property to be
substituted, in each case at the date of such application for release;
and
(2) that, in the opinion of the signer, the security afforded by
the Deed of Trust will not be impaired by such release and
substitution in contravention of the terms of the Deed of Trust or
this Indenture.
(d) The then fair value of the Substitute Timber Property,
together with any cash consideration received, shall be at least equal to
the then fair value of the Company Owned Timberlands (or timber rights
thereon) or Company Timber Rights to be released as evidenced by the
certificates delivered pursuant to clauses (b) and/or (c) above.
(e) Simultaneously with any release and substitution, all
actions necessary to grant to the Collateral Agent a first priority
perfected Lien on the Substitute Timber Property (subject only to Permitted
Encumbrances) shall have been taken, and if any cash consideration is
received, all such cash shall have been deposited into the Collection
Account.
(f) Simultaneously with such release an Opinion of Counsel,
substantially to the effect that all conditions precedent and other
requirements herein and under the Deed of Trust relating to the release of,
and substitution for, such Company Owned Timberlands (or timber rights
thereon) or Company Timber Rights have been complied with.
(g) Simultaneously with such release, evidence that a title
company shall have committed to issue an endorsement to the Title Insurance
Policy relating to the remaining Company Owned Timberlands and Company
Timber Rights confirming that after such release such Title Insurance
Policy insures against any loss that may be sustained by the Trustee or the
Collateral Agent by reason of any loss of priority of the Lien of the Deed
of Trust on the remaining Company Owned Timberlands or Company Timber
Rights occasioned by the release of the Company Owned Timberlands or
Company Timber Rights being released and further insuring, by endorsement
to the existing Title Insurance Policy or by issuance of a new Title
Insurance Policy in an amount equal to the lesser of (i) the fair value of
the Substitute Timber Property or (ii) the then outstanding principal
balance of the Timber Notes and any Additional Timber Notes, plus the
amount of the then existing Commitments under the Line of Credit Agreement,
that the Lien of the Deed of Trust is a first priority perfected Lien upon
the Substitute Timber Property, subject only to Permitted Encumbrances, and
that the Substitute Timber Property is in compliance with the California
Subdivision Map Act.
(h) If required by Section 6.4(b)(vii), a copy of the Rating
Agency Confirmation.
In connection with any such release, the Issuer shall execute,
deliver and record or file and obtain such instruments as the Collateral
Agent and the Trustee may reasonably require including, without limitation,
an amendment to the Deed of Trust subjecting the Substitute Timber Property
to the Lien thereof.
The Issuer shall exercise its rights under this Section 6.4 by
delivery to the Collateral Agent and the Trustee of a notice (each, a
"Release and Substitution Notice"), which shall refer to this Section,
describe with particularity the items of property proposed to be covered by
the release and proposed to be substituted for such released property and
be accompanied by a form of the instruments proposed to give effect to the
release and substitution in form for execution by the Collateral Agent
and/or the Deed of Trust Trustee (the "Release and Substitution
Documents"). Upon compliance with this Section 6.4, the Issuer shall
direct the Collateral Agent and/or the Deed of Trust Trustee to execute,
acknowledge (if applicable) and deliver to the Issuer a counterpart of the
Release and Substitution Documents within two Business Days after receipt
by the Collateral Agent and the Trustee of a Release and Substitution
Notice and the satisfaction of the requirements of this Section. For
purposes of this Section 6.4, timber rights on Company Owned Timberlands
means the ownership of, and (subject to compliance with applicable law) the
right in perpetuity (or for a period of time) to harvest, all or a portion
of the trees and timber, including standing timber and crops, then located
or thereafter growing in the soil of the Company Owned Timberlands which
are subject to such timber rights.
Any releases and substitutions of Company Owned Timberlands (or
timber rights thereon) or Company Timber Rights made in compliance with the
provisions of this Section 6.4 shall be deemed not to impair the Lien of
the Deed of Trust.
In addition to the foregoing requirements, no release and
substitution of Company Owned Timberlands (or timber rights thereon) or
Company Timber Rights shall be permitted pursuant to this Section 6.4
unless:
(i) the aggregate fair value of all Company Owned
Timberlands (or timber rights thereon) and Company Timber Rights
released or to be released in accordance with this Section 6.4 at
any time during the term of the Timber Notes would not exceed
$90,000,000 multiplied by the Lumber PPI Inflation Factor then
applicable (unless the Issuer shall have obtained Rating Agency
Confirmation);
(ii) the types of timber contained in the Substitute Timber
Property are of the same types as contained on the Company Owned
Timberlands (or timber rights thereon) or Company Timber Rights
to be released or are otherwise included on the Structuring
Schedule; and
(iii) either (A) the number of Mbfe of timber on the
Substitute Timber Property being acquired (as indicated in an
Officer's Certificate) is at least equal to the number of Mbfe of
Company Timber on the Company Owned Timberlands (or in respect of
the timber rights thereon), or subject to the Company Timber
Rights, being released (as indicated in an Officer's Certificate)
(or, if Company Owned Timberlands (or timber rights thereon) or
Company Timber Rights are being released in exchange for
Substitute Timber Property and cash, the number of Mbfe of timber
on the Substitute Timber Property being acquired (as indicated in
an Officer's Certificate) is at least equal to the number of Mbfe
of Company Timber on the Company Owned Timberlands (or in respect
of the timber rights thereon), or subject to the Company Timber
Rights, being released (as indicated in an Officer's Certificate)
multiplied by a fraction, the numerator of which is the fair
value of the Substitute Timber Property to be acquired and the
denominator of which is the sum of the fair value of the
Substitute Timber Property to be acquired and the cash to be
received) or (B) the Issuer elects (in an Officer's Certificate)
to recognize Deemed Production in respect of a number of Mbfe of
Company Timber equal to the excess, if any, of the number of Mbfe
of Company Timber on the Company Owned Timberlands (or in respect
of the timber rights thereon), or subject to the Company Timber
Rights, being released (or, if Company Owned Timberlands (or the
timber rights thereon) or Company Timber Rights are being
released in exchange for Substitute Timber Property and cash,
equal to the excess, if any, of the number of Mbfe of Company
Timber on the Company Owned Timberlands (or in respect of the
timber rights thereon), or subject to the Company Timber Rights,
being released multiplied by a fraction, the numerator of which
is the fair value of the Substitute Timber Property to be
acquired and the denominator of which is the sum of the fair
value of the Substitute Timber Property to be acquired and the
cash to be received) over the number of Mbfe of timber on the
Substitute Timber Property being acquired or (C) the value of the
Company Owned Timberlands (or timber rights thereon) or Company
Timber Rights being released is less than $100,000 multiplied by
the Lumber PPI Inflation Factor then applicable. The Officer's
Certificate delivered pursuant to the preceding clauses (A) and
(B) may be based upon good faith estimates of a Responsible
Officer of the Issuer of the Mbfe of Company Timber on the
Substitute Timber Property to be acquired.
For the purposes of Sections 6.1(c) and 6.4(c), the fair value of
Company Owned Timberlands (or timber rights thereon), Company Timber Rights
and Company Timber released in any calendar year shall include (i) all Lump
Sum Sales pursuant to Section 6.1, (ii) all sales of Company Owned
Timberlands and Company Timber Rights pursuant to Section 6.1 and (iii) all
releases and substitutions pursuant to Section 6.4, but shall exclude (A)
all sales or other dispositions of Pacific Lumber Timber Rights Property
pursuant to Section 6.3 and (B) all sales of Company Timber pursuant to
Section 6.2.
6.5 Trust Indenture Act Requirements. The release of (i) any of the
Company Owned Timberlands (or timber rights thereon) or Company Timber
Rights or (ii) Company Timber pursuant to a Lump Sum Sale, from the Lien of
the Deed of Trust will not be deemed to impair the Lien of the Deed of
Trust in contravention of the provisions hereof and thereof if and to the
extent such Company Owned Timberlands (or timber rights thereon), Company
Timber Rights or Company Timber, as the case may be, is released pursuant
to the terms of this Indenture and the Deed of Trust. The Trustee and each
of the Noteholders and the Liquidity Providers acknowledge that a release
of Company Owned Timberlands (or timber rights thereon), Company Timber
Rights or Company Timber, as the case may be, in accordance with the terms
of the Deed of Trust and this Indenture will not be deemed for any purpose
to be an impairment of the Lien of the Deed of Trust in contravention of
the terms of this Indenture and the Deed of Trust. To the extent
applicable, without limitation, the Issuer and each obligor on the Timber
Notes and any Additional Timber Notes shall cause TIA Section 314(d)
relating to the release of property from the Lien of the Deed of Trust to
be complied with. Any certificate or opinion required by TIA Section
314(d) may be made by a Responsible Officer of the Issuer, except in cases
in which TIA Section 314(d) requires that such certificate or opinion be
made by an Independent person.
ARTICLE 7
DEFAULTS AND REMEDIES
7.1 Events of Default. "Event of Default" with respect to the
Timber Notes, wherever used herein, means any one of the following events:
(1) default in the payment of principal of any Timber Note
on the Final Maturity Date;
(2) failure of the Issuer to cause the amount on deposit in
the Payment Account on any Note Payment Date, to the extent such
amount is available for such application pursuant to Section 5.7, to
be applied to pay any amount of Minimum Principal Amortization Amount
(as such amount may be modified pursuant to Section 2.14(b)) or
Depletion Amortization Amount (as such amount may be modified pursuant
to Section 2.14(b)) that has become due or payable on any Class of
Timber Notes, and the continuation of such default for a period of
five days);
(3) default in the payment of any Regular Interest or
Default Interest on any Timber Note or in the payment of any interest
on any Additional Timber Note (except interest on any premiums) when
the same becomes due and payable and the continuation of such default
for a period of five days;
(4) failure of the Issuer to cause the amount on deposit in
the Payment Account on any Note Payment Date, to the extent such
amount is available for such application pursuant to Section 5.7, to
be applied to pay any amount of premium that has become due or payable
on any Timber Note or Additional Timber Note and the continuation of
such default for a period of five days;
(5) failure of the Issuer to cause the amount on deposit in
the Payment Account on any Note Payment Date, to the extent such
amount is available for such application pursuant to Section 5.7, to
be applied to pay any amount of interest that has become due or
payable on any amount of Premium on any Timber Note (or on any premium
on any Additional Timber Note), and the continuation of such default
for a period of five days;
(6) the sale, transfer, conveyance, pledge or hypothecation
of any membership interest in the Issuer or any interest therein by
Pacific Lumber (other than any transfer incidental to a merger or sale
or other disposition of substantially all of the assets of Pacific
Lumber (or substantially all of the assets of Pacific Lumber excluding
its interest in Salmon Creek) permitted by Section 4.2 of the New
Services Agreement or a transfer incidental to a merger, consolidation
or transfer of assets of the Issuer permitted by Section 4.13 of this
Indenture).
(7) default in the performance or observance of any
covenant or agreement of the Issuer set forth in Sections 4.4(b), (c),
(d) and (e), 4.5, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17,
4.20, 4.21, 4.22, 4.23, 4.24, 4.25 and 4.26 of this Indenture or
Sections 7.1(c, (d), (e), (g) and (h), and 7.2(a), (b) and (c) of the
Deed of Trust (and, in each such case, to the extent such default is
remediable, such default shall continue for a period of 15 days
following written notice from the Trustee, or from the Holders of 25%
in aggregate principal amount of the outstanding Timber Notes and any
Additional Timber Notes);
(8) the failure of the Board of Managers to contain at
least two individuals who are Independent Managers, and the
continuation of such failure for a period of 30 consecutive days (or,
if such failure results from the death or resignation of an
Independent Manager, and provided that the Issuer is diligently
attempting to obtain replacement Independent Managers, the
continuation of such failure for a period of 90 days);
(9) default in the observance or performance of any
covenant or agreement of the Issuer made in this Indenture or the Deed
of Trust (other than a covenant or agreement, a default in the
observance or performance of which is elsewhere in this Section 7.1
specifically dealt with); or the Services Provider shall default in
the observance or performance of any covenant or agreement made by it
in the New Services Agreement; or Pacific Lumber shall default in the
observance of any covenant or agreement made by it in the New Master
Purchase Agreement or in any Conveyance Document (and, in each such
case, to the extent such default is remediable, such default shall
continue for a period of 30 days following written notice from the
Trustee, or from the Holders of 25% in aggregate principal amount of
the outstanding Timber Notes and any Additional Timber Notes);
(10) any representation or warranty of the Issuer made in
this Indenture, the Deed of Trust or any other Operative Document, or
any representation or warranty made by Pacific Lumber in any Operative
Document, or, in each such case, in any certificate or other writing
delivered pursuant hereto or thereto, shall prove to have been
incorrect in any material respect as of the time when the same was
made (and, in each such case, to the extent such default is
remediable, such default shall continue for a period of 30 days
following written notice from the Trustee, or from the Holders of 25%
in aggregate principal amount of the outstanding Timber Notes and any
Additional Timber Notes);
(11) the Issuer shall become Bankrupt or Insolvent; or
(12) a final judgment or judgments for the payment of money
in excess of $500,000 in the aggregate shall be rendered against the
Issuer by one or more courts, administrative tribunals or other bodies
having jurisdiction over the Issuer and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within 30 days from
the date of entry thereof and the Issuer shall not, within said period
of 30 days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal.
7.2 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default under Section 7.1(11) shall occur, an
amount equal to all amounts payable with respect to the Timber Notes and
any Additional Timber Notes shall, without any demand, presentment or
notice (all of which are expressly waived by the Issuer), become
immediately due and payable.
(b) If any Event of Default under Sections 7.1(1), (2), (3), (4)
or (5) shall occur and be continuing, the Trustee may, or, if the Holders
of 25% in aggregate outstanding principal amount of the Timber Notes and
any Additional Timber Notes so elect, shall, declare all amounts payable
with respect to the Timber Notes and any Additional Timber Notes to be
immediately due and payable, and upon any such declaration of acceleration
such amount shall become immediately due and payable.
(c) If an Event of Default under Sections 7.1(6), (7), (8), (9),
(10) or (12) shall occur and be continuing, if the Majority Holders so
elect, the Trustee shall declare all amounts payable with respect to the
Timber Notes and any Additional Timber Notes to be immediately due and
payable, and upon any such declaration of acceleration such amount shall
become immediately due and payable.
(d) At any time after such declaration of acceleration of
maturity has been made (other than a declaration approved by the
Noteholders of 100% in aggregate principal amount of outstanding Timber
Notes and any Additional Timber Notes) and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article 7 provided, the Majority Holders, by written notice to the
Issuer and the Trustee, may rescind and annul such declaration of
acceleration and its consequences if:
(1) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay:
(x) all payments of principal of and interest and
premium, if any, on the Timber Notes and any Additional Timber
Notes and all other amounts that would then be due and payable
hereunder or upon the Timber Notes and any Additional Timber
Notes otherwise than by virtue of such declaration of
acceleration; and
(y) all sums paid or advanced by the Trustee and the
Collateral Agent hereunder or under the Deed of Trust on behalf
of the Issuer and the reasonable compensation, expenses,
disbursements and advances of the Trustee and the Collateral
Agent and their agents and counsel; and
(2) all Events of Default, other than the nonpayment of the
principal of the Timber Notes and any Additional Timber Notes that has
become due and payable solely by such declaration of acceleration,
have been cured or waived.
(e) No such rescission and annulment under this Indenture shall
affect any subsequent default or impair any right consequent thereon.
7.3 Collection of Indebtedness and Suits for Enforcement by
Trustee.
(a) The Issuer covenants that if the Timber Notes have been
declared due and payable pursuant to paragraph (b) or (c) of Section 7.2
and such declaration has not been rescinded and annulled pursuant to
Section 7.2(d), the Issuer will, upon demand of the Trustee, pay to the
Liquidity Providers the whole amount then due and payable to the Liquidity
Providers and pay to the Trustee, for the benefit of the Noteholders, the
whole amount then due and payable on all outstanding Timber Notes and any
Additional Timber Notes and in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection,
including, without limitation, the reasonable compensation, expenses,
disbursements and advances of the Trustee and the Collateral Agent and
their agents and counsel.
(b) If the Issuer fails forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may exercise all such rights as are provided under this Indenture and the
Deed of Trust, may institute a Proceeding in any court of competent
jurisdiction for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the
same against the Issuer or other obligor upon such Timber Notes and
Additional Timber Notes and collect in the manner provided by law out of
the property of the Issuer or other obligor upon such Timber Notes and
Additional Timber Notes, wherever situated, the monies adjudged or decreed
to be payable.
(c) If an Event of Default occurs and is continuing, the Trustee
may, as more particularly provided in Section 7.4, proceed to protect and
enforce its rights and the rights of the Noteholders and the holders of any
Additional Timber Notes, by such appropriate Proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture
or the Deed of Trust or in aid of the exercise of any power granted herein
or to enforce any other proper remedy or legal or equitable right vested in
the Trustee by this Indenture or the Deed of Trust or by law.
(d) In any Proceeding brought by the Trustee, the Trustee shall
be held to represent the Noteholders and it shall not be necessary for any
such Noteholder to be a party to any such Proceeding.
7.4 Trustee May File Proofs of Claim.
(a) Without limiting the rights of any Noteholder to do the
same, the Trustee, in case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other similar Proceeding relating to the Issuer or any other
obligor upon the Timber Notes or any Additional Timber Notes or to the
Mortgaged Property or any Person having or claiming any ownership interest
in the Mortgaged Property, or to the creditors or property of the Issuer or
such other obligor or Person (irrespective of whether the principal of any
Timber Notes or any Additional Timber Notes shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions
of this Section 7.4), shall be entitled and empowered, by intervention in
such Proceeding or otherwise:
(1) to file and prove a claim or claims for the aggregate amount
of principal, interest and premiums, if any, owing and unpaid in
respect of the Timber Notes and any Additional Timber Notes and to
file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including, without
limitation, any claim for reasonable compensation, expenses,
disbursements and advances of the Trustee and each predecessor
Trustee, and their respective agents, attorneys and counsel, except as
a result of negligence or bad faith) and of the Noteholders allowed in
such Proceeding; and
(2) to collect and receive any monies or other property payable
or deliverable on any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized
by each Noteholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments
directly to the Noteholders, to pay the Trustee and the Collateral
Agent any amount due to either of them for the reasonable
compensation, expenses, disbursements and advances of the Trustee and
the Collateral Agent, their agents and counsel, and any other amounts
due the Trustee and the Collateral Agent under Section 9.7.
(b) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Timber Notes or any Additional Timber Notes or
the rights of any Noteholder thereof or to authorize the Trustee to vote in
respect of the claim of any Noteholder in any such proceeding or to vote
for the election of a trustee in bankruptcy or similar person.
7.5 Trustee May Enforce Claims Without Possession of Notes. All
rights of action and of asserting claims under this Indenture or under any
of the Timber Notes or any of the Additional Timber Notes may be enforced
by the Trustee without the possession of any of the Timber Notes or any of
the Additional Timber Notes or the production thereof in any Proceeding,
and any such Proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable expenses,
disbursements and compensation of the Trustee, each predecessor Trustee and
their respective agents and attorneys, be for the ratable benefit of the
Noteholders and shall be applied in accordance with Section 7.7.
7.6 Remedies. If an Event of Default shall have occurred and be
continuing, the Trustee may institute a Proceeding in its own name and as
trustee of an express trust for the collection of all amounts then payable
on the Timber Notes and on any Additional Timber Notes or under the Line of
Credit Agreement or under this Indenture or the Deed of Trust with respect
thereto, and exercise all remedies under this Indenture or the Deed of
Trust, whether by declaration or otherwise, enforce any judgment obtained
and collect from the Issuer and any other obligor upon such Timber Notes or
Additional Timber Notes monies adjudged due.
7.7 Application of Money Collected. On any date when the Timber
Notes have been declared due and payable during the continuance of an Event
of Default and such declaration and its consequences have not been
rescinded and annulled (a "Post-Acceleration Date"), any monies collected
by the Trustee pursuant to this Article Seven or otherwise with respect to
the Timber Notes and on any Additional Timber Notes shall be deposited into
the Payment Account and shall be applied, first, to amounts described in
Section 9.7 (exclusive of indemnification payments) and to Liquidity
Providers' Expenses (exclusive of indemnification payments), second, to the
payment of all interest (other than Supplemental Liquidity Provider
Interest) and principal owing to the Liquidity Providers, third, to the
payment of interest (other than interest on premiums) due on each Class of
Timber Notes and any Additional Timber Notes pro rata in proportion to the
interest (other than interest on premiums) due on each such Class, fourth,
to the payment of principal on each Class of Timber Notes and any
Additional Timber Notes pro rata in proportion to the principal due on each
such Class, fifth, to the payment of any interest on premiums on each Class
of Timber Notes and any Additional Timber Notes pro rata in proportion to
the interest on premiums due on each such Class, sixth, to the payment of
any premiums on each Class of Timber Notes and any Additional Timber Notes
pro rata in proportion to the premiums due on each such Class, seventh, to
the payment of any Additional Liquidity Provider Fees and any Supplemental
Liquidity Provider Interest owing under the Line of Credit Agreement,
eighth, to the payment of indemnification payments under Section 9.7 and
indemnification payments owing by the Issuer under the Line of Credit
Agreement and, ninth, to the Issuer, free and clear of the Lien of the
Deed of Trust.
7.8 Limitation of Suits. No Holder of any Timber Note or
Additional Timber Note shall have any right to institute any Proceeding
with respect to this Indenture, the Timber Notes, any Additional Timber
Notes or the Deed of Trust, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, or under the Timber Notes or
the Deed of Trust, unless:
(a) such Noteholder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the holders of not less than 25% in aggregate outstanding
principal amount of Timber Notes, any Additional Timber Notes and Advances
shall have made a written request to the Trustee to institute a proceeding
in respect of such Event of Default in its own name hereunder or under the
Deed of Trust;
(c) such holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
complying with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such Proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Majority Holders (as
such term is defined in Section 7.13(c)).
A Noteholder may not use this Indenture to prejudice the rights
of another Noteholder or to obtain a preference or priority over such other
Noteholder.
7.9 Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture or the
Deed of Trust, the Holder of any Timber Note or Additional Timber Note
shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and interest and premium, if any, on, such
Timber Note or Additional Timber Note on or after the respective due dates
thereof expressed in such Timber Note or Additional Timber Note or in this
Indenture and to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such
Noteholder; provided, however, that no Holder shall have the right to
institute any such suit, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver or loss of the
Lien of the Deed of Trust. Without limiting the foregoing, in no event
shall any Noteholder exercise any right of set-off, banker's lien, or the
like, against any deposit account or property of the Company held or
maintained by such Noteholder or amount owing by such Noteholder to the
Company, without prior consent of the Majority Holders, which rights of
set-off, banker's lien and the like are waived by the Noteholder's
acceptance of its Note and the benefit of this Indenture.
7.10 Restoration of Rights and Remedies. If the Trustee, the
Collateral Agent or any Noteholder has instituted any Proceeding to enforce
any right or remedy under this Indenture or the Deed of Trust and such
Proceeding has been discontinued or abandoned for any reason or has been
determined adversely to the Trustee, the Collateral Agent or such
Noteholder, then and in every such case the Issuer, the Trustee, the
Collateral Agent and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder and under the Deed of Trust, and thereafter all rights
and remedies of the Trustee, the Collateral Agent and the Noteholders shall
continue as though no such Proceeding had been instituted.
7.11 Rights and Remedies Cumulative. No right or remedy
conferred upon or reserved to the Trustee, the Collateral Agent or the
Noteholders in this Indenture or the Deed of Trust is intended to be
exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or thereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of
any right or remedy hereunder or thereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate
right or remedy.
7.12 Delay or Omission Not a Waiver. No delay or omission of the
Trustee, the Collateral Agent or any Noteholder to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or
remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 7, by
the Deed of Trust or by law to the Trustee, the Collateral Agent or the
Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee, the Collateral Agent or, subject to
Section 7.8, the Noteholders, as the case may be.
7.13 Control by Majority Holders. Except as otherwise specified
in this Indenture, the Majority Holders shall have the right to direct the
time, method, and place of conducting any Proceeding for any remedy
available to the Trustee under this Indenture or otherwise with respect to
the Timber Notes or exercising any trust or power conferred on the Trustee
or the Collateral Agent, including the giving of any notice or direction
under the Deed of Trust, provided that:
(a) such direction shall not be in conflict with any rule of law
or with this Indenture; and
(b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction.
(c) the Liquidity Providers shall have the right to vote pro
rata with the Holders of the Timber Notes and any Additional Timber Notes,
based on the outstanding principal amount of Timber Notes, Additional
Timber Notes and Advances, in directing the Trustee or Collateral Agent
with respect to whether and how to exercise rights against the Mortgaged
Property under the Deed of Trust and, for such purpose (and for purposes of
Section 7.8(e)), the "Majority Holders" shall be deemed to consist of a
majority by outstanding principal amount of Holders of Timber Notes and
Additional Timber Notes and the Liquidity Providers.
7.14 Course of Dealing Not a Waiver. No course of dealing
between the Trustee, the Collateral Agent and/or any Noteholder, on the one
hand, and the Issuer or any person claiming through or under the Issuer, on
the other hand, or any delay on the part of the Trustee, the Collateral
Agent and/or any Noteholder in exercising any right available to them shall
operate as a waiver of any rights of the Trustee, the Collateral Agent or
the Noteholder.
7.15 Waiver of Stay or Extension Laws. The Issuer covenants (to
the fullest extent that it may lawfully do so) that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, that may affect the covenants or the
performance of this Indenture or the Deed of Trust; and the Issuer (to the
fullest extent that it may lawfully do so) hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power granted herein to the
Trustee or in the Deed of Trust to the Collateral Agent, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
7.16 Action on Notes. The Trustee's right to seek and recover
judgment on the Timber Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture or the Deed of Trust. No rights or remedies of
the Trustee, the Collateral Agent or the Noteholders shall be impaired by
the recovery of any judgment by the Trustee or the Collateral Agent against
the Issuer or by the levy of any execution under such judgment upon any
portion of the Mortgaged Property or upon any of the assets of the Issuer.
7.17 Waiver of Past Defaults. Subject to Sections 7.9 and 10.2,
the Majority Holders by notice to the Trustee may waive an existing Default
and its consequences except (1) a Default or Event of Default in the
payment of the principal of or interest or Premium on a Timber Note as
specified in clauses (1) - (5) of Section 7.1 or (2) a Default in respect
of a provision that under Section 10.2 cannot be amended without the
consent of each Noteholder affected. When a Default or Event of Default is
waived, it is deemed cured and ceases, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
7.18 Certain Limitations on Exercise of Remedies under Deed of
Trust. In connection with any trustee sale or judicial sale by the Deed of
Trust Trustee under the Deed of Trust, the Collateral Agent shall not
accept any cash bid in an amount less than the aggregate amount payable on
the Timber Notes and any Additional Timber Notes plus the aggregate amount,
if any, of principal and interest then owed to the Liquidity Providers,
unless the holders of 66 2/3% in aggregate outstanding principal amount of
Advances under the Line of Credit Agreement, Timber Notes and any
Additional Timber Notes shall have approved the taking of such action
(which approval may be given generally and need not be given in respect of
any specific sale or bid). In the event that relevant law provides that a
trustee sale or judicial sale may be made in respect of less than all of
the Company Owned Timberlands and Company Timber Rights, and the Collateral
Agent shall determine to permit a trustee sale or judicial sale for less
than all of the Company Owned Timberlands and Company Timber Rights, in
connection with any such trustee sale or judicial sale by the Deed of Trust
Trustee, the Collateral Agent shall not accept any cash bid in an amount
less than the pro rata portion of the aggregate amount payable on the
Timber Notes and any Additional Timber Notes plus the aggregate amount, if
any, of principal and interest then owed to the Liquidity Providers, unless
the holders of 66 2/3% in aggregate outstanding principal amount of
Advances under the Line of Credit Agreement, Timber Notes and any
Additional Timber Notes shall have approved the taking of such action
(which approval may be given generally and need not be given in respect of
any specific sale or bid).
ARTICLE 8
DEFEASANCE AND COVENANT DEFEASANCE
8.1 Issuer's Option to Effect Defeasance or Covenant Defeasance.
The Issuer may, at its option by Board Resolution, at any time, with
respect to the Timber Notes and any Additional Timber Notes, elect to have
either Section 8.2 or Section 8.3 be applied to all of the outstanding
Timber Notes and any Additional Timber Notes (the "Defeased Notes"), upon
compliance with the conditions set forth below in this Article 8.
8.2 Defeasance and Discharge. Upon the Issuer's exercise under
Section 8.1 of the option applicable to this Section 8.2, the Issuer shall
be deemed to have been discharged from its obligations with respect to the
Defeased Notes on the date the conditions set forth below are satisfied
(hereinafter, "defeasance"). For this purpose, such defeasance means that
the Issuer shall be deemed to have paid and discharged the entire
indebtedness represented by the Defeased Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.5 and the
other Sections of this Indenture referred to in (a) and (b) below, and to
have satisfied all its other obligations under such Defeased Notes, this
Indenture and the Deed of Trust insofar as such Defeased Notes are
concerned (and the Trustee, at the expense of the Issuer, and, upon written
request, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of Defeased Notes to
receive solely from the trust fund described in Section 8.5 and as more
fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Defeased Notes when such payments are
due, (b) the Issuer's obligations with respect to such Defeased Notes under
Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.9, and 4.2, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder, including,
without limitation, the Trustee's rights under Section 9.7, and (d) this
Article 8. Subject to compliance with this Article 8, the Issuer may
exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 with respect to the Timber Notes
and any Additional Timber Notes.
8.3 Covenant Defeasance. Upon the Issuer's exercise under
Section 8.1 of the option applicable to this Section 8.3, the Issuer shall
be released from its obligations under any covenant or provision contained
in Sections 4.3 through 4.32, subsections (6), (7), (8), (9), (10) and (12)
of Section 7.1 shall not constitute a Default or an Event of Default, with
respect to the Defeased Notes on and after the date the conditions set
forth below are satisfied (hereinafter, "covenant defeasance"), and the
Defeased Notes shall thereafter be deemed to be not "outstanding" for the
purposes of any direction, waiver, consent or declaration or other act of
the Noteholders (and the consequences of any thereof) in connection with
such covenants and Events of Default, but shall continue to be deemed
"outstanding" for all other purposes hereunder. For this purpose, such
covenant defeasance means that, with respect to the Defeased Notes, the
Issuer may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such Section or Article,
whether directly or indirectly, by reason of any reference elsewhere herein
to any such Section or Article or by reason of any reference in any such
Section or Article to any other provision herein or in any other document
and such omission to comply shall not constitute a Default or an Event of
Default under subsections (6), (7), (8), (9), (10) and (12) of Section 7.1,
but, except as specified above, the remainder of this Indenture and such
Defeased Notes shall be unaffected thereby.
8.4 Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of either Section 8.2 or
Section 8.3 to the Defeased Notes :
(1) The Issuer shall irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 9.10 who shall agree to comply with the
provisions of this Article 8 applicable to it ("qualifying trustee"))
as trust funds in trust for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of the Timber Notes and any Additional
Timber Notes, (a) money in an amount, or (b) U.S. Government
Obligations (as defined below) which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than the due date of any payment, money
in an amount, or (c) a combination thereof, sufficient (in the opinion
of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to
the Trustee), without consideration of reinvestment of interest of
such U.S. Government Obligations, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge, the principal of, premium, if any, and interest on the
Defeased Notes of each Class to maturity (based upon the original
Scheduled Amortization of the Timber Notes (and any similar schedule
with respect to any Additional Timber Notes) for such Class with
adjustments to such original Scheduled Amortization schedule (and any
similar schedule with respect to any Additional Timber Notes) for such
Class, which adjustments shall (A) increase the amount of principal
payable in accordance with the original Scheduled Amortization
schedule (and any similar schedule with respect to any Additional
Timber Notes) for such Class on the next succeeding Note Payment Date
by the amount of any Payment Deficiency on the date of defeasance or
covenant defeasance and (B) decrease, in order of maturity, the amount
of principal payable in accordance with the original Scheduled
Amortization schedule (and any similar schedule with respect to any
Additional Timber Notes) for such Class on the next succeeding Note
Payment Date(s) by the excess, if any, of (i) aggregate principal
amount that was paid on or prior to the date of defeasance on the
Defeased Notes, over (ii) the sum of all amounts specified in Schedule
B to the Indenture as Scheduled Amortization (and any similar schedule
with respect to any Additional Timber Notes) for such Class opposite
the respective dates occurring on or before the date of defeasance;
provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations
to said payments with respect to the Notes. For this purpose, "U.S.
Government Obligations" means (i) direct obligations of the United
States of America for the timely payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States
of America, which, in either case, are not callable or redeemable at
the option of the issuer thereof, and shall also include a depository
receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act), as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such
depository receipt.
(2) No Default or Event of Default under subsection 7.1(11)
shall have occurred and be continuing on the date of such deposit or
at any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period).
(3) No event or condition shall exist that would prevent the
issuer from making payments of the principal of, premium, if any, and
interest on the Timber Notes and any Additional Timber Notes on the
date of such deposit or at any time during the period ending on the
91st day after the date of such deposit (it being understood that this
condition shall not be deemed satisfied until the expiration of such
period).
(4) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any of the
Operative Documents, or any other material agreement or instrument to
which the Issuer is a party or by which it is bound.
(5) The Issuer shall have delivered to the Trustee an Opinion of
Counsel (who shall be Independent) or a ruling from the Internal
Revenue Service to the effect that the Holders of the outstanding
Timber Notes and any Additional Timber Notes will not recognize
income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance, as the case may
be, and will be subject to United States federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance, as the case
may be, had not occurred.
(6) The Issuer shall have delivered to the Trustee an Opinion of
Counsel (who shall be Independent) to the effect that, (x) the trust
funds established pursuant to this Article will not be subject to any
rights of other creditors of the Issuer, and (y) after the 91st day
following the deposit, the trust funds established pursuant to this
Article will not be subject to the effect of any applicable United
States bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally. (For the limited purpose of
the Opinion of Counsel referred to in this clause (6), such Opinion
may contain an assumption that the conclusions contained in a
customary solvency letter by a nationally recognized appraisal firm,
dated as of the date of the deposit and taking into account such
deposit, are accurate as of such date, provided that such solvency
letter is also addressed and delivered to the Trustee.)
(7) The Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions precedent (other than conditions requiring the passage of
time) provided for relating to either the defeasance under Section 8.2
or the covenant defeasance under Section 8.3 (as the case may be) have
been complied with as contemplated by this Section 8.4.
Opinions required to be delivered under this Section may have
qualifications customary for opinions of the type required.
Expenses of defeasance or covenant defeasance shall be payable
solely from funds not held pursuant to this Article 8.
8.5 Deposited Money and U.S. Government Obligations to be Held
in Trust; Other Miscellaneous Provisions. All money and U.S. Government
Obligations (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee--collectively for purposes of this Section 8.5,
the "Trustee") pursuant to Section 8.4 in respect of the Defeased Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Defeased Notes and this Indenture, to the payment,
either directly or through any Paying Agent, as the Trustee may determine,
to the Holders of such Defeased Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such
money need not be segregated from other funds except to the extent required
by law.
The Issuer shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 8.4 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of the Defeased Notes.
Until principal, interest and all amounts payable in respect of the
Defeased Notes have been paid in full or defeased pursuant to this Article
8, all amounts payable by the Issuer in respect of its indemnification
obligations pursuant to this paragraph shall be payable solely from funds
not held pursuant to this Article 8.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall promptly deliver or pay to the Issuer from time to time upon
Issuer Request any money or U.S. Government Obligations held by it as
provided in Section 8.4 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect an equivalent defeasance
or covenant defeasance.
8.6 Reinstatement. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section
8.2 or 8.3, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Issuer's obligations under this
Indenture, the Timber Notes and any Additional Timber Notes and the Deed of
Trust shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 8.2 or 8.3, as the case
may be; provided, however, that if the Issuer makes any payment to the
Trustee or Paying Agent of principal of, premium, if any, or interest on
any Timber Note or Additional Timber Note following the reinstatement of
its obligations, the Trustee or Paying Agent shall promptly pay any such
amount to the Holders of the Timber Notes and any Additional Timber Notes
and the Issuer shall be subrogated to the rights of the Holders of such
Timber Notes and any Additional Timber Notes to receive such payment from
the money held by the Trustee or Paying Agent.
ARTICLE 9
THE TRUSTEE AND THE COLLATERAL AGENT
9.1 Duties of Trustee and Collateral Agent.
(a) The Trustee and the Collateral Agent, prior to the
occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred, undertake to perform such duties
and only such duties as are specifically set forth in this Indenture and
the Deed of Trust. If an Event of Default has occurred and is continuing,
the Trustee and the Collateral Agent shall exercise the rights and powers
vested in it by this Indenture and the Deed of Trust and use the same
degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee and the Collateral Agent need perform only
those duties that are specifically set forth in this Indenture and the
Deed of Trust and no covenants or obligations shall be implied in this
Indenture or the Deed of Trust against the Trustee or the Collateral
Agent; and
(2) in the absence of bad faith on its part, the Trustee
and the Collateral Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee or the Collateral
Agent and conforming to the requirements of this Indenture and the
Deed of Trust; provided, however, that the Trustee and the Collateral
Agent shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture and the Deed
of Trust.
(c) The Trustee and the Collateral Agent may not be relieved
from liability for their own negligent action, their own negligent failure
to act or their own willful misconduct, except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section 9.1;
(2) neither the Trustee nor the Collateral Agent shall be
liable for any error of judgment made in good faith by a Responsible
Officer, unless it is proved that the Trustee or the Collateral Agent
was negligent in ascertaining the pertinent facts; and
(3) neither the Trustee nor the Collateral Agent shall be
liable with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it pursuant to
Section 7.13.
(d) Every provision of this Indenture and the Deed of Trust that
in any way relates to the Trustee or the Collateral Agent is subject to
paragraphs (a), (b) and (c) of this Section 9.1.
(e) Money held in trust by the Trustee need not be segregated
from other funds except (i) to the extent provided by Article 5 of this
Indenture and (ii) to the extent required by law.
(f) No provision of this Indenture or the Deed of Trust shall
require the Trustee or the Collateral Agent to expend or risk its own funds
or otherwise incur financial liability in the performance of any of its
duties hereunder or thereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
9.2 Rights of Trustee and Collateral Agent.
Subject to Section 9.1:
(a) The Trustee and the Collateral Agent may rely on any
document believed by it to be genuine and to have been signed or presented
by the proper person. Neither the Trustee nor the Collateral Agent need
investigate any fact or matter stated in the document.
(b) Before the Trustee or the Collateral Agent acts or refrains
from acting, it may require an Officer's Certificate or an Opinion of
Counsel.
(c) The Trustee and the Collateral Agent may act through agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) Neither the Trustee nor the Collateral Agent shall be liable
for any action it takes or omits to take in good faith which it believes to
be authorized or within its rights or powers conferred on it by this
Indenture or the Deed of Trust; provided, however, that the Trustee's or
the Collateral Agent's conduct does not constitute wilful misconduct,
negligence or bad faith.
(e) The Trustee and the Collateral Agent may consult with
counsel, and the advice or Opinion of Counsel with respect to matters of
law relating to this Indenture, the Timber Notes and the Deed of Trust
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder or
thereunder in good faith and in accordance with the advice or Opinion of
Counsel.
9.3 Individual Rights of Trustee and Collateral Agent. The
Trustee or the Collateral Agent, in its individual or any other capacity,
may become the owner or pledgee of Timber Notes and may otherwise deal with
the Issuer or its Affiliates with the same rights it would have if it were
not Trustee or Collateral Agent. Any Paying Agent or Registrar may do the
same with like rights. Notwithstanding the foregoing, the Trustee and the
Collateral Agent must comply with Sections 9.10 and 9.12.
9.4 Trustee's and Collateral Agent's Disclaimer. Neither the
Trustee nor the Collateral Agent shall be responsible for, and neither the
Trustee nor the Collateral Agent makes any representation as to the
validity or adequacy of this Indenture, the Notes, or the Deed of Trust,
and neither the Trustee nor the Collateral Agent shall be accountable for
the Issuer's use of the proceeds from the Timber Notes, and neither the
Trustee nor the Collateral Agent shall be responsible for any statement in
this Indenture, the Notes, or the Deed of Trust other than its certificate
of authentication.
9.5 Notice of Defaults. If a Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each
Noteholder (in the manner and to the extent provided in TIA Section
313(c)), to the Line of Credit Agent and to each Rating Agency notices of
the Default within 60 days after it occurs. Except in the case of a
Default in payment of principal of or interest on any Timber Note, the
Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice
is in the interest of Noteholders.
9.6 Reports by Trustee to Noteholders. As promptly as
practicable after each May 15, beginning with the May 15 following the date
of this Indenture, and in any event prior to July 15 in each year, the
Trustee shall mail to each Noteholder a brief report dated as of May 15 of
such year that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b)(1) and (2).
A copy of such report at the time of its mailing to Noteholders
shall be filed with the SEC and each stock exchange, if any, on which the
Timber Notes are listed. The Issuer agrees to notify the Trustee whenever
the Timber Notes become listed on any stock exchange and of any delisting
thereof.
9.7 Compensation and Indemnity. The Issuer shall pay to the
Trustee and the Collateral Agent from time to time reasonable compensation
for its services. The Trustee's and the Collateral Agent's compensation
shall not be limited by any law on compensation relating to the trustee of
an express trust. The Issuer shall reimburse the Trustee and the
Collateral Agent upon request for all reasonable out-of-pocket expenses
incurred by it, except any such expense as may arise from the Trustee's or
Collateral Agent's negligence, bad faith or wilful misconduct. Such
expenses shall include the reasonable compensation and expenses of the
Trustee's and the Collateral Agent's agents and counsel. The Issuer shall
indemnify the Trustee and the Collateral Agent against any loss, liability
or expense (including reasonable attorneys' fees) incurred by it without
negligence or bad faith on its part in connection with the administration
of this trust and the performance of its duties hereunder. The Trustee and
the Collateral Agent shall notify the Issuer promptly of any claim for
which it may seek indemnity. The Issuer shall have the right to defend the
claim and the Trustee and the Collateral Agent shall cooperate in the
defense. The failure of the Trustee or the Collateral Agent to so notify
the Issuer shall not relieve the Issuer of its obligations hereunder. The
Issuer need not pay for any settlement made without its written consent.
The Issuer need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee or the Collateral Agent through willful
misconduct, negligence or bad faith. Until principal, interest and all
other amounts payable in respect of the Timber Notes have been paid in
full, all amounts payable by the Issuer in respect of its indemnification
obligations pursuant to this paragraph shall be payable solely from Excess
Funds.
The Issuer's payment obligations pursuant to this Section shall
survive the discharge of this Indenture and release of the Deed of Trust.
When the Trustee or Collateral Agent incurs expenses after the occurrence
of an Event of Default specified in Section 7.1(12) with respect to the
Issuer, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.
9.8 Replacement of Trustee and Collateral Agent. A resignation
or removal of the Trustee or the Collateral Agent and the appointment of a
successor Trustee and Collateral Agent shall become effective only upon the
successor Trustee's and Collateral Agent's acceptance of appointment as
provided in this Section 9.8. The Trustee and the Collateral Agent may
resign at any time by so notifying the Issuer and the Holders in writing.
The Majority Holders may remove the Trustee and the Collateral Agent by so
notifying the Trustee and the Collateral Agent in writing and may appoint a
successor Trustee and Collateral Agent with the Issuer's consent. The
Issuer shall remove the Trustee and the Collateral Agent if:
(1) the Trustee or Collateral Agent fails to comply with
Section 9.10;
(2) the Trustee or Collateral Agent is adjudged as bankrupt
or insolvent or an order for relief is entered with respect to the
Trustee or Collateral Agent under any Bankruptcy Law;
(3) a custodian, receiver or other public officer takes
charge of the Trustee or Collateral Agent or its property; or
(4) the Trustee or Collateral Agent otherwise becomes
incapable of acting.
If the Trustee or Collateral Agent resigns or is removed or if a
vacancy exists in the office of Trustee or Collateral Agent for any reason,
the Issuer shall promptly appoint a successor Trustee and Collateral Agent.
A successor Trustee and Collateral Agent shall deliver a written
acceptance of its appointment to the retiring Trustee and Collateral Agent
and to the Issuer. Thereupon the resignation or removal of the retiring
Trustee and Collateral Agent shall become effective, and the successor
Trustee and Collateral Agent shall have all the rights, powers and duties
of the Trustee and Collateral Agent under this Indenture and the Deed of
Trust. The successor Trustee and Collateral Agent shall mail a notice of
its succession to Noteholders. The retiring Trustee and Collateral Agent
shall promptly transfer all property held by it as Trustee or Collateral
Agent to the successor Trustee.
If a successor Trustee and Collateral Agent does not take office
within 60 days after the retiring Trustee and Collateral Agent resigns or
is removed, the retiring Trustee and Collateral Agent, the Issuer or the
Majority Holders may petition any court of competent jurisdiction for the
appointment of a successor Trustee and Collateral Agent.
If the Trustee and Collateral Agent fails to comply with Section
9.10, any Noteholder may petition any court of competent jurisdiction for
the removal of the Trustee and Collateral Agent and the appointment of a
successor Trustee and Collateral Agent.
9.9 Successor Trustee or Collateral Agent by Merger. If the
Trustee or Collateral Agent consolidates with, merges or converts into, or
transfers all or substantially all its corporate trust business or assets
(including the trust created by this Indenture) to, another corporation or
banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Trustee and Collateral
Agent; provided that in the case of a transfer of all or substantially all
of its corporate trust business to another corporation, the transferee
corporation expressly assumes all the Trustee's and Collateral Agent's
liabilities under the Indenture and the Deed of Trust.
In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts
created by this Indenture and the Deed of Trust, any of the Timber Notes
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor
trustee, and deliver such Timber Notes so authenticated; and in case at
that time any of the Timber Notes shall not have been authenticated, any
successor to the Trustee may authenticate such Timber Notes either in the
name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force
which it is anywhere in the Timber Notes or in this Indenture provided that
the certificate of the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor trustee
or authenticate Timber Notes in the name of any predecessor trustee shall
only apply to its successors by merger, conversion or consolidation.
9.10 Eligibility; Disqualification. The Trustee and the
Collateral Agent shall at all times satisfy the requirements of TIA Section
310(a)(1) and (2). In addition, without limiting the foregoing, the
Trustee and the Collateral Agent shall at all times be authorized to
conduct a corporate trust business, in good standing, and be either (a) a
bank or trust company having, or (b) a wholly-owned subsidiary of a bank or
trust company having, a combined capital and surplus of at least
$250,000,000 as set forth in its most recent published annual report of
condition. The Trustee and the Collateral Agent shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9).
9.11 Preferential Collection of Claims Against Issuer. The
Trustee and the Collateral Agent shall comply with TIA Section 311(a),
excluding any creditor relationship listed in TIA Section 311(b). A
Trustee and Collateral Agent who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated therein.
9.12 Trustee and Collateral Agent. The Trustee and the
Collateral Agent shall at all times be one and the same Person.
9.13 Escrow Agreement. The Trustee is authorized to enter into a
confidentiality agreement satisfactory to the Trustee pursuant to Section 6
of the Escrow Agreement among the Issuer, Pacific Lumber, Salmon Creek and
U.S. Bank of California.
ARTICLE 10
AMENDMENTS
10.1 Without Consent of Noteholders. The Issuer and the Trustee
may amend, supplement or otherwise modify this Indenture or the Timber
Notes or any Additional Timber Notes without notice to or consent of any
Noteholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to provide for uncertificated notes in addition to or
in place of certificated notes; provided, however, that the
uncertificated notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the
uncertificated notes are described in Section 163(f)(2)(B) of the
Code;
(3) to make any change that does not adversely affect the
rights of any Noteholder;
(4) to add to the covenants of the Issuer for the benefit
of the Noteholders or to surrender any right or power herein conferred
upon the Issuer;
(5) to comply with the TIA;
(6) to comply with the provisions of Section 4.13; or
(7) subject to the limitations set forth in Section
2.14(b), in connection with the issuance of any Additional Timber
Notes.
After an amendment, supplement or modification under this Section
becomes effective, the Issuer shall mail to Noteholders a notice briefly
describing such amendment, supplement or other modification. The failure
to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment, supplement or other
modification under this Section 10.1.
10.2 With Consent of Noteholders.
(a) The Issuer and the Trustee may amend, supplement or otherwise
modify this Indenture or the Timber Notes or any Additional Timber Notes
without notice to any Noteholder but (i) with the written consent of the
Majority Holders and Rating Agency Confirmation or (ii) with the written
consent of the Supermajority Holders (after prior notice of the Rating
Agency Evaluation) and Rating Agency Evaluation. Subject to Sections 7.9
and 7.17, the Majority Holders may waive compliance by the Issuer with any
provision of this Indenture, the Deed of Trust or the Timber Notes or any
Additional Timber Notes without notice to any Noteholder.
(b) Notwithstanding anything to the contrary contained in
Sections 10.1 and 10.2(a), without the consent of each Noteholder affected,
an amendment, supplement, other modification or waiver may not:
(1) reduce the aggregate outstanding principal amount of
Timber Notes (or of Timber Notes and any Additional Timber Notes, as
applicable) whose Noteholders must consent to an amendment,
supplement, other modification or waiver;
(2) reduce the rate of or extend the time for payment of
interest on any Timber Note;
(3) reduce the principal of or extend the fixed maturity of
any Timber Note or Additional Timber Note; or
(4) reduce the premium payable (including any change in the
formulas utilized to compute such amount) upon the redemption or
prepayment of any Timber Note or Additional Timber Note;
(5) make any Timber Note or Additional Timber Note payable
in money other than that stated in the Timber Note or Additional
Timber Note;
(6) impair the right to institute suit for the enforcement
of any payment on or with respect to any Timber Note or Additional
Timber Note; or
(7) make any change in this Section 10.2.
(c) It shall not be necessary for the consent of the Noteholders
under this Section 10.2 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent approves the
substance thereof.
(d) After an amendment, supplement, waiver or other modification
under this Section becomes effective, the Issuer shall mail to Noteholders
a notice briefly describing such amendment. The failure to give such
notice to all Noteholders, or any defect therein, shall not impair or
affect the validity of an amendment, supplement, waiver or other
modification under this Section. Any amendment, supplement, waiver or
other modification shall be binding upon all subsequent transferees of
Notes.
10.3 Compliance with Trust Indenture Act. Every amendment,
supplement or other modification to this Indenture, the Timber Notes or any
Additional Timber Notes shall comply with the TIA as then in effect.
10.4 Effect of Consents and Waivers; No Revocation of Consents.
A consent to an amendment, supplement or other modification or a waiver by
a Noteholder under or in connection with this Indenture or the Deed of
Trust shall bind the Noteholder and every subsequent holder of that Timber
Note or Additional Timber Note or portion of the Timber Note or Additional
Timber Note that evidences the same debt as the consenting Noteholder's
Timber Note or Additional Timber Note, even if notation of the consent or
waiver is not made on the Timber Note or Additional Timber Note. Once such
consent shall be given by a Noteholder, such consent may not be revoked by
such Noteholder or any subsequent holder. After an amendment, supplement
or other modification or waiver becomes effective, it shall bind every
Noteholder, unless it makes a change described in any of clauses (1)
through (7) of Section 10.2(b). In that case, the amendment, supplement,
waiver or other modification shall bind each Noteholder who has consented
to it and every subsequent Holder of a Timber Note or Additional Timber
Note or a portion of a Timber Note or Additional Timber Note that evidences
the same debt as the consenting Noteholder's Timber Note or Additional
Timber Note.
The Issuer shall (or, if Definitive Timber Notes have been
issued, may, but shall not be obligated to) fix a record date for the
purpose of determining the Noteholders entitled to give their consent or
take any other action described above. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and
only those persons, shall be entitled to give such consent or to take any
such action, whether or not such persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 130
days after such record date.
10.5 Notation on or Exchange of Notes. If an amendment changes
the terms of a Timber Note or Additional Timber Note, the Trustee may
require the Noteholder to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Timber Note or Additional Timber Note
regarding the changed terms and return it to the Holder. Alternatively, if
the Issuer or the Trustee so determines, the Issuer in exchange for the
Timber Note or Additional Timber Note shall issue and the Trustee shall
authenticate a new Timber Note or Additional Timber Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Timber Note or Additional Timber Note shall not affect the validity of such
amendment, supplement or other modification.
10.6 Trustee to Sign Amendments, Etc. The Trustee shall sign any
amendment, supplement or other modification authorized pursuant to this
Article 10 if the amendment, supplement or other modification does not
adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not sign it. In signing
such amendment, supplement or other modification the Trustee shall be
entitled to receive, and (subject to Section 9.1) shall be fully protected
in relying upon, an Officers' Certificate and an Opinion of Counsel stating
that such amendment, supplement, waiver or other modification is authorized
or permitted by this Indenture.
ARTICLE 11
LINE OF CREDIT
11.1 Line of Credit Agreement . In order to provide liquidity
for the payment of interest on the Timber Notes, the Issuer has entered
into a Line of Credit Agreement, with the Commitments thereunder equal to
the Required Liquidity Amount.
11.2 Advances Under Line of Credit Agreement.
(a) Interest Advances. In the event that any Note Payment
Trustee Certificate delivered to the Trustee indicates that, on the Note
Payment Date to which such Note Payment Trustee Certificate relates, there
will be insufficient funds in the Payment Account on such Note Payment Date
(the amount of such insufficiency being referred to as a "Funding
Deficiency") to pay the interest on the Timber Notes required to be paid
pursuant to clause (i) of Section 5.7(b) on such Note Payment Date, the
Issuer shall, on or prior to the date of delivery of such Note Payment
Trustee Certificate, if there is then an amount available under the Line
of Credit Agreement, deliver a notice of borrowing under the Line of Credit
Agreement (and deliver a copy thereof to the Trustee) for an Advance (any
Advance pursuant to a notice of borrowing given pursuant to this Section
11.2(a), an "Interest Advance") to be made under the Line of Credit
Agreement prior to 1:00 p.m. New York City time on such Note Payment Date
in an amount (the "Deficiency Amount") equal to the lesser of (i) the
amount then available under the Line of Credit Agreement and (ii) the
amount indicated on such Note Payment Trustee Certificate which, when added
to the other funds expected to be in the Payment Account on such Note
Payment Date, will be sufficient to permit the payment in full, from funds
available therefor under Section 5.7(b) of the Indenture, of all accrued
and unpaid interest (excluding interest on Premiums) on the Timber Notes.
If the Note Payment Trustee Certificate indicates that a Funding Deficiency
exists, such Note Payment Trustee Certificate is not accompanied by a copy
of a notice of borrowing under the Line of Credit Agreement in the
Deficiency Amount and there is then an amount available under the Line of
Credit Agreement, the Trustee shall promptly deliver a notice of borrowing
under the Line of Credit Agreement (and deliver a copy thereof to the
Issuer) for an Interest Advance in the Deficiency Amount (or any portion
thereof not reflected in a notice of borrowing delivered by the Issuer as
aforesaid) to be made under the Line of Credit Agreement prior to 1:00 p.m.
New York City time on such Note Payment Date.
In the event that, as of 1:00 p.m. New York City time on any Note
Payment Date there exists a Funding Deficiency in the Payment Account, the
Trustee shall (I) pay the interest on the Timber Notes on the Payment Date
to the extent of the funds available therefor in the Payment Account and
(II) if there is then an amount available under the Line of Credit
Agreement, deliver a notice of borrowing under the Line of Credit Agreement
(and deliver a copy thereof to the Issuer) for an Interest Advance to be
made under the Line of Credit Agreement on the next Business Day or as soon
as practicable thereafter in an amount equal to the lesser of (i) the
amount then available under the Line of Credit Agreement and (ii) the
amount which, when added to the other funds in the Payment Account on such
Note Payment Date, will be sufficient to permit the payment in full, from
funds available therefor under Section 5.7(b) of the Indenture, of all
accrued and unpaid interest (excluding interest on Premiums) on the Timber
Notes to the Note Payment Date. If the Interest Advance referred to in
clause (II) above has been deposited into the Payment Account at or before
1:00 p.m. New York City time on any Business Day, then, at or before 2:00
p.m. New York City time on such Business Day, or if such Interest Advance
has been deposited into the Payment Account after 1:00 p.m. New York City
time on any Business Day, at or before 2:00 p.m. New York City time on the
following Business Day, the Trustee shall utilize such Interest Advance to
make a supplemental interest payment pursuant to clause (ii) of Section
5.7(b) in the amount thereof to the Holders of the Timber Notes.
The proceeds of each Interest Advance shall be deposited in the
Payment Account as provided in Section 5.7(a)(i).
(b) Non-Renewal Advances. If the Line of Credit Agreement has a
Scheduled Termination Date prior to the date that is 15 days after the
Final Maturity Date, then, no earlier than the 120th day and no later than
the 90th day prior to such Scheduled Termination Date, the Issuer shall
request that the Liquidity Providers extend the Scheduled Termination Date
for a period not less than 364 days after the Scheduled Termination Date
(unless a Line of Credit Acceleration has theretofore occurred or a
Termination Advance has theretofore been made under the Line of Credit
Agreement). If the Trustee has not received a copy of such request from
the Issuer by the date that is 90 days prior to such Scheduled Termination
Date, the Trustee shall, on the first Business Day thereafter, request that
the Liquidity Providers extend the Scheduled Termination Date for a period
of 364 days after the Scheduled Termination Date (unless a Line of Credit
Acceleration has theretofore occurred or a Termination Advance has
theretofore been made under the Line of Credit Agreement).
The Issuer shall give the Trustee prompt notice (an "Extension
Notice") of any extension of the then effective Scheduled Termination Date,
which shall be accompanied by a written statement of the Line of Credit
Agent to such effect and shall specify the date to which the Scheduled
Termination Date has been extended. If the Trustee has not received an
Extension Notice on or before the 11th day prior to the then effective
Scheduled Termination Date, the Trustee shall, on the following Business
Day, deliver a notice of borrowing under the Line of Credit Agreement (and
deliver a copy thereof to the Issuer) for an Advance (a "Non-Renewal
Advance") in an amount equal to the entire amount then available under the
Line of Credit Agreement (unless the Issuer shall have earlier delivered
such a notice of borrowing and delivered a copy thereof to the Trustee or
unless a Line of Credit Acceleration has theretofore occurred or a
Termination Advance has theretofore been made under the Line of Credit
Agreement). The proceeds of any Non-Renewal Advance shall be deposited in
the Liquidity Account.
(c) Downgrade Advances. If any Liquidity Provider shall cease
to have the Required Liquidity Provider Rating (a "Downgraded Liquidity
Provider"), the Issuer shall deliver written notice thereof to the Trustee
promptly after it obtains notice or knowledge of such fact. If, by the
date that is 30 days after the giving of such notice, the Trustee has not
received written notice from the Liquidity Providers or the Line of Credit
Agent that the Commitment of the Downgraded Liquidity Provider under the
Line of Credit Agreement has been assumed by one or more Liquidity
Providers having the Required Liquidity Provider Rating, the Trustee shall,
on the following Business Day, deliver a notice of borrowing under the Line
of Credit Agreement (and deliver a copy thereof to the Issuer) for an
Advance (a "Downgrade Advance") in an amount equal to the entire amount
then available under the Line of Credit Agreement (unless the Issuer shall
have earlier delivered such a notice of borrowing and delivered a copy
thereof to the Trustee or unless a Line of Credit Acceleration has
theretofore occurred or a Termination Advance has theretofore been made
under the Line of Credit Agreement). The proceeds of any Downgrade Advance
shall be deposited in the Liquidity Account.
(d) Interest Rate Option. If the applicable form of a notice of
borrowing delivered by the Trustee under this Section 11.2 permits the
selection of an interest rate option in respect of an Advance, the Trustee
shall select such available interest rate option as has been specified to
the Trustee in advance in writing by the Issuer or, in the absence of such
specification, such available interest rate option as the Trustee shall, in
its sole discretion, determine to select.
11.3 Amendments to Line of Credit Agreement. The Issuer shall
not consent to any amendment to the Line of Credit Agreement, unless (i)
such amendment has been approved by a resolution of the Board of Managers,
including all Independent Managers and (ii) either (A) such amendment is to
(1) cure any ambiguity, omission, defect or inconsistency, (2) add to the
covenants of the other parties thereto for the benefit of the Issuer, the
Holders of the Timber Notes or the Trustee, (3) surrender any right of the
other parties thereto, (4) modify the obligations of the other parties
thereto among such other parties, (5) provide for the assignment to, and
assumption by, Liquidity Providers having the Required Liquidity Provider
Rating of the rights and obligations of one or more Liquidity Providers,
(6) extend the Scheduled Termination Date of the Line of Credit Agreement
and/or (7) modify the fees or the interest rates payable by the Issuer
under the Line of Credit Agreement; provided that no such amendment may
adversely affect in any material respect the interests of the Holders of
the Timber Notes (it being understood that no amendment referred to in the
preceding clauses (5), (6) and (7) shall be deemed to have such adverse
effect) or (B) such amendment has received Rating Agency Confirmation.
11.4 Replacement of Line of Credit Agreement.
(a) At any time, the Issuer may, at its option, arrange for a
replacement Line of Credit Agreement to replace the then existing Line of
Credit Agreement. No such replacement Line of Credit Agreement shall
become effective and no such replacement Line of Credit Agreement shall be
deemed a "Line of Credit Agreement" unless and until each of the following
conditions shall have been satisfied:
(i) such replacement Line of Credit Agreement has received
Rating Agency Confirmation;
(ii) the terms of such replacement Line of Credit Agreement
shall not be inconsistent with this Article 11 or
Sections 5.3 and 5.7;
(iii)all monetary obligations then owing under the Line of
Credit Agreement being replaced have been paid (which
payment shall be made first from any available funds in
the Liquidity Account as described in Section 11.4(b))
and the Commitments thereunder have been terminated;
(iv) the amount available under the replacement Line of
Credit Agreement is not less than the Required
Liquidity Amount; and
(v) an Officer's Certificate shall have been delivered to
the Trustee stating that each of the foregoing
conditions has been satisfied.
Upon satisfaction of the conditions set forth in this Section
11.4(a), (i) the replaced Line of Credit Agreement shall cease to be a
"Line of Credit Agreement", and the Liquidity Providers pursuant to the
replaced Line of Credit Agreement shall cease to be "Liquidity Providers",
under this Indenture, the Deed of Trust and the other Operative Documents
and (ii) such replacement Line of Credit Agreement shall be deemed to be
the "Line of Credit Agreement", and the Liquidity Providers under such
replacement Line of Credit shall be deemed to be the "Liquidity Providers",
under this Indenture, the Deed of Trust and the other Operative Documents.
(b) Upon satisfaction of the conditions set forth in Section
11.4(a), the Trustee shall release all funds then in the Liquidity Account
for use in payment of the monetary obligations owing under the Line of
Credit Agreement being replaced and any remaining funds in the Liquidity
Account shall be paid to or as directed by the Issuer, free and clear of
the Lien of the Deed of Trust.
ARTICLE 12
MISCELLANEOUS
12.1 Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required
provision shall control.
12.2 Notices. Any notice or communication shall be in writing
and delivered in person, transmitted by facsimile (confirmed in writing by
mail simultaneously dispatched) or mailed by first-class mail addressed as
follows:
If to the Issuer:
Scotia Pacific Company LLC
P.O. Box 712
125 Main Street
Second Floor
Scotia, California 95565
Telecopy No.: (707) 764-5001
Attention: Vice President, Finance and
Administration
With copies to:
Scotia Pacific Company LLC
5847 San Felipe, Suite 2610
Houston, Texas 77057
Telecopy No.: (713) 267-3702
Attention: General Counsel
and
if to the Trustee:
State Street Bank and Trust Company
Two International Place, 4th Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Administration
(Scotia Pacific Company LLC
Timber Collaterized Notes)
Telecopy No.: (617) 664-5371
and
if to the Liquidity Providers or the Line of Credit Agent:
Bank of America National Trust
and Savings Association, as Agent
Bank of America National Trust
and Savings Association
Paper & Forest Products #9973
555 California Street - 41st Floor
San Francisco, CA 94104
Attention: M. J. Balok, Managing Director
Telecopy No.: (415) 622-2385
with a copy to
Bank of America National Trust and Savings Association
Agency Administrative Services #5596
1850 Gateway Blvd.
Concord, CA 94520-3281
Attention: Scotia Pacific AO
Telecopy No.: (925) 675-8500
The Issuer, the Trustee or the Line of Credit Agent by notice to
the others may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Noteholder shall be
mailed to the Noteholder at the Noteholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Notwithstanding anything to the contrary in this Section 12.2, notices to
the Issuer or the Trustee shall only be deemed given when received by the
Issuer or the Trustee, as the case may be.
12.3 Communication by Holders with Other Noteholders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Timber
Notes and the Trustee will comply with TIA Section 312(b). The Issuer, the
Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
12.4 Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Issuer to the Trustee to take any action
under this Indenture, the Issuer shall furnish to the Trustee upon the
Trustee's request:
(i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied
with (or will have been complied with upon the execution and
delivery of designated instruments); and
(ii) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied
with (or will have been complied with upon the execution and
delivery of designated instruments).
except that in the case of any application or request as to which the
furnishing of such Officers' Certificate or Opinion of Counsel is
specifically required by any provisions of this Indenture relating to such
particular application or request, no additional certificate or opinion
need be furnished.
12.5 Statements Required in Certificate or Opinion.
(a) Each certificate or opinion with respect to compliance with
a covenant or condition provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
rendering such opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or
she has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such covenant or condition has been complied with.
(b) Unless otherwise expressly provided herein, any application,
request, order, certified resolution, certificate, notice, statement or
other instrument of the Issuer or of any other Person required or permitted
to be filed with the Trustee or to be made or given under this Indenture
shall be dated and shall state the provision or provisions of this
Indenture pursuant to which it is filed, made or given and shall be signed
by a Responsible Officer of the Person taking such action.
(c) Any counsel giving an Opinion of Counsel that an instrument
conforms to the requirements of this Indenture, or with respect to any
similar matter, may state that such counsel is not passing upon the truth,
accuracy or good faith of the facts or opinions stated in any application,
request, order, certified resolution, Officer's Certificate, appraiser's
certificate, notice, statement or other instrument required to be delivered
to the Trustee signed by any Person other than such counsel.
(d) Any Officer's Certificate of the Issuer or certificate of an
appraiser, forester or other expert may be based, insofar as the matters
therein are of a legal nature, upon an Opinion of Counsel, unless such
officer, appraiser or forester knows that such Opinion of Counsel is, or
any of the facts upon which such Opinion of Counsel is based is, erroneous.
(e) Any Opinion of Counsel may be based, insofar as it relates
to factual matters or information in possession of the Issuer or the
Services Provider, upon an Officer's Certificate or representations of a
Responsible Officer of the Issuer or the Services Provider, unless such
counsel knows that such Officer's Certificate or representations are
erroneous.
(f) Any Opinion of Counsel may be based, insofar as it relates
to appraisal matters, upon an appraiser's certificate, unless such counsel
knows that the appraiser's certificate is erroneous.
(g) Any Opinion of Counsel may be based on the written opinion
of other counsel reasonably satisfactory to the Trustee, in which event
such Opinion of Counsel shall be accompanied by a copy of such other
counsel's opinion addressed to the Trustee.
12.6 When Timber Notes Disregarded. In determining whether the
Holders of the required principal amount of Timber Notes have concurred in
any request, demand, authorization, direction, notice, consent or waiver
under or in connection with this Indenture or the Deed of Trust, Timber
Notes owned by the Issuer or by any person described in the last clause of
the definition of "outstanding" shall be disregarded and deemed not to be
outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Timber Notes
which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Timber Notes outstanding at the time shall
be considered in any such determination.
12.7 Rules by Trustee, Paying Agent and Registrar. The Trustee
may make reasonable rules for action by or a meeting of Noteholders. The
Registrar and the Paying Agent may make reasonable rules for their
functions.
12.8 Business Days. If a payment date is not a Business Day,
payment shall be made on the next succeeding Business Day, and no interest
or Deficiency Premiums shall accrue for the intervening period. If a
regular record date is not a Business Day, the record date shall not be
affected.
12.9 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL
GOVERN THIS INDENTURE, THE TIMBER NOTES AND ANY ADDITIONAL TIMBER NOTES,
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
12.10 No Recourse Against Others. A manager, director, officer,
employee, member or stockholder, as such, of the Issuer or the Trustee
shall not have any liability for any obligations of the Issuer or the
Trustee under the Timber Notes or any Additional Timber Notes or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Timber Note or Additional
Timber Note, each Noteholder shall waive and release all such liability.
The waiver and release shall be part of the consideration for the issue of
the Timber Notes or any Additional Timber Notes.
12.11 Successors. All agreements of the Issuer in this Indenture
and the Timber Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
12.12 Severability. In case any provision of this Indenture or
in the Timber Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions thereof
shall not in any way be affected or impaired thereby.
12.13 Multiple Originals. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement. One signed copy is enough
to prove this Indenture. This Indenture may be executed in two or more
counterparts, each of which shall be an original, but all of them together
constitute the same agreement.
12.14 Table of Contents; Headings. The table of contents, cross
reference sheet and headings of the Articles and Sections of this Indenture
and the Timber Notes have been inserted for convenience of reference only,
are not intended to be considered a part hereof and shall not modify,
restrict or otherwise affect the meaning or interpretation of any of the
terms or provisions hereof.
12.15 Benefits of Indenture. Nothing in this Indenture or the
Notes, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, the Noteholders, and the Liquidity
Providers, any benefit or any legal or equitable right, remedy or claim
under this Indenture.
12.16 Limitations on Bankruptcy Petition Against Issuer. The
Trustee and each of the Noteholders hereby covenant and agree that, prior
to the date which is one year and one day after the payment in full of all
outstanding Timber Notes and Additional Timber Notes, it will not institute
against, or join any other Persons in instituting against, the Issuer any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other similar proceeding under any Bankruptcy Law, unless the
consent of the Holders of 51% in aggregate outstanding principal amount of
the Timber Notes and any Additional Timber Notes to the taking of such
action is obtained.
12.17 Entire Agreement. This Indenture constitutes the entire
agreement of the parties with respect to the subject matter hereof.
12.18 Concerning Paying Agents, Registrars, Securities
Intermediaries and Collateral Agents. Whether or not any applicable
provision of this Indenture or any other Operative Document expressly so
provides, and notwithstanding any other provision of this Indenture or any
other Operative Document to the contrary, any document, investment
direction or other written or oral statement of any other Person on which
the Trustee is entitled to rely may also be relied upon by any Paying
Agent, Registrar, Securities Intermediary or Collateral Agent.
ARTICLE 13
DISCHARGE
13.1 Discharge. This Indenture shall cease to be of further
effect at such time as (i) all outstanding Timber Notes and any Additional
Timber Notes have become due and payable, will become due and payable
within six months (based upon the actual principal amount of the Timber
Notes and any Additional Timber Notes previously paid and future payments
of principal based upon Minimum Principal Amortization (column L of the
Structuring Schedule)), or have been called for redemption on a redemption
date that is within six months under arrangements satisfactory to the
Trustee for giving the notice of redemption and the Issuer shall have
irrevocably (i.e., without condition or right of withdrawal) deposited with
the Trustee funds sufficient to pay all outstanding Timber Notes and any
Additional Notes, including unpaid principal thereof, accrued and unpaid
Regular Interest, accrued and unpaid Default Interest, if any, premiums, if
any, and interest on premiums, if any, thereon, and the Issuer shall have
paid in full all other sums payable hereunder and under the Deed of Trust
by the Issuer and (ii) an Officer's Certificate and an Opinion of Counsel
to the effect of the preceding clause (i) shall have been delivered to the
Trustee; provided that the Issuer's obligations under Sections 2.3, 2.5,
2.6, 2.7, 2.8, 2.9, 9.7 and 9.8 shall survive until the Timber Notes and
any Additional Notes have been paid in full, and thereafter the Issuer's
obligations under Section 9.7 shall continue to survive. Upon satisfaction
of the conditions in the preceding clauses (i) and (ii), the Trustee shall
acknowledge in writing the discharge of the Issuer's obligations under the
Timber Notes and this Indenture except for those surviving obligations
specified herein.
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
SCOTIA PACIFIC COMPANY LLC
By: /S/ GARY L. CLARK
Name: Gary L. Clark
Title: Vice President-Financial Administration
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /S/ EARL W. DENNISON
Name: Earl W. Dennison
Title: Vice President
<PAGE>
SCHEDULE A
DEFINITIONS
An "Acceleration Event" will be deemed to exist at any time when
the Timber Notes have been accelerated and such acceleration has not been
rescinded.
"Accounts" has the meaning given to such term in Section 5.1(a) of
the Indenture.
"Actual Production" through any date means the number of Mbfe of
Company Timber actually harvested and sold from July 20, 1998 through such
date, except any such Company Timber that has been included in Deemed
Production for such period.
"Additional Liquidity Provider Fees" means any commitment fee,
agent's fee or similar fee payable to the Liquidity Providers or to any
agent for the Liquidity Providers under the Line of Credit Agreement to the
extent, but only to the extent, that the amount or rate of such fee is in
excess of the amount that would be payable therefor under the terms of the
Bank of America Credit Agreement as in effect on the Closing Date, it being
understood that no amount of any such fee that is or becomes payable
pursuant to the terms of the Bank of America Credit Agreement as in effect
on the Closing Date, whether or not such amount is actually payable on the
Closing Date, shall constitute Additional Liquidity Provider Fees.
"Additional Services" has the meaning given to such term in
Schedule 1 to the New Additional Services Agreement.
"Additional Timber Notes" means notes issued pursuant to a
Supplemental Indenture pursuant to Section 2.14 of the Indenture.
"Additional Timber Properties" means (a) any timber rights or
timberlands located in the State of California which are purchased by the
Company subsequent to the Closing Date and subjected to the Lien of the
Deed of Trust in connection with the release of funds from the Prefunding
Account pursuant to Section 5.10 of the Indenture and (b) the Elk River
Timberlands if and when the Elk River Timberlands become subject to the
Lien of the Deed of Trust.
"Adjusted Debt Obligations" means, on any Note Payment Date, an
amount equal to the excess, if any, of (a) the aggregate unpaid principal
amount of the outstanding Timber Notes on such date, determined before
giving effect to the payment of any amount paid in respect of the Timber
Notes on such date, over (b) the Aggregate Minimum Principal Amortization
Amount on such date.
"Advance" means any Interest Advance and any Termination Advance,
which may be a borrowing, draw or other cash receipt obtained by the Issuer
or the Trustee or behalf of the Issuer from the Liquidity Providers under
the Line of Credit Agreement. The term "borrow" when used with respect to
any Advance means to obtain such Advance under the Line of Credit Agreement
and the term "borrowing" has a like meaning.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this
definition of "Affiliate," "control," when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Aggregate Minimum Principal Amortization Amount" as of any Note
Payment Date means the aggregate, for all Classes of Timber Notes, of the
respective Minimum Principal Amortization Amounts for such date.
"Agreement Not to Cut" means any agreement by the Issuer to limit
or refrain from cutting, harvesting, severing or selling any Company Timber
in exchange for a monetary payment to the Issuer.
"Alternate Property" means timberlands (a) containing at least the
number of Mbfe of timber as the Headwaters Acquisition Property, (b) having
a fair value at least equal to the Headwaters Acquisition Property, (c)
having expected operating costs not materially greater than the Headwaters
Acquisition Property, and (d) having sufficient access or access rights to
enable harvesting operations to be conducted thereon, all of which matters
shall be reflected in an Officer's Certificate.
"Assigned Proceeds" has the meaning given to such term in Section
2.1 of the Deed of Trust.
"Assigned Proceeds Obligor" means any Person (a) owing any Assigned
Proceeds, (b) having in their possession any Assigned Proceeds or (c)
obligated to pay, perform or deliver any Assigned Proceeds.
"Authenticating Agent" has the meaning given to such term in
Section 2.2 of the Indenture.
"Bank of America Credit Agreement" means the Credit Agreement,
dated July 20, 1998, among the Issuer, Bank of America National Trust and
Savings Association, as Agent, and the other financial institutions parties
thereto, as such credit agreement may from time to time be extended,
amended, modified, supplemented or amended and restated in accordance with
the provisions of Section 11.3 of the Indenture.
"Bankruptcy Law" means any Federal or State bankruptcy, insolvency,
reorganization or similar law for the relief of debtors from time to time
in effect.
"Bankrupt or Insolvent" or "Bankruptcy or Insolvency" shall have
occurred or exist with respect to any Person if:
(a) such Person shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property under
any Bankruptcy Law, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other
Bankruptcy Law, or (v) acquiesce in writing to any petition filed against
it in an involuntary case under the Federal Bankruptcy Code;
(b) a proceeding or case shall be commenced, without the
application or consent of such Person, in any court of competent
jurisdiction, seeking under any Bankruptcy Law (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Person, or of all or any
substantial part of its assets or (iii) similar relief in respect of such
Person under any Bankruptcy Law, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing (other than an order referred to in clause (c) below) shall
be entered and continue unstayed and in effect, for a period of 60 or more
consecutive days; or
(c) an order for relief against such Person shall be entered in
an involuntary case under the Federal Bankruptcy Code.
"Bill of Sale" has the meaning given to such term in the definition
of "Conveyance Documents."
"Board of Managers" means:
(a) the Board of Managers of the Issuer; or
(b) any Manager or committee of such Board of Managers duly
authorized under applicable law to act on behalf of such Board of Managers.
"Board Resolution" means a resolution duly adopted by the Board of
Managers of the Issuer.
"Book-Entry Note" means any beneficial interest in the Timber
Notes, ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 2.6 of the Indenture;
provided, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Notes are
issued to all Note Owners, such Timber Notes shall no longer be "Book-Entry
Notes."
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in the Borough of Manhattan, the City of
New York, New York, in San Francisco, California or in the Commonwealth of
Massachusetts, are authorized or required by law or executive order to
close.
A "Cash Retention Event" shall be deemed to exist on any date,
subsequent to January 20, 2014, on which any Timber Notes are outstanding.
"Cedel" means Cedel Bank, societe anonyme.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as the same may be in effect from time to
time, any successor statute, and the rules and regulations thereunder.
"Certificate" means a certificate conforming to the requirements of
Section 12.5 of the Indenture and Section 10.9 of the Deed of Trust.
"Class" means any of (i) the Class A-1 Timber Notes, (ii) the Class
A-2 Timber Notes, (iii) the Class A-3 Timber Notes or (iv) any class of
Additional Timber Notes.
"Class A-1 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
6.55% Class A-1 Timber Collateralized Notes.
"Class A-2 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
7.11% Class A-2 Timber Collateralized Notes.
"Class A-3 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
7.71% Class A-3 Timber Collateralized Notes.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act, and meeting
the requirements of the definition of the term "clearing corporation" in
Article Eight of the Uniform Commercial Code of the State of New York,
which is the Holder of any Book-Entry Note.
"Clearing Agency Agreement" shall mean the letter of
representations dated on or prior to the Closing Date, among the Issuer,
the Trustee and the initial Clearing Agency relating to the Book-Entry
Notes, as the same may be amended, modified or supplemented.
"Clearing Agency Participant" shall mean a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency records in a book-entry system ownership, transfers and
pledges of securities deposited with such Clearing Agency.
"Clearing System Certificate" A certificate in substantially the
form of Exhibit L to the Indenture or such other form of certificate as
shall be satisfactory to the Registrar, Euroclear and Cedel.
"Closing Date" shall mean the date on which the Timber Notes are
issued pursuant to the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means State Street Bank and Trust Company, in
its capacity as collateral agent for the Holders of the Timber Notes and
the Liquidity Providers pursuant to the Deed of Trust and the Indenture,
together with its successors in such capacity.
"Collateral Agent Expenses" means any expenses or damages of or
compensation owing to the Collateral Agent (including, without limitation,
the reasonable fees and disbursements of counsel to the Collateral Agent)
incurred with respect to the enforcement or administration of the Deed of
Trust or owing to the Collateral Agent as part of the Secured Obligations.
"Collateral Mortgaged Property" means and includes all Mortgaged
Property (including both those now and hereafter existing), to which
Article 9 of the Uniform Commercial Code may now or hereafter apply,
including, but not limited to, personal property (tangible and intangible),
fixtures, goods, documents, instruments, general intangibles, chattel
paper, accounts, deposit accounts, products and proceeds, and further
including, without limitation, Harvested Timber, Company Timber to be cut
pursuant to a Purchase Agreement, the Assigned Proceeds, the Data
Processing Equipment, Data Processing Information, the Subject Contracts
and the Accounts.
"Collateral Release Price" means, as of any date, in respect of any
Company Owned Timberlands or Company Timber Rights to be released from the
Lien of the Deed of Trust on such date pursuant to Section 6.1 of the
Indenture, an amount equal to the product of (a) the number of Mbfe of
Company Timber located on the Company Owned Timberlands to be released (or
on the Company Timber Rights Property that is subject to the Company Timber
Rights to be released, as applicable) and (b) an amount equal to $724,
escalated at rate of 3-1/2% per annum (compounded annually, commencing
January 1, 1999) to such date.
"Collateral Value Factor", for any Monthly Calculation Date, shall
be the factor indicated as of such date in the Structuring Schedule under
the caption "Collateral Value Factor" (column H).
"Collection Account" means account number GE4767 established
pursuant to Section 5.1(a) of the Indenture with the Securities
Intermediary in the name of "State Street Bank and Trust Company, as
Collateral Agent for the Scotia Pacific Company LLC Class A-1, A-2 and A-3
Noteholders and the Liquidity Providers--Collection Account," and all
successor accounts thereto.
"Collection Account Disbursement" has the meaning given to such
term in Section 5.3(b) of the Indenture.
"Collection Account Disbursement Funds" has the meaning given to
such term in Section 5.3(b) of the Indenture.
"Collection Account Rate" means, for any date, a rate per annum
equal to the rate per annum (determined as of a date not more than three
Business Days prior to such date) for the offering to leading banks in the
London interbank market of Dollar deposits having a term of 30 days and in
an amount comparable to the amount to which such rate is applied.
"Commitment" means, at any time, the maximum principal or face
amount of the Advances, whether or not outstanding, that a Liquidity
Provider is required to make under the Line of Credit Agreement at such
time, as such amount may be varied or adjusted from time to time.
"Commitments" means, at any time, the aggregate amount of the Commitments
of all Liquidity Providers at such time.
"Company Timber" means (i) all trees and timber, including, without
limitation, standing timber and crops, now located on or hereafter planted
or growing in the soil of any Company Timber Property (other than the
Pacific Lumber Timber Rights Property), or any part or parcel thereof, and
all additions, substitutions and replacements thereof (including timber to
be cut pursuant to a Purchase Agreement) and (ii) any and all Harvested
Timber.
"Company Timber Property" means the Company Owned Timberlands and
the Company Timber Rights Property.
"Company Timber Rights" means (i) the timber rights of the Issuer
in respect of the Company Timber Rights Property referred to in clause (i)
of the definition of such term, including, without limitation, the
ownership of, and (subject to compliance with applicable law) the right in
perpetuity (or, in the case of Company Timber Rights in respect of not more
than 200 acres of timberlands, the right expiring not earlier than November
1, 2027) to harvest, all trees and timber, including, without limitation,
standing timber and crops, now located on or hereafter planted or growing
in the soil of such Company Timber Rights Property or any part or parcel
thereof and (ii) any timber rights which are (A) purchased by the Issuer
subsequent to the Closing Date with funds from the Prefunding Account, (B)
in perpetuity or expire no earlier than December 31, 2048 and (C) described
in an amendment to the Deed of Trust.
"Company Timber Rights Property" means (i) those portions of the
timberlands owned by Pacific Lumber, Salmon Creek or an unrelated third
party on the date hereof which are subject to the Company Timber Rights and
are described with particularity in the Pacific Lumber Timber Deeds and, as
to a portion of such lands, in certain maps referenced in the Pacific
Lumber Timber Deeds and held by an escrow agent pursuant to an Escrow
Agreement by and among the Issuer, Pacific Lumber, Salmon Creek and such
escrow agent, dated as of the Closing Date, and (ii) any timberlands that
are subject to timber rights referred to in clause (ii) of the definition
of Company Timber Rights.
"Company Owned Timberlands" means:
(a) the parcels of land described in (i) Exhibit A to the Deed of
Trust and (ii) any amendment to the Deed of Trust with respect to the
addition of Substitute Timber Property or Additional Timber Properties,
together with the entire right, title and interest of the Issuer in and to
such parcels of land, subject to Permitted Encumbrances, together with (a)
all right, title and interest of the Issuer in and to all buildings,
structures and other improvements now standing, or at any time hereafter
constructed or placed, upon such land, including, without limitation, all
right in and to all equipment and fixtures of every kind and nature on such
land or in any such buildings, structures or other improvements (such
buildings, structures, other improvements, equipment and fixtures being
herein collectively called the "Improvements"), (b) all right, title and
interest of the Issuer in and to all and singular the tenements,
hereditaments, easements, rights of way, rights, privileges and
appurtenances in and to such land belonging or in any way appertaining
thereto, including without limitation, all right, title and interest of the
Issuer in, to and under any streets, ways, alleys, vaults, gores or strips
of land adjoining such land and (c) all claims or demands of the Issuer, in
law or in equity, in possession or expectancy of, in and to such land
together with all rents, income, revenues, issues and profits from and in
respect of the property described above in this paragraph (a) and the
present and continuing right to make claim for, collect, receive and
receipt for the same as hereinafter provided. It is the intention of the
Issuer that, so far as may be permitted by law, all of the foregoing,
whether now owned or hereafter acquired by the Issuer, affixed, attached or
annexed to such land shall be and remain or become and constitute a part of
the Mortgaged Property and the security covered by and subject to the Lien
of the Deed of Trust;
(b) all right, title and interest of the Issuer in and to (i) all
extensions, improvements, betterments, renewals, substitutes and
replacements of and on the property described in the foregoing clause (a)
and (ii) all additions and appurtenances thereto not presently leased to or
owned by the Issuer and hereafter leased to, acquired by or released to the
Issuer or, constructed, assembled or placed upon the Company Owned
Timberlands immediately upon such leasing, acquisition, release,
construction, assembling or placement, and without any further grant or
other act by the Issuer (including, without limitation, all lands added by
lot line adjustment to any existing legal parcel constituting part of the
Company Owned Timberlands); and
(c) all the estate, right, title and interest of the Issuer, in and
to all contract rights, actions and rights in action, relating to the
property described in clause (a), including, without limitation, all rights
to insurance proceeds and unearned premiums arising from or relating to
damage to such property.
Notwithstanding the foregoing, Company Owned Timberlands shall not
include any Pacific Lumber Timber.
"Contingent Obligation" means, as to any Person, any obligation of
such Person guaranteeing any Indebtedness, leases, dividends or other
obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligations of such Person, whether or not contingent, (i)
to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term
Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business or obligations in
connection with surety or appeal bonds.
"Conveyance Documents" means (i) the Grant Deed dated March 18,
1993 from Pacific Lumber, as grantor, to Scotia Pacific Holding Company, a
Delaware corporation ("Scotia Pacific"), as grantee, conveying certain of
the Company Owned Timberlands to Scotia Pacific and reserving in Pacific
Lumber certain timber rights (the "First Pacific Lumber Grant Deed"), (ii)
the Grant Deed dated on or prior to the Closing Date from Pacific Lumber,
as grantor, to the Issuer, as grantee, conveying certain Company Owned
Timberlands to the Issuer (the "Second Pacific Lumber Grant Deed"), (iii)
the Quitclaim Deed dated on or prior to the Closing Date from Pacific
Lumber to the Issuer conveying to the Issuer all of Pacific Lumber's
interest in certain of the timber rights previously reserved by Pacific
Lumber in the First Pacific Lumber Grant Deed (the "Pacific Lumber
Quitclaim Deed"), (iv) three Grant Deeds, each dated on or prior to the
Closing Date, from Pacific Lumber, as grantor, to the Issuer, as grantee,
conveying the Company Timber Rights to the Issuer (the "Pacific Lumber
Timber Deeds"), (v) the Bill of Sale and General Assignment dated as of
March 23, 1993 transferring from Pacific Lumber certain of the Data
Processing Information and other personal property to Scotia Pacific (the
"Bill of Sale"), (vi) the Bill of Sale and General Assignment dated as of
the Closing Date transferring from Pacific Lumber certain Data Processing
Information and other personal property with respect to certain Company
Owned Timberlands and the Company Timber Rights to the Issuer (the "New
Bill of Sale"), (vii) the New Environmental Indemnification Agreement,
(viii) the New Reciprocal Rights Agreement and (ix) the Transfer Agreement
dated as of the Closing Date (the "New Transfer Agreement") among the
Issuer, Pacific Lumber and Salmon Creek.
"Corporate Trust Office" means the office of the Trustee, the
Collateral Agent or the Registrar, as applicable, at which the trust
created by this Indenture shall be principally administered.
"Counsel" means legal counsel reasonably satisfactory to the
Trustee. Such legal counsel may be an employee, officer, manager or
director of the Issuer, Pacific Lumber or an Affiliate of either of them,
unless otherwise indicated.
"covenant defeasance" shall have the meaning set forth in Section
8.3 of the Indenture.
"Data Processing Equipment" means all hardware, software, or other
data processing systems or equipment, whether now owned or hereafter
acquired by the Issuer, and wherever located.
"Data Processing Information" means all information, programs,
know-how, methods or methodology relating to the management of the Company
Timber Property, the harvesting, severing or cutting of Company Timber, and
the preparation of applications for Timber Harvesting Plans, including,
without limitation, all such information, programs, know-how, methods or
methodology relating to the GIS.
"De Minimis Receipts" means payments received by the Issuer in an
aggregate amount not greater than $50,000 at any one time that would
otherwise be required to be deposited in the Collection Account and which
the Issuer has deposited into another bank account.
"Debt Obligations", as of any date (in each case determined before
giving effect to any payment made on such date), means the sum of (a) the
outstanding principal balance of the Timber Notes as of such date plus (b)
interest accrued and unpaid on the Timber Notes to such date, including any
interest on unpaid interest (computed on the basis of a 360-day year of
twelve 30-day months), plus (c) any Premium accrued and unpaid on the
Timber Notes and any interest accrued and unpaid thereon.
"Deed of Trust" means the Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment dated the Closing Date
by the Issuer, as trustor, in favor of the Deed of Trust Trustee for the
benefit of the Collateral Agent, as beneficiary and agent for the Secured
Parties, as the same may be amended, supplemented and otherwise modified
and in effect from time to time.
"Deed of Trust Trustee" means Fidelity National Title Insurance
Company, and its successors in the trust created by the Deed of Trust.
"Deemed Collateral Value", for any Monthly Calculation Date, shall
be an amount equal to the product (in Dollars) of the Collateral Value
Factor for such date and the Deemed Remaining Harvest Quantity for such
date.
"Deemed Production" through any date, means the number of Mbfe of
Company Timber deemed harvested and sold from July 20, 1998 through such
date pursuant to Section 5.5 of the Indenture.
"Deemed Remaining Harvest Quantity" means, for any Monthly
Calculation Date, an amount equal to the excess of (i) of the Structured
Harvest Quantity over (ii) the sum of all Actual Production and all Deemed
Production (each expressed in Mbfe) through such date.
"Default" means any occurrence or condition that, with notice or
the lapse of time, or both, would become an Event of Default.
"Default Interest" means the interest accruing at the Default Rate
on any amount of Regular Interest on any Class of Timber Notes that was not
paid when such amount became due and payable.
"Default Rate" means the applicable Note Rate plus 2.00% per annum.
"defeasance" shall have the meaning set forth in Section 8.2 of the
Indenture.
"Defeased Notes" shall have the meaning set forth in Section 8.1 of
the Indenture.
"Deficiency Premium Amount", with respect to any Payment Deficiency
on any Class of Timber Notes with respect to which a Deficiency Premium
Amount is payable on a Note Payment Date, means an amount of interest
(computed on the basis of a 360-day year of twelve 30-day months) on such
Payment Deficiency, for the period from and including the Note Payment Date
immediately preceding such Note Payment Date to but excluding such Note
Payment Date, at a rate per annum equal to 1.50%.
"Definitive Notes" has the meaning given to such term in Section
2.1.
"Depletion Amortization Amount" means, on any Note Payment Date,
an amount, if any, equal to the lesser of (a) the excess, if any, of (i)
the balance in the Payment Account on such date over (ii) the sum of the
Minimum Obligations on such date or (b) the Excess Debt Obligations Amount
on such date.
"Depository" means, with respect to the Global Certificates, DTC or
such other Person or Persons as shall be designated as Depository by the
Registrar pursuant to Section 2.6(a) of the Indenture.
"Discounted Servicing Obligation", at any Monthly Deposit Date or
Note Payment Date, means the amount specified as the Discounted Servicing
Obligation (column J) opposite the Monthly Period preceding such date on
the Structuring Schedule.
"Disposal Site" means any site, facility or location to which any
Hazardous Materials from or attributable to the Company Owned Timberlands
have been transported for treatment, disposal, storage or deposit.
"Dollars" and "$" means lawful money of the United States of
America.
"Downgrade Advance" has the meaning set forth in Section 11.2(c) of
the Indenture.
"DTC" means The Depository Trust Company, a New York corporation.
"DTC Custodian" has the meaning given to such term in Section 2.1.
"Eligible Investments" means any one or more of the following,
which, in each case, matures (or is redeemable by the holder thereof
without the incurrence of a loss) not later than the date the funds
invested therein are required to be used: (a) direct obligations of, and
obligations fully guaranteed or insured by, the United States of America or
any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America; (b) demand deposits (including but not limited to
controlled disbursement accounts or other similar accounts) and time
deposits with, and certificates of deposit and bankers' acceptances issued
by, any bank or trust company organized under the laws of the United States
of America or any State thereof whose unsecured, unguaranteed long-term
senior debt obligations are rated "AA" by S&P and "Aa2" by Moody's or
higher, or whose unsecured, unguaranteed commercial paper obligations are
rated "A-1" by S&P and "P-1" by Moody's or higher, including the Trustee,
so long as the Trustee otherwise satisfies such requirements (or, in the
case of the Expense Reserve, whether or not the Trustee satisfies such
requirements); (c) repurchase agreements entered into with entities whose
unsecured, unguaranteed long-term debt obligations are rated "AA" by S&P
and "Aa2" by Moody's or higher, or whose unsecured, unguaranteed commercial
paper obligations are rated "A-1" by S&P and "P-1" by Moody's or higher,
pursuant to a written agreement with respect to any obligation described in
clause (a) above; (d) commercial paper (including both noninterest-bearing
discount obligations and interest-bearing obligations payable on demand or
on a specified date not later than 150 days from the date of acquisition
thereof) and having a rating of "A-1" by S&P and "P-1" by Moody's or
higher; (e) direct obligations or shares of any money market fund or other
similar investment company all of whose investments consist of obligations
described in the foregoing clauses of this definition and that is rated
"AAm" by S&P and "Aa" by Moody's or higher; (f) taxable auction rate
securities commonly known as "money market notes" that at the time of
purchase have been rated and the ratings for which (i) for direct issues,
must not be less than "P-1" if rated by Moody's and not less than "A-1" if
rated by S&P, or (ii) for collateralized issues which follow the asset
coverage tests set forth in the Investment Company Act of 1940, as amended,
must have long-term ratings of at least "AAA" if rated by S&P and "Aaa" if
rated by Moody's; or (g) with Rating Agency Confirmation, any investments
hereafter developed which are substantially comparable to those described
above.
"Elk River Timberlands" means, in the event that any Headwaters
Acquisition Property is acquired by an Affiliate of the Issuer upon
consummation of the Headwaters Agreement (as such term is defined in the
Offering Memorandum), (a) such Headwaters Acquisition Property or (b) the
Alternate Property, either (a) or (b) of which will be transferred to the
Issuer within 180 days after consummation of the Headwaters Agreement and
made subject to the Lien of the Deed of Trust promptly after the
acquisition thereof by the Issuer.
"Environmental Laws" means all federal, state or local statutes,
laws, ordinances, regulations, rules, rulings, orders, restrictions,
requirements, writs, injunctions, decrees or other official acts relating
to the environment or hazardous or similar substances (including, without
limitation, CERCLA and similar state laws), whether now or hereafter
enacted or imposed by any Governmental Authority.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Event of Default" has the meaning given to such term in Section
7.1 of the Indenture.
"Excess Debt Obligations Amount" means, on any Note Payment Date,
an amount equal to the excess, if any, of (a) the sum of (i) the Adjusted
Debt Obligations on such date plus (ii) the Discounted Servicing Obligation
at such date over (b) the Total Collateral Value at such date.
"Excess Funds" has the meaning given to such term in Section
5.3(c)(x) of the Indenture.
"Excess Payment" has the meaning given to such term in Section
2.12(a) of the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time.
"Exchange Offer Registration Statement" shall mean a registration
statement of the Issuer on an appropriate form under the Securities Act
with respect to the Registered Exchange Offer, all amendments and
supplements to such registration statement, including post-effective
amendments thereto, in each case including the prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Exchange Timber Notes" shall mean debt securities of the Issuer
identical in all material respects to the Timber Notes (except that the
Non-Registration Premium provisions and the transfer restrictions shall be
modified or eliminated, as appropriate, and interest thereon shall accrue
from and including the last date to which interest was paid on the Timber
Notes or, if no such interest has been paid, from the Closing Date) to be
issued under the Indenture to Holders in exchange for Registrable
Securities pursuant to the Registered Exchange Offer.
"Expense Reserve" means account number GE4766 established pursuant
to Section 5.1(a) of the Indenture with the Securities Intermediary in the
name of "State Street Bank and Trust Company, as Collateral Agent for the
Scotia Pacific Company LLC Class A-1, A-2 and A-3 Noteholders and the
Liquidity Providers--Expense Reserve," and all successor accounts thereto.
"Final Maturity Date" means July 20, 2028.
"Financial Asset" means "financial asset" as defined in Section 8-
102(a)(9) of the Uniform Commercial Code.
"First Pacific Lumber Grant Deed" has the meaning given to such
term in the definition of "Conveyance Documents."
"General Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts of any Governmental Authority,
now and hereafter existing at any time or times, other than Environmental
Laws and Tax Laws.
"GIS" means the geographical information system of the Issuer,
including any Data Processing Equipment and/or Data Processing Information
which is a part of such system, and any updates, upgrades or modifications
thereto developed by Pacific Lumber or the Issuer.
"Global Notes" has the meaning ascribed to such term in Section
2.1.
"Governmental Authority" means (a) the United States of America,
(b) any State, commonwealth, county, parish, municipality, territory,
possession or other governmental subdivision within the United States of
America or under the jurisdiction of the United States of America and (c)
any Tribunal.
"Grant Deeds" means the First Pacific Lumber Grant Deed and the
Second Pacific Lumber Grant Deed.
"Harvested Timber" means all trees, timber and crops which have
been severed, cut or harvested from the Company Timber Property (other than
the Pacific Lumber Timber Rights Property), or any parcel thereof, and with
respect to which title has not yet passed to a third party purchaser in
compliance with the terms of the Indenture.
"Hazardous Materials" means (a) any "hazardous waste," "hazardous
substance," "hazardous material," "hazardous constituent," "toxic
chemical," "toxic substance," "acutely toxic substance," "pollutant" or
"contaminant," or any other formulation intended to define, list or
classify substances by reason of hazardous, dangerous, toxic or other
deleterious properties, such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," as defined in any
Environmental Law (including, without limitation, asbestos, polychlorinated
biphenyls, oil, petroleum, petroleum-related or petroleum-derived products,
natural gas, natural gas liquids, liquified natural gas or synthetic
natural gas), or any similar substances, (b) any substance the presence of
which on any property included in the Company Owned Timberlands is
prohibited by any Environmental Law, (c) any underground storage tanks, (d)
any flammable substances or explosives or any radioactive materials and (e)
any other substances subject to any rules or regulations (including,
without limitation, any notice requirements or special handling
requirements) of any Governmental Authority under any Environmental Law.
"Hazardous Materials Contamination" means the contamination
(whether now existing or hereafter occurring) of any improvements,
facilities, soil, groundwater, air or other elements on or of any property
included in the Company Owned Timberlands or the contamination of any
improvements, facilities, soil, groundwater, air or other elements on or of
any other lands as a result of Hazardous Materials at any time (before or
after date of the Deed of Trust) emanating from any Company Owned
Timberlands.
"Holder" means the Person in whose name a Timber Note or an
Additional Timber Note is registered on the Register or on any similar
register for any Additional Timber Notes, as the case may be.
"Headwaters Acquisition Property" means, of the approximately 7,700
acres of timberlands expected to be acquired by an Affiliate of the Issuer
upon the consummation of the Headwaters Agreement, that portion of such
timberlands, if any, actually so acquired by an Affiliate of the Issuer
upon consummation of the Headwaters Agreement.
"Indebtedness" means, as to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (ii) the face amount of all letters
of credit issued for the account of such Person and all drafts drawn
thereunder, (iii) the aggregate amount payable under all capital leases
under which such person is the lessee, (iv) all Contingent Obligations of
such Person, (v) all net obligations of such Person under any interest rate
protection agreements, (vi) all obligations of such Person under
"take-or-pay" or other similar agreements and (vii) all liabilities of the
types described in clauses (i), (ii), (iii), (iv), (v) and (vi) secured by
any Lien on any property owned by such Person, whether or not such
liabilities have been assumed by such Person; provided, however, that
Indebtedness shall not include (a) trade payables due within 90 days,
accrued expenses and other current liabilities arising in the ordinary
course of business in commercially reasonable amounts not inconsistent with
industry standards, (b) compensation, pension obligations and other
obligations arising from employee benefits and employee arrangements in
commercially reasonable amounts not inconsistent with industry standards,
(c) indebtedness consisting of letters of credit or otherwise required by
law in respect of workers' compensation obligations or similar social
insurance and (d) indebtedness the occurrence of which is expressly
contemplated by the terms of the Indenture or other Operative Documents.
"Indebtedness Reserve Account" means account number GE4806
established pursuant to Section 5.1(a) of the Indenture with the Securities
Intermediary in the name of "State Street Bank and Trust Company, as
Collateral Agent for the Scotia Pacific Company LLC Class A-1, A-2 and A-3
Noteholders and the Liquidity Providers--Indebtedness Reserve Account," and
all successor accounts thereto..
"Indebtedness Reserve Debt" has the meaning given to such term in
Section 5.11 of the Indenture.
"Indenture" shall mean the Indenture between the Issuer and the
Trustee, pursuant to which the Timber Notes have been issued, as the same
may be amended, modified or supplemented.
"Independent" when used with respect to any specified Person, means
that such Person:
(a) is in fact independent of the Issuer and any other obligor
upon the Timber Notes;
(b) is not an employee, officer, manager, director or an
Affiliate of the Issuer or such other obligor; and
(c) does not own, and that no Affiliate of such Person owns,
directly or indirectly, any beneficial or other interest in the Issuer
or such other obligor or in any Affiliate of the Issuer or such other
obligor.
"Independent Appraiser" means any person who in the course of his
business appraises properties of a type similar to the Company Owned
Timberlands or Company Timber Rights and who is Independent.
"Independent Manager" means a Person who, on any date on which a
determination thereof is to be made:
(a) is a voting member of the Board of Managers;
(b) is not an Affiliate of the Issuer (otherwise than to the
extent such Person may be deemed an Affiliate of the Issuer by virtue of
such position as a manager or as a director of the Issuer or of any
entity merged with or consolidated into the Issuer) or Pacific Lumber,
or an employee, officer or director of Pacific Lumber, or an employee or
officer of the Issuer;
(c) has not received, directly or indirectly, at any time during
the two years immediately preceding such date, material compensation or
payment from the Issuer or Pacific Lumber or from any Affiliate of the
Issuer or Pacific Lumber (except for director's or manager's fees and
expense reimbursement for serving as such);
(d) does not own, directly or indirectly, any beneficial or other
interest in the Issuer or Pacific Lumber; and
(e) shall have a fiduciary duty to the Noteholders.
"Insolvency Event of Default" means the Event of Default specified
in Section 7.1(11) of the Indenture.
"Institutional Accredited Investor" means a Person which is an
institution and is an "accredited investor" as defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act, but is not a QIB.
"Interest Advance" has the meaning set forth in Section 11.2(a) of
the Indenture.
"Issuer" has the meaning given to such term in the recitals to the
Indenture.
"Issuer Taxes" means (without duplication) all taxes, assessments,
fees, levies, imposts, duties, deductions, withholdings or other charges,
together with any interest and penalties payable in connection therewith,
from time to time or at any time imposed or assessed by any statute, law,
ordinance, regulation, rule, ruling, order, writ, injunction, decree or
other official act of any Governmental Authority (a) against the Issuer by
reason of the Issuer's ownership, harvesting, sale or other disposition or
use of all or any part of the Mortgaged Property, (b) upon or with respect
to, measured by or charged against, required to be deducted or withheld
from or otherwise attributable to all or any part of the Mortgaged Property
(or the use, sale or other disposition thereof) or (c) upon or against the
Issuer, the Collateral Agent, the Services Provider, the Trustee or any
Beneficiary (as defined in the Deed of Trust) by reason of the Deed of
Trust or the Liens created thereby, including, without limitation, yield,
franchise, sales, transfer, gross receipts, profits, income (other than
income taxes imposed on amounts paid or accrued on the Notes), property, ad
valorem, production and severance taxes.
"Legended Definitive Note" means a Definitive Note bearing the
Securities Legend.
"Lien" means any deed of trust, security interest, assignment,
pledge, hypothecation, charge or other encumbrance.
"Lien of the Deed of Trust" means the lien, assignment and security
interest created or granted, or renewed, extended and continued in force
and effect, by the Deed of Trust (including the after-acquired property
provisions of the Deed of Trust), or created by any subsequent conveyance
under the Deed of Trust or supplement to the Deed of Trust in favor of the
Collateral Agent (whether made by the Issuer or any other Person), or
otherwise created, effectively constituting any property a part of the
security and Mortgaged Property held by the Collateral Agent for the
benefit of the Secured Parties.
"Line of Credit Acceleration" means the election of the Liquidity
Providers, during the continuance of a Triggering Event, to permanently
cancel their obligations to make Advances under the Line of Credit
Agreement (other than by reason of a Termination Advance having been made
or the occurrence of the Scheduled Termination Date) or, if a Termination
Advance has been made, to require that such Advance be payable on each
Monthly Deposit Date and Note Payment Date in accordance with Sections 5.3
and 5.7 of the Indenture, in each case as provided in the Line of Credit
Agreement, or such other meaning as provided in the Line of Credit
Agreement then in effect.
"Line of Credit Agent" means the financial institution or other
agent under the Line of Credit Agreement, designated thereunder from time
to time, through whom the Liquidity Providers make Advances to the Issuer
or to the Trustee on behalf of the Issuer and who is authorized to receive
payments of interest and principal payable to the Liquidity Providers from
the Issuer, in accordance with the terms of the Line of Credit Agreement.
"Line of Credit Agreement" means a credit facility, including a
line of credit, revolving loan agreement, letter of credit facility or any
similar financing facility, of the Issuer in effect from time to time with
one or more Liquidity Providers each of whom, as of the date such credit
facility is first entered into, or, if later with respect to any Liquidity
Provider, as of the date it first becomes party thereto, has the Required
Liquidity Provider Rating, pursuant to which the Issuer or the Trustee on
behalf of the Issuer may obtain Interest Advances or a Termination Advance
from the Liquidity Providers thereunder, as such credit facility may from
time to time be extended, amended, modified, supplemented or amended and
restated in accordance with the provisions of Section 11.3 of the
Indenture; provided, however, that such credit facility is either (I) the
Bank of America Credit Agreement or (II) a replacement for a then existing
Line of Credit Agreement entered into in compliance with Section 11.4 of
the Indenture. As of the Closing Date, the Line of Credit Agreement is the
Bank of America Credit Agreement.
"Line of Credit Amortization Amount" means, as of any Note Payment
Date, the amount, if any, of principal, which, under the terms of the Line
of Credit Agreement is payable on such Note Payment Date in respect of a
Termination Advance.
"Liquidity Account" means account number GE4808 established
pursuant to Section 5.1(a) of the Indenture with the Securities
Intermediary in the name of "State Street Bank and Trust Company, as
Collateral Agent for the Scotia Pacific Company LLC Class A-1, A-2 and A-3
Noteholders and the Liquidity Providers -- Liquidity Account," and all
successor accounts thereto.
"Liquidity Provider" means any financial institution that is at the
relevant time a party to the Line of Credit Agreement and has a Commitment
thereunder or has Advances outstanding thereunder.
"Liquidity Providers' Expenses" means, as of any date, all amounts
then due from the Issuer under the Line of Credit Agreement, other than
interest (including any Supplemental Liquidity Provider Interest) and
principal and other than any Additional Liquidity Provider Fees; provided,
however, that indemnification obligations under the Line of Credit
Agreement shall not be deemed to be Liquidity Providers' Expenses (but
shall be deemed to be obligations for interest and principal on Advances)
to the extent that such indemnification obligations include, or represent
compensation for or damages constituting, the principal of and interest on
Advances.
"Lumber PPI Index" means, with respect to any date, the most recent
Producer Price Index (Lumber and Wood Products Commodity Groups) (Standard
Industrial Classification No. 2400) as published by the United States
Department of Labor, Bureau of Labor Statistics or any substitute index
hereafter adopted by the Department of Labor.
"Lumber PPI Inflation Factor" means, with respect to any date, a
fraction, the numerator of which is the then most recent Lumber PPI Index
and the denominator of which is the Lumber PPI Index in effect with respect
to January 1, 1998.
"Lump Sum Sale" means, with respect to any sale of Company Timber,
any agreement or arrangement pursuant to which the Issuer receives full
cash payment in advance for the purchase price for a specified quantity of
Company Timber (or Company Timber covered by one or more Timber Harvesting
Plans or contained on one or more parcels of land), and is required to
provide, subsequent to the date of such payment, the quantity of timber
provided therein (or covered by such Timber Harvesting Plans or contained
on such parcels).
"Majority Holders," at any date, means, subject to the provisions
of Section 7.13 of the Indenture, the Holders of a majority in aggregate
outstanding principal amount of Timber Notes and any Additional Timber
Notes of all Classes at such date.
"Manager" means a manager of the Issuer.
"Material Adverse Effect" means any material adverse effect on (a)
the Mortgaged Property or the operation, use or value thereof, (b) the
ability of the Issuer to perform and observe in all material respects its
covenants and obligations under the Deed of Trust, the Indenture or any of
the other Operative Documents, (c) the condition (financial or otherwise),
results of operations, business or business prospects of the Issuer or (d)
the rights or remedies of the Trustee or any Noteholder under the Indenture
or of the Deed of Trust Trustee or the Collateral Agent under the Deed of
Trust.
"Maximum Non-Cash Consideration Amount" shall mean, as of the date
of release of any Company Owned Timberlands or Company Timber Rights (the
"Release Date"), an amount equal to the amount of Excess Funds which would
be available for payment to or as directed by the Issuer pursuant to
Section 5.3(c)(x) of the Indenture on the next succeeding Monthly Deposit
Date, based upon the following assumptions: (i) all Section 6.1 Notes
proposed to be received in connection with the sale of Company Owned
Timberlands or Company Timber Rights were to be received in the form of
cash, (ii) no proceeds from any Company Owned Timberlands or Company Timber
Rights (pursuant to sales under the New Master Purchase Agreement or
otherwise) were received during the period from the Release Date through
and including the next succeeding Monthly Deposit Date (except for the
proceeds of sales pursuant to the New Master Purchase Agreement made prior
to the Release Date in the Monthly Period to which such next succeeding
Monthly Deposit Date relates), (iii) except for Deemed Production
attributable to such sale of Company Owned Timberlands or Company Timber
Rights, there was no Actual Production or Deemed Production during the
period, if any, from and including the Release Date through the end of the
Monthly Period to which such next succeeding Monthly Deposit Date relates,
(iv) the balances in the Collection Account, the Liquidity Account, if
any, plus any amount available under the Line of Credit Agreement and the
Expense Reserve shall equal the respective balances as of such Release Date
(giving effect to transactions on such date and to payments under the New
Master Purchase Agreement to be made on such next succeeding Monthly
Deposit Date in respect of sales made prior to the Release Date) and (v)
all transfers to and from the Collection Account as described in Sections
5.3(c)(i) through (ix), except to the extent provided in clauses (ii),
(iii) and (iv) of this definition, shall be computed in the same manner as
such items would be computed on the next succeeding Monthly Deposit Date.
"Mbfe" means, with respect to (i) old growth redwood, one Mbfe for
each one thousand board feet, net Scribner scale, of Company Timber, (ii)
old growth Douglas-fir, 0.723757 Mbfe for each one thousand board feet, net
Scribner scale, of Company Timber, (iii) young growth redwood, 0.751381
Mbfe for each one thousand board feet, net Scribner scale, of Company
Timber, (iv) young growth Douglas-fir, 0.488950 Mbfe for each one thousand
board feet, net Scribner scale, of Company Timber and (v) each other
species or category of Company Timber other than hardwoods (i.e., trees
which are not conifers), 0.309392 Mbfe for each one thousand feet, net
Scribner scale, of Company Timber.
"Minimum Principal Amortization" means, for any Class of Timber
Notes, the amount of principal payments on the Timber Notes of such Class
set forth for such Class under the column headed "Minimum Principal
Amortization" in Schedule B to the Indenture.
"Minimum Principal Amortization Amount" means, for any Class of
Timber Notes, as of any Note Payment Date, the excess, if any, of: (i) the
sum of all amounts specified with respect to such Class in Schedule B to
the Indenture as Minimum Principal Amortization opposite the respective
Note Payment Dates occurring on or prior to such Note Payment Date, over
(ii) the aggregate principal amount that was paid on the Timber Notes of
such Class prior to such Note Payment Date.
"Minimum Obligations" means, on any Note Payment Date, the sum of
(a) the Aggregate Minimum Principal Amortization Amount on such Note
Payment Date, (b) all accrued and unpaid interest (excluding interest on
premiums) due and payable to the Holders of the Timber Notes and any
Additional Timber Notes on such Note Payment Date, and (c) the aggregate
amount, if any, of principal and interest (other than any Supplemental
Liquidity Provider Interest) in respect of outstanding Advances under the
Line of Credit Agreement to be paid from the Payment Account on such Note
Payment Date.
"Monthly Calculation Date" means the last day of each calendar
month.
"Monthly Certificate Delivery Date", with respect to any Monthly
Calculation Date, means the day which is two Business Days prior to the
Monthly Deposit Date with respect to such Monthly Calculation Date.
"Monthly Deposit Date", with respect to any Monthly Calculation
Date, means (a) the 20th day of the calendar month following such Monthly
Calculation Date or (b) if such day is not a Business Day, the Business Day
immediately succeeding such day (provided, however, that all calculations
as of such Monthly Deposit Date shall be computed as of the date that would
have been a Monthly Deposit Date if such date were a Business Day).
"Monthly Period" means, with respect to any Monthly Calculation
Date, the calendar month ending on such Monthly Calculation Date.
"Monthly Noteholder Certificate" means a Certificate in
substantially in the form of Exhibit D to the Indenture.
"Monthly Trustee Certificate" means a Certificate as of a Monthly
Calculation Date prepared and delivered by the Issuer pursuant to Section
5.3(b) of the Indenture (which Certificate, except as otherwise provided
herein, shall relate to the sale of Company Timber during the Monthly
Period ending on such Monthly Calculation Date).
"Moody's" means Moody's Investors Service, Inc. or any successor to
such corporation's business of rating securities.
"Mortgaged Property" means all of the rights, titles, interests
and estates now owned or hereafter acquired by the Issuer in, to and under,
each of the following:
(a) the Company Owned Timberlands;
(b) the Company Timber Rights;
(c) all Company Timber;
(d) the Accounts, all funds, investments, securities and Financial
Assets from time to time held in or credited to any Account, all
Security Entitlements with respect to any Account and all interests,
profits, Proceeds, or other income derived from such funds, investments,
securities, Financial Assets and Security Entitlements and all the
Issuer's rights in any funds held in any Account;
(e) all the Subject Contracts, and all the Proceeds now or
hereafter receivable, owing, deliverable, performable or attributable to
or under the Subject Contracts;
(f) all Data Processing Equipment and all other machinery,
equipment and other tangible personal property and all fixtures and
improvements now or hereafter situated upon any part of the Company
Owned Timberlands;
(g) all Data Processing Information and all other information,
programs, know-how, methods or methodology relating to the management of
the Company Timber Property and the harvesting, severing or cutting of
Company Timber;
(h) all existing and future permits, licenses, rights-of-way,
easements, leases, franchises, certificates of public convenience and
necessity, and all similar rights and privileges, that relate to or are
appurtenant to any part of the Company Timber Property;
(i) all Proceeds of and other rights relating to insurance or
condemnation (including, without limitation, any judgments, insurance
proceeds, awards of damages and settlements) receivable or accruing by
reason of the loss of, damage to, diminution in the value of or income
or revenues from, or taking (by power of eminent domain or otherwise) of
all or any part of the properties or interests hereinabove or
hereinbelow described in this definition of the Mortgaged Property;
(j) all documents, instruments, drafts, acceptances, general
intangibles, chattel paper, deposit accounts, accounts, and all the
Proceeds therefrom or attributable thereto, whether now or hereafter
existing, arising out of or relating to the sale, use, exchange,
development, operation, cutting, harvesting, storage, gathering,
transportation, improvement, marketing, disposal, lease, handling or
other dealings with or of all or any portion of the properties or
interests hereinabove or hereinbelow described in this definition of
Mortgaged Property;
(k) without limiting the foregoing descriptions, all equipment and
inventory (as such terms are defined in the Uniform Commercial Code) and
all documents (as defined in the Uniform Commercial Code) now and at any
time or times hereafter obtained or acquired by the Issuer covering or
representing all or any portion of the properties or interests
hereinabove or hereinbelow described in this definition of Mortgaged
Property;
(l) all Timber Harvesting Plans and any other permits, documents
or other governmental approvals pertaining to the harvesting, cutting,
severing, transporting, storing, processing or handling of the Company
Timber; and all plans, engineering reports, land planning, maps,
surveys, and information and any other reports, plans, maps, surveys or
information to be used in connection with the Company Owned Timberlands
or Company Timber Rights.
(m) all property of any kind or description that (i) may from time
to time after the date of the Deed of Trust by delivery or by writing of
any kind be conveyed, mortgaged, pledged, assigned or transferred to the
Collateral Agent by the Issuer, or by any Person, with the consent of
the Issuer, or otherwise as expressly permitted by the terms of the Deed
of Trust and accepted by the Collateral Agent to be held as part of the
Mortgaged Property or (ii) is required by the terms of the Indenture or
the Deed of Trust to be subjected to the Lien of the Deed of Trust;
(n) each and every right, privilege, hereditament and/or
appurtenance in anywise incident or appertaining to any of the
properties or interests hereinabove or hereinbelow described in this
definition of the Mortgaged Property;
(o) the Proceeds from or attributable to the rights, titles,
interests and estates hereinabove referred to in this definition of the
Mortgaged Property (including, without limitation, all Assigned
Proceeds), all guarantees and suretyship agreements relating to any such
Proceeds, and the rights, titles and interests of the Issuer therein,
and all security for payment or performance thereof, now or hereafter
existing or arising;
(p) all other personal property used in connection with the
above-described Mortgaged Property; and
(q) all extensions, renewals, proceeds, accessions, improvements,
substitutions and replacements of and to any of the above-described
Mortgaged Property.
Notwithstanding the foregoing, Mortgaged Property shall not include (i) any
Pacific Lumber Timber, (ii) any motor vehicles subject to a certificate of
title law, (iii) any Timber Harvesting Plans, to the extent that the Issuer
is prohibited from granting a security interest therein, (iv) any permits,
documents or other governmental approvals other than Timber Harvesting
Plans which the Issuer is prohibited by applicable law from granting a
security interest in or (v) any accounts or inventory (as each such term is
defined in the Uniform Commercial Code) of Pacific Lumber or any proceeds
thereof.
"New Additional Services Agreement" means the New Additional
Services Agreement dated as of the Closing Date between the Issuer and
Pacific Lumber, as the same may be amended, modified or supplemented.
"New Bill of Sale" has the meaning assigned to such term in the
definition of "Conveyance Documents."
"New Environmental Indemnification Agreement" means the New
Environmental Indemnification Agreement dated as of the Closing Date
between the Issuer and Pacific Lumber, as the same may be amended, modified
or supplemented.
"New Master Purchase Agreement" means the New Master Purchase
Agreement dated as of the Closing Date between the Issuer and Pacific
Lumber, as the same may be amended, modified or supplemented.
"New Reciprocal Rights Agreement" means the New Reciprocal Rights
Agreement dated as of the Closing Date among the Issuer, Pacific Lumber and
Salmon Creek, as the same may be amended, modified or supplemented.
"New Services Agreement" means the New Services Agreement entered
into between the Issuer and Pacific Lumber dated as of the Closing Date, as
the same may be amended, modified or supplemented, and any similar
agreement hereafter entered into between the Issuer and any Person (other
than Pacific Lumber) as successor Services Provider, as the same may be
amended, modified or supplemented.
"New Transfer Agreement" has the meaning assigned to such term in
the definition of "Conveyance Documents."
"Nonrecourse Timber Acquisition Indebtedness" means purchase money
indebtedness incurred by the Issuer in the course of acquisition of any
timberlands or timber rights, provided that (i) in the event of nonpayment
of such purchase money indebtedness, the holder thereof shall only have
recourse for repayment to the property securing such indebtedness and (ii)
the agreements in respect of such purchase money indebtedness shall contain
a non-petition agreement substantially similar to that included in the New
Master Purchase Agreement.
"Non-Renewal Advance" has the meaning set forth in Section 11.2(b)
of the Indenture.
"Note Owner," with respect to a Book-Entry Note, means the person
who is the owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly or through a Clearing Agency Participant, in
accordance with the rules of such Clearing Agency).
"Note Payment Date" means January 20, 1999, and the 20th day of
each January and July thereafter through and including the Final Maturity
Date. Notwithstanding the foregoing provisions of this definition, if any
date or day that would constitute a Note Payment Date is not a Business
Day, the next succeeding such date or day shall constitute the Note Payment
Date (provided, however, that interest and Deficiency Premiums payable on
such Note Payment Date, and all other calculations as of such Note Payment
Date, shall be computed as of the date which would have been a Note Payment
Date if such date were a Business Day).
"Note Payment Noteholder Certificate" means a Certificate
substantially in the form of Exhibit F to the Indenture.
"Note Payment Trustee Certificate" means the Certificate required
to be prepared and submitted by the Issuer pursuant to Section 5.7(e) of
the Indenture.
"Note Purchase Agreement" means the Purchase Agreement dated as of
July 9, 1998 among the Issuer, Pacific Lumber and Salomon Brothers Inc., as
Representative of the Initial Purchasers, in respect of the initial
purchase of the Timber Notes.
"Note Rate" means, for each Class of Timber Notes, the interest
rate indicated on the face of each Timber Note of such Class.
"Noteholder" means a Holder.
"Offering Memorandum" means the Offering Memorandum dated July 9,
1998 relating to the offering of the Timber Notes, as such Offering
Memorandum may be amended or supplemented.
"Officer" has the meaning given to such term in the definition of
"Responsible Officer."
"Officer's Certificate" means a certificate that:
(a) is signed by a Responsible Officer of the Person or Persons
required to furnish or submit such certificate; and
(b) complies with the applicable requirements of Section 12.5 of
the Indenture or Section 10.9 of the Deed of Trust, as the case may be.
"Operating Agreement" means the Agreement of Limited Liability
Company of the Issuer, as amended from time to time.
"Operating Default" means:
(a) any failure by the Services Provider to provide any
certificate, report or notice to the Issuer or the Trustee, all in
accordance with the New Services Agreement, and the continuation of such
failure for five Business Days after notice thereof from the Issuer or the
Trustee;
(b) any failure by the Services Provider to observe or perform any
covenant or agreement of the Services Provider under the New Services
Agreement that has a Material Adverse Effect (and if such default is
remediable, the continuation of such default for a period of 30 days
after notice thereof from the Issuer or the Trustee);
(c) the execution by the Services Provider of any instrument
purporting to assign any of its duties or responsibilities under the New
Services Agreement except as expressly permitted by the New Services
Agreement;
(d) any representation or warranty made by Pacific Lumber as
initial Services Provider in the New Services Agreement (or by any
successor Services Provider in any other New Services Agreement) shall
prove to have been incorrect as of the time when the same was made and
the circumstance or condition in respect of which such representation or
warranty was incorrect has a Material Adverse Effect (and if such
default is remediable, the continuation of such default for a period of
30 days after notice thereof from the Issuer or the Trustee); or
(e) the Bankruptcy or Insolvency of the Services Provider.
"Operative Documents" means the Indenture, the Deed of Trust, the
Timber Notes from time to time outstanding, the New Services Agreement, the
New Master Purchase Agreement (and log purchase agreements entered into
pursuant thereto) and the Conveyance Documents.
"Opinion of Counsel" means a written opinion of Counsel which:
(a) complies with the applicable requirements of Section 12.5 of
the Indenture or Section 10.9 of the Deed of Trust, as applicable;
(b) is addressed to the Trustee or the Collateral Agent, as
applicable; and
(c) is in form and substance reasonably satisfactory to the
addressee.
"outstanding" when used with reference to any Timber Notes or any
Additional Timber Notes, means, as of any particular time, all Timber Notes
(or Additional Timber Notes, as applicable) theretofore authenticated and
delivered by the Trustee, other than Timber Notes (or Additional Timber
Notes, as applicable) in respect of which all outstanding or accrued
principal of, Regular Interest and Default Interest on, Premium on and
interest on Premium (or similar amounts with respect to the Additional
Timber Notes, as applicable) shall have been paid in full in accordance
with the Indenture; Timber Notes or Additional Timber Notes theretofore
canceled by the Trustee, or surrendered to the Trustee for cancellation,
pursuant to Section 2.9 of the Indenture; Timber Notes or Additional
Timber Notes in substitution for which other Timber Notes or Additional
Timber Notes shall theretofore have been authenticated and delivered
pursuant to the Indenture; and solely for purposes of determining whether
the holders of the requisite aggregate outstanding principal amount of
Timber Notes (or Timber Notes and Additional Timber Notes, as applicable)
have given any request, demand, authorization, direction, notice, consent
or waiver hereunder, Timber Notes (and Additional Timber Notes, as
applicable) registered in the name of (i) the Issuer or any other obligor
upon the Timber Notes (or Additional Timber Notes, as applicable), (ii) any
nominee or Affiliate of the Issuer or such other obligor, (iii) any
successor to the interest of the Issuer in all or substantially all of the
Mortgaged Property, (iv) any nominee or Affiliate of any such successor,
(v) Pacific Lumber or (vi) any nominee or Affiliate or nominee of any
Affiliate of Pacific Lumber.
"Pacific Lumber" means The Pacific Lumber Company and any successor
in interest thereto.
"Pacific Lumber Timber" means (i) all trees and timber, including,
without limitation, standing timber and crops, now located on or hereafter
planted or growing in the soil of any Pacific Lumber Timber Rights
Property, or any part or parcel thereof, and all additions, substitutions
and replacements thereof and (ii) any and all of the foregoing which have
been severed, cut or harvested from the Pacific Lumber Timber Rights
Property or any part of parcel thereof.
"Pacific Lumber Timber Deeds" has the meaning assigned to such term
in the definition of "Conveyance Documents."
"Pacific Lumber Timber Rights" means the timber rights of Pacific
Lumber in respect of the Pacific Lumber Timber Rights Property, including,
without limitation, the ownership of, and (subject to compliance with
applicable law) the right in perpetuity to harvest, all trees and timber,
including, without limitation, standing timber and crops, now located on or
hereafter planted or growing in the soil of any Pacific Lumber Timber
Rights Property or any part or parcel thereof.
"Pacific Lumber Timber Rights Property" means those portions of the
Company Owned Timberlands specifically identified as Pacific Lumber Timber
Rights Property on those certain maps held by an escrow agent pursuant to
an Escrow Agreement by and among the Issuer, Pacific Lumber, Salmon Creek
and such escrow agent, dated as of the Closing Date.
"Pacific Lumber Timber Rights Property Release Documents" has the
meaning assigned to such term in Section 6.3 of the Indenture.
"Pacific Lumber Timber Rights Property Release Notice" has the
meaning set forth in Section 6.3 of the Indenture.
"Pay-as-You-Harvest Sale" means, with respect to any sale of
Company Timber, any agreement or arrangement pursuant to which (A) the
Issuer shall receive partial payment in advance (the "Up-Front Payment")
for the purchase of a specified quantity of Company Timber (or Company
Timber covered by one or more Timber Harvesting Plans or contained on one
or more parcels of land), and the balance of which shall be paid as (or
after) such Company Timber is harvested and/or delivered or (B) the Issuer
shall receive payments for the purchase of a specified quantity of Company
Timber (or Company Timber covered by one or more Timber Harvesting Plans or
contained on one or more parcels of land) as (or after) such Company Timber
is harvested and/or delivered.
"Paying Agent" has the meaning given to such term in Section 2.3 of
the Indenture.
"Payment Account" means account number GE4765 established pursuant
to Section 5.1(a) of the Indenture with the Securities Intermediary in the
name of "State Street Bank and Trust Company, as Collateral Agent for the
Scotia Pacific Company LLC Class A-1, A-2 and A-3 Noteholders and the
Liquidity Providers--Payment Account," and all successor accounts thereto.
"Payment Default" means any Event of Default specified in paragraph
(1), (2), (3), (4) or (5) of Section 7.1 of the Indenture.
"Payment Deficiency" has the meaning given to such term in Section
2.12(b) of the Indenture.
"Permitted Encumbrances" means:
(a) the specific matters, if any, to which the Deed of Trust is
expressly made subject as set forth in a Schedule to a mortgagee title
insurance policy in favor of the Trustee or Collateral Agent in respect
of the Mortgaged Property;
(b) the New Reciprocal Rights Agreement;
(c) easements, restrictions, rights-of-way, servitudes,
restrictive covenants, permits, licenses, use agreements, boundary
agreements, surface leases, subsurface leases, or other similar
encumbrances on, over or in respect of the Company Timber or the Company
Timber Property contained in or arising from or in respect of any
document, instrument or agreement entered into by or with the consent of
the Issuer in connection with any Timber Harvesting Plans, Timber Laws
or Environmental Laws;
(d) discrepancies, conflicts in boundary lines, shortages in area,
encroachments or any other facts which a correct survey would disclose,
none of which, singly or in the aggregate, materially adversely affects
the operation or value of the Mortgaged Property or materially adversely
impairs the Issuer's or the Collateral Agent's right to receive and
retain the proceeds of cutting, harvesting or severing of Company Timber
attributable to the Company Owned Timberlands or the Company Timber
Rights;
(e) Liens for Issuer Taxes not yet delinquent or that are being
diligently contested by the Issuer in good faith by appropriate
proceedings and against which adequate reserves are being maintained in
accordance with generally accepted accounting principles by the Issuer,
provided that the enforcement or foreclosure of any such lien shall have
been stayed pending the resolution of such proceedings;
(f) operators' liens or mechanics' or materialmen's liens arising
in the ordinary course of business and incidental to the incurrence of
reasonable expenses permitted by the Indenture or Deed of Trust with
respect to the Mortgaged Property for amounts not yet due and payable or
that are being diligently contested by the Issuer in good faith by
appropriate proceedings and against which adequate reserves are being
maintained by the Issuer, provided that the enforcement or foreclosure
of any such lien shall have been stayed pending the resolution of such
proceedings and such lien is fully subordinate to and subject in right
of prior payment of the Secured Obligations;
(g) easements, restrictions, rights-of-way, servitudes,
restrictive covenants, permits, licenses, use agreements, boundary
agreements, surface leases, subsurface leases or other similar
encumbrances on, over or in respect of the Company Timber or Company
Owned Timberlands, none of which, singly or in the aggregate, materially
adversely affects the operation or value of the Mortgaged Property or
materially adversely impairs the Issuer's or the Collateral Agent's
right to receive and retain the Proceeds of cutting, harvesting or
severing Company Timber attributable to the Company Owned Timberlands or
the Company Timber Rights;
(h) such sales contracts and other similar agreements as are
customarily found in connection with operating properties comparable to
the Company Owned Timberlands or Company Timber Rights, none of which,
singly or in the aggregate, materially adversely affects the operation
or value of the Mortgaged Property or materially adversely impairs the
Issuer's or the Collateral Agent's right to receive and retain the
Proceeds of cutting, harvesting or severing Company Timber attributable
to the Company Owned Timberlands or the Company Timber Rights;
(i) any lease, contract or other agreement or encumbrance
(including, without limitation, the interest of any purchaser under a
Lump Sum Sale Agreement entered into in accordance with Section 6.1 of
the Indenture in and to the Company Timber so purchased) granted or
created by the Issuer after the date of the Deed of Trust that is
specifically permitted and authorized under the terms of the Indenture
and/or the Deed of Trust; and
(j) Liens securing the Indebtedness referred to in clause (u) of
Section 4.9 of the Indenture.
"Permitted Investments" means (i) Eligible Investments, (ii) any
Section 6.1 Notes, and (iii) investments of a nature described in the
definition of Eligible Investments, without regard to the required ratings
or maturities set forth therein.
"Person" means an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company
(including, without limitation, the Issuer), or a government or political
subdivision thereof.
"Personnel Costs" means all costs and expenses incurred by the
Issuer after the Closing Date attributable to individuals employed by the
Issuer.
"Post-Acceleration Date" has the meaning given to such term in
Section 7.7 of the Indenture.
"PPI Index" means, with respect to any date, the most recent
Producer Price Index (all Commodities) as published by the United States
Department of Labor, Bureau of Labor Statistics or any substitute index
hereafter adopted by the Department of Labor.
"Prefunding Account" means account number GE4794 established
pursuant to Section 5.1(a) of the Indenture with the Securities
Intermediary in the name of "State Street Bank and Trust Company, as
Collateral Agent for the Scotia Pacific Company LLC Class A-1, A-2 and A-3
Noteholders and the Liquidity Providers--Prefunding Account," and all
successor accounts thereto.
"Premium" means any Prepayment Premium payable in respect of an
Excess Payment pursuant to Section 2.12(a) of the Indenture, any Deficiency
Premium Amount payable in respect of a Payment Deficiency pursuant to
Section 2.12(b) of the Indenture and any Non-Registration Premium payable
pursuant to Section 2.12(c) of the Indenture.
"Premium Provision" means, for any Monthly Deposit Date, an amount
equal to that described in either paragraph (a) or (b) below:
(a) if such Monthly Deposit Date is a Note Payment Date, the
Premium Provision will equal the amount, if any, of the Prepayment
Premium that will become payable on such Monthly Deposit Date by virtue
of the payments or prepayments of principal on the Timber Notes being
made on such Note Payment Date, less the amount, if any, of all amounts
of Premium Provision deposits made in the Payment Account since the
immediately preceding Note Payment Date and the interest earned on such
deposits to such Monthly Deposit Date; and
(b) if such Monthly Deposit Date is not a Note Payment Date, the
Premium Provision will equal an amount equal to the present value at
such Monthly Deposit Date (discounted from the immediately succeeding
Note Payment Date at the Collection Account Rate, compounded monthly) of
the excess, if any, of (i) the amount, if any, of the Prepayment Premium
that would become payable on the Timber Notes on such Monthly Deposit
Date if such Monthly Deposit Date were a Note Payment Date and the
Scheduled Amortization for each Class of Timber Notes with respect to
such Monthly Deposit Date were the amount obtained by multiplying the
Scheduled Amortization for such Class of Timber Notes with respect to
the immediately succeeding Note Payment Date by a fraction, the
numerator of which is the number of months from the immediately
preceding Note Payment Date to such Monthly Deposit Date and the
denominator of which is six over (ii) the amount, if any, of all amounts
of Premium Provision deposited in the Payment Account after the
immediately preceding Note Payment Date and the interest earned on such
deposits to such Monthly Deposit Date.
"Premium Provision Refundable Amount" means, for any Monthly
Deposit Date (except any Monthly Deposit Date immediately following a
Monthly Deposit Date that is a Note Payment Date), the amount, if any, by
which the Premium Provision for the immediately preceding Monthly Deposit
Date exceeded the Premium Provision for such Monthly Deposit Date. The
"Premium Provision Refundable Amount" for any Monthly Deposit Date
immediately following a Monthly Deposit Date that is a Note Payment Date
shall be zero.
"Prepayment Premium" means, with respect to principal of any Class
of Timber Notes paid earlier than provided under the Scheduled Amortization
for such Class of Timber Notes, the premium that will be due and payable as
a result of such prepayment, determined as provided in the Indenture.
"Prepayment Premium Amount," for any Class of Timber Notes with
respect to any Excess Payment on such Class on any date, means an amount
that is equal to the excess, if any, of:
(a) the sum of (i) the present value (as defined below and subject
to the assumption below) at such date of such Excess Payment plus (ii) the
sum of the present values (as so defined and subject to said assumption) at
such date of the amounts of interest, computed at the Note Rate for such
Class, that would thereafter have accrued with respect to such Excess
Payment over
(b) such Excess Payment.
For purposes of this definition, (1) the present values of such Excess
Payment and interest thereon shall be calculated assuming that such Excess
Payment had been paid on the Note Payment Date or Note Payment Dates on
which such Excess Payment would have otherwise been paid if a portion of
the principal amount of the applicable Class of Timber Notes that equals
(but does not exceed) the Scheduled Amortization Amount for such Class on
each such Note Payment Date were paid on such Note Payment Date, (2)
"present value" shall be computed in accordance with generally accepted
financial practice based on a 360-day year of twelve 30-day months and at a
discount rate, compounded semiannually on each Note Payment Date, equal to
the Reinvestment Yield and (3) "Reinvestment Yield" shall be determined
by reference to the most recent Federal Reserve Statistical Release H.
15(519) (or, if such Statistical Release is no longer published, any
publicly available source of similar market data) that became publicly
available at least two, but not more than six, Business Days prior to the
date on which the Excess Payment occurs or, in the case of an optional
redemption, prior to the redemption date and shall be the sum of (A) 0.50%
per annum plus (B) the most recent weekly average yield on actively traded
U.S. Treasury securities adjusted to a constant maturity equal to the then
remaining weighted average life (computed as described in the following
paragraph) of such Excess Payment. For purposes of clause (1) of the
preceding sentence, the Scheduled Amortization Amount for the applicable
Class of Timber Notes on any Note Payment Date or Note Payment Dates shall
be calculated assuming that, after the date on which the payment of the
Excess Payment occurs, no payments of principal (other than those assumed
to be made in clause (1) of the preceding sentence) will be made to the
holders of such Class of Timber Notes. If the weighted average life of the
Excess Payment (so computed) is not equal to the constant maturity of a
U.S. Treasury security for which a weekly average yield is given, the
Reinvestment Yield shall be obtained by linear interpolation (calculated to
the nearest one-twelfth of a year) from the weekly average yields of U.S.
Treasury securities for which such yields are given, except that if the
weighted average life of the Excess Payment (so computed) is less than one
year, the weekly average yield in actively traded U.S. Treasury securities
adjusted to a constant maturity of one year shall be used.
For the purpose of clause (3)(B) of the preceding paragraph,
"weighted average life" shall mean the number of years (calculated to the
nearest one-twelfth year) obtained by dividing (a) the sum of the products
obtained by multiplying, for each date on which an Excess Payment (or
portion thereof) would have been paid if such Excess Payment had been paid
in accordance with the Scheduled Amortization for the applicable Class of
Timber Notes set forth in Schedule B to the Indenture, (i) the number of
years (calculated to the nearest one-twelfth year) which will elapse
between the date on which such Excess Payment is made and the date on which
such Excess Payment (or portion thereof) would have been paid if such
Excess Payment had been paid in accordance with the Scheduled Amortization
Schedule for the applicable Class of Timber Notes by (ii) the Excess
Payment (or portion thereof) which would have been paid if such Excess
Payment had been paid in accordance with the Scheduled Amortization
Schedule for such Class by (b) the Excess Payment on which the Prepayment
Premium Amount is computed.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Proceeds" means all proceeds, products, offspring, rents or
profits of or derived from the Mortgaged Property. The term "Proceeds"
includes whatever is receivable or received when any of the Mortgaged
Property or Proceeds is sold, collected, exchanged or otherwise disposed
of, whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including return premiums, with
respect to any insurance relating thereto.
"Producer Price Index Inflation Factor" means, with respect to any
date, a fraction, the numerator of which is the then most recent PPI Index
and the denominator of which is the PPI Index in effect with respect to
January 1, 1998.
"Purchase Agreement" shall mean (i) the New Master Purchase
Agreement or (ii) any other agreement for the purchase of stumpage or logs
between the Issuer and any other Person, as the same may be extended,
renewed, modified, amended or supplemented.
"Purchase Agreement Default" means:
(a) any failure by Pacific Lumber to make any payment, transfer or
deposit to the Issuer or the Trustee in accordance with the New Master
Purchase Agreement, and the continuation of such failure for ten Business
Days after notice from the Issuer or the Trustee;
(b) any failure by Pacific Lumber to observe or perform any
covenant or agreement of Pacific Lumber under the New Master Purchase
Agreement that has a Material Adverse Effect (and if such default is
remediable, the continuation of such default for a period of 30 days after
notice from the Issuer or the Trustee);
(c) the execution by Pacific Lumber of any instrument purporting
to assign any of its duties or responsibilities under the New Master
Purchase Agreement except as expressly permitted by the New Master Purchase
Agreement;
(d) any representation or warranty of Pacific Lumber in the New
Master Purchase Agreement shall prove to have been incorrect as of the time
when the same was made and the circumstance or condition in respect of
which such representation or warranty was incorrect has a Material Adverse
Effect (and if such default is remediable, the continuation of such default
for a period of 30 days after notice from the Issuer or the Trustee);
(e) the Bankruptcy or Insolvency of Pacific Lumber; or
(f) the failure by the applicable Affiliate of the Issuer to
transfer the Elk River Timberlands, if any, to the Issuer within the time
period specified under the definition of "Elk River Timberlands," and the
continuation of such failure for ten Business Days after notice from the
Issuer or the Trustee.
"QIB" means "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
"qualifying trustee" shall have the meaning set forth in Section
8.4 of the Indenture.
"Quitclaim Deed" has the meaning assigned to such term in the
definition of "Conveyance Documents."
"Rating Agencies" means, at any time, S&P and Moody's or any
successor to each such corporation's business of rating securities, which
is then providing a rating for any of the Timber Notes.
"Rating Agency Condition" means, with respect to the issuance of
any Additional Timber Notes, that at the time of the issuance of such
Additional Timber Notes and after giving effect to the issuance thereof,
the Timber Notes shall be rated by S&P and Moody's not lower than the
Required Note Ratings.
"Rating Agency Confirmation" means, with respect to any action
proposed to be taken by the Issuer, that each of the Rating Agencies which
is then providing a rating for the Timber Notes shall have unconditionally
(except for conditions which will be fulfilled prior to consummation of the
transaction requiring Rating Agency Confirmation) confirmed in writing that
the contemplated action will not result in a downgrade, withdrawal or
qualification of the then current rating given each Class of Timber Notes
then outstanding by such Rating Agency.
"Rating Agency Evaluation" shall mean, with respect to any action
proposed to be taken by the Issuer, that each of the Rating Agencies which
is then providing a rating for the Timber Notes shall have indicated in
writing the rating which will be given to the Timber Notes of each Class by
such Rating Agency as a consequence of such action, which may be a
downgrading of such rating.
"Record Date" for any Note Payment Date, means the close of
business on the fifth day of the month in which such Note Payment Date
occurs. If a Record Date is not a Business Day, the Record Date shall not
be affected.
"Register" shall have the meaning set forth in Section 2.3 of the
Indenture.
"Registered Exchange Offer" shall mean the proposed offer of the
Issuer to issue and deliver to the Holders of the Registrable Securities
that are not prohibited by any law or policy of the SEC from participating
in such offer, in exchange for the Registrable Securities of each Class, a
like aggregate principal amount of the Exchange Timber Notes of such Class.
"Registrable Securities" shall mean the Timber Notes; provided,
however, that any Timber Note shall cease to be a Registrable Security when
(i) such Timber Note has been exchanged for a freely tradeable Exchange
Timber Note upon consummation of the Registered Exchange Offer and is
thereafter freely tradeable by the holder thereof not an Affiliate of the
Issuer, (ii) a Registration Statement with respect to such Timber Note
shall have been declared effective under the Securities Act and such Timber
Note shall have been disposed of pursuant to such Registration Statement,
(iii) such Timber Note shall have been sold to the public in compliance
with Rule 144 (or any similar provision then in force) under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act, or
(iv) such Timber Note shall have ceased to be outstanding.
"Registrar" shall have the meaning set forth in Section 2.3 of the
Indenture.
"Registration Default" means, if (i) the Exchange Offer
Registration Statement or a Shelf Registration Statement, if applicable, is
not declared effective on or prior to 180 days after the Closing Date, (ii)
the Registered Exchange Offer is not consummated on or prior to 240 days
after the Closing Date or (iii) a Shelf Registration Statement is filed and
declared effective on or prior to 180 days after the Closing Date but shall
thereafter cease to be effective or usable (at any time that the Issuer is
obligated to maintain the effectiveness thereof) in connection with resales
of Timber Notes or Exchange Timber Notes in accordance with and during the
periods specified in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Closing Date, between the Issuer and Salomon Brothers
Inc, as representative for Salomon Brothers Inc, BancAmerica Robertson
Stephens, Bear, Stearns & Co. Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation, as initial purchasers.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement.
"Regular Interest" means interest on the unpaid portions of the
principal amounts of the outstanding Timber Notes (computed on the basis of
a 360-day year of twelve 30-day months).
"Regulation S Transfer Certificate" means a certificate
substantially in the form of Exhibit H to the Indenture.
"Regulation S Exchange Certificate" means a certificate
substantially in the form of Exhibit I to the Indenture.
"Reinvestment Factor" means, for any Monthly Deposit Date in each
year, the following factors:
<TABLE>
<CAPTION>
Monthly Deposit Dates Factor
-------------------------- --------------------------
<S> <C>
January 20 and July 20 1.00000
February 20 and August 20 1.02872
March 20 and September 20 1.02291
April 20 and October 20 1.01713
May 20 and November 20 1.01139
June 20 and December 20 1.00568
</TABLE>
"Reinvestment Yield" has the meaning given to such term in the
definition of "Prepayment Premium Amount".
"Release and Substitution Notice" has the meaning given to such
term in Section 6.4 of the Indenture.
"Release and Substitution Documents" has the meaning given to such
term in Section 6.4 of the Indenture.
"Release Date" has the meaning given to such term under the
definition of "Maximum Non-Cash Consideration Amount."
"Release Documents" has the meaning given to such term in Section
6.1 of the Indenture.
"Release Notice" has the meaning given to such term in Section 6.1
of the Indenture.
"Required Liquidity Amount", as of any date, is an amount equal to
the aggregate, for all Classes of Timber Notes outstanding, of (i) the Note
Rate for such Class multiplied by (ii) the principal amount of such Class
then outstanding. The Required Liquidity Amount may be modified in
connection with the issuance of Additional Timber Notes.
"Required Liquidity Provider Rating" means, with respect to a
Liquidity Provider, a rating on its short-term unsecured debt obligations
of not less than P-1 by Moody's and A-1 by S&P or, if S&P and Moody's have
not rated such Liquidity Provider's short-term unsecured debt obligations,
a rating on its long-term unsecured debt obligations of not less than Aa2
by Moody's and not less than AA by S&P or, in each case, if any such Rating
Agency adopts a new rating system, any successor rating thereto.
"Required Note Ratings" shall mean:
<TABLE>
<CAPTION>
Rating for
------------------------
Rating Agency Class A-1 Class A-2 Class A-3
- -------------- --------- --------- ---------
<S> <C> <C> <C>
Moody's A1 A3 Baa2
S&P A A BBB
</TABLE>
or, if any such Rating Agency adopts a new rating system, any successor
rating thereto.
"Responsible Officer" or "Officer"
(a) of any Person that is a corporation (other than the Trustee),
means the chairman of the board of directors, the president or any vice
president, the controller or any assistant controller, the treasurer or
any assistant treasurer, or the secretary or any assistant secretary of
such Person;
(b) of any Person that is a partnership (other than the Trustee),
means any such officer of a corporate general partner of such Person or
any individual general partner of such Person;
(c) of any Person that is a limited liability company (other than
the Trustee), means the chairman of the board of managers and any other
person performing functions comparable to the functions of the officers
enumerated in (a) of this definition); and
(d) of the Trustee or the Collateral Agent, means (i) any officer
in the Corporate Trust Office of the Trustee and (ii) any other officer
of the Trustee to whom a matter is referred because of such officer's
knowledge of and familiarity with such matter.
"Restricted Global Notes" has the meaning set forth in Section 2.1
of the Indenture.
"Restricted Payment" shall have the meaning set forth in Section
4.11 of the Indenture.
"Restricted Period" means the period from the Closing Date through
the 40th day after the Closing Date.
"Rule 144A Transfer Certificate" means a certificate substantially
in the form of Exhibit G to the Indenture.
"Rule 144A Exchange Certificate" means a certificate substantially
in the form of Exhibit J to the Indenture.
"Salmon Creek" means Salmon Creek Corporation, a Delaware
corporation, and any successor in interest thereto.
"Scotia Pacific" means Scotia Pacific Holding Company, a Delaware
corporation.
"Scheduled Amortization" means, for any Class of Timber Notes, the
amount of principal payments on the Timber Notes of such Class set forth
for such Class under the column headed "Scheduled Amortization" in Schedule
B to the Indenture.
"Scheduled Amortization Amount" means, for any Class of Timber
Notes, as of any date, the excess, if any, of:
(i) the sum of all amounts specified with respect to such
Class in Schedule B to the Indenture as Scheduled Amortization opposite
the respective dates occurring on or before such date, over
(ii) the aggregate principal amount that was paid on the
Timber Notes of such Class prior to such date.
"Scheduled Termination Date" means the date specified under the
Line of Credit Agreement, as of which, at 5:00 p.m. New York City time or
such other time as is stated in the Line of Credit Agreement, the Liquidity
Providers thereunder cease to be required to make Advances (other than by
reason of the occurrence of a Line of Credit Acceleration or a Termination
Advance having been made), as such date may be extended from time to time.
"SEC" means the Securities and Exchange Commission or any successor
agency responsible for the administration of the Securities Act.
"Second Pacific Lumber Grant Deed" has the meaning given to such
term in the definition of "Conveyance Documents."
"S&P" means Standard & Poor's, a division of The McGraw-Hill
Companies, or any successor to such division's business of rating
securities.
"Section 6.1 Notes" shall have the meaning given to such term in
Section 6.1 of the Indenture.
"Secured Obligations" means all indebtedness, liabilities and other
obligations described or referred to in and provided to be secured by the
Deed of Trust as set forth in the granting clause of the Deed of Trust.
"Secured Parties" means any Persons who at any time or from time to
time are holders of any of the Secured Obligations or any portion thereof.
"Securities Act" means the Securities Act of 1933, as amended and
in effect from time to time.
"Securities Intermediary" means State Street Bank and Trust
Company, acting in its capacity as a "securities intermediary" (as defined
in Section 8-102(a)(14) of the Uniform Commercial Code, and any successor
entity thereto.
"Securities Legend" means the legend set forth in Section 2.6(b) of
the Indenture.
"Security Agreement" means the security agreement set forth in
Article III of the Deed of Trust, covering and describing the Collateral
Mortgaged Property and other rights and interests of the Issuer and
securing payment of the Secured Obligations.
"Security Entitlement" means "security entitlement" as defined in
Section 8-102(a)(17) of the Uniform Commercial Code.
"Services" has the meaning given to such term in the New Services
Agreement.
"Services Fee" means, for any month, the fee for such month payable
by the Issuer to the Services Provider pursuant to Section 5.1(a)(i) of the
New Services Agreement as partial compensation for the Services provided
during such month by the Services Provider pursuant to the New Services
Agreement.
"Services Provider" means Pacific Lumber, as the initial service
provider under the New Services Agreement, together with its successors in
such capacity under the New Services Agreement.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Issuer pursuant to the provisions of Section 3 of the
Registration Rights Agreement which covers some or all of the Registrable
Securities or Exchange Timber Notes, as applicable, on an appropriate form
under Rule 415 under the Securities Act, or any similar rule that may be
adopted by the SEC, amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"State" means any one of the 50 states of the United States of
America (and any additional states that may be admitted after the Closing
Date) or the District of Columbia.
"Structured Harvest Quantity" shall mean 3,397,345 Mbfe.
"Structuring Schedule" means the schedule attached to and
incorporated in the Indenture as Schedule C.
"Structuring Prices" means the prices per Mbfe set forth under
Column C in the Structuring Schedule.
"Subject Contracts" means (a) all presently existing and future
contracts or leases relating in any manner to the purchase, sale, removal,
regeneration, cutting, harvesting, hauling or storing of any Company
Timber, including, without limitation, the New Master Purchase Agreement,
(b) the New Services Agreement, (c) the Conveyance Documents, and (d) any
other agreements entered into by the Issuer subsequent to the date of the
Deed of Trust, whether or not of the same general nature as set forth in
clauses (a) through (d).
"Substitute Timber Property" means any parcel or parcels of land or
any timber rights subjected to the Lien of Deed of Trust in accordance with
Section 6.4 of the Indenture.
"Supermajority Holders," at any date, means the Holders of 66 2/3%
in aggregate outstanding principal amount of Timber Notes and any
Additional Timber Notes at such date.
"Supplemental Liquidity Provider Interest" means any interest
payable under the Line of Credit Agreement to the extent, but only to the
extent, that such interest is payable at a rate per annum that is in excess
of the rate per annum for such interest payable under the terms of the Bank
of America Credit Agreement as in effect on the Closing Date, it being
understood that no amount of interest that is or becomes payable pursuant
to the terms of the Bank of America Credit Agreement as in effect on the
Closing Date (including by reason of any payments provided for in Article
III thereof), whether or not such amount is actually payable on the Closing
Date, shall constitute Supplemental Liquidity Provider Interest.
"Takings Litigation" means any existing or future action brought by
the Issuer alleging uncompensated taking, by any governmental authority, of
Company Owned Timberlands or Company Timber Rights for public use, and
seeking just compensation from or other relief against such governmental
authority.
"Targeted Monthly Deposit Amount" means, for any Monthly Deposit
Date, the excess of (a) the sum of (i) the Debt Obligations as of such
Monthly Deposit Date plus (ii) the Discounted Servicing Obligation as of
such Monthly Deposit Date over (b) the sum of (i) the Total Collateral
Value as of such Monthly Deposit Date plus (ii) all amounts then on deposit
in the Payment Account, including interest earned thereon as of such
Monthly Deposit Date (before giving effect to any deposits made in the
Payment Account, or to any transactions effected pursuant to Section 5.7 of
the Indenture, on such Monthly Deposit Date but after deducting the amount
of any deposits made pursuant to Sections 5.3(c)(vi) and 5.3(c)(viii) of
the Indenture after the immediately preceding Note Payment Date or, if the
first Note Payment Date has not yet occurred, after the Closing Date);
provided that in no event shall the Targeted Monthly Deposit Amount be less
than the excess (if any) of (x) the amount of accrued and unpaid interest
on the principal of the outstanding Timber Notes on such Monthly Deposit
Date over (y) the balance in the Payment Account on such Monthly Deposit
Date (before giving effect to any deposits made in the Payment Account, or
to any transactions effected pursuant to Section 5.7 of the Indenture, on
such Monthly Deposit Date but after deducting the amount of any deposits
made pursuant to Sections 5.3(c)(vi) and 5.3(c)(viii) of the Indenture
after the immediately preceding Note Payment Date or, if the first Note
Payment Date has not yet occurred, after the Closing Date).
"Tax Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts relating to the reporting,
imposition, rendition, collection, enforcement or other aspects of Issuer
Taxes, of every kind or character now imposed or hereafter enacted by any
Governmental Authority.
"Taxes" means all Yield Taxes and all ad valorem, occupation,
property and other taxes and assessments imposed with respect to the
Company Owned Timberlands or Company Timber Rights subject to the Lien of
the Deed of Trust (excluding income taxes and franchise taxes).
"Termination Advance" means a Downgrade Advance or a Non-Renewal
Advance, together with any Interest Advances outstanding on the date such
Downgrade Advance or Non-Renewal Advance is made.
"TIA" means the Trust Indenture Act of 1939, as amended and in
effect from time to time.
"Timber Harvesting Plans" means all permits, whether now existing
or hereafter created, filed with any Governmental Authority with respect to
the harvesting, cutting or severance of Timber.
"Timber Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts relating to the harvesting,
cutting, severance, handling or transporting of Company Timber, and the
maintenance, operation and management of the Company Timber Property,
whether now or hereafter enacted or imposed by any Governmental Authority,
including, without limitation, those relating to streams, waterways,
wildlife habitat and endangered species, exclusive of Environmental Laws.
"Timber Note" or "Note" means any of the Class A-1 Timber Notes,
the Class A-2 Timber Notes and the Class A-3 Timber Notes.
"Title Commitment" means the commitment for a Title Insurance
Policy.
"Title Defect" means any encumbrance, encroachment, irregularity,
defect, or deficiency in or objection to the Issuer's title to any portion
of the Company Owned Timberlands or Company Timber Rights subject to the
Lien of the Deed of Trust (other than Permitted Encumbrances) that, alone
or in combination with other defects, renders the Issuer's title to such
Company Owned Timberlands or Company Timber Rights other than good and
marketable title.
"Title Insurance Policy" means any ALTA mortgagee's policy of title
insurance in favor of the Trustee or the Collateral Agent in respect of the
Company Owned Timberlands and Company Timber Rights subject to the Lien of
the Deed of Trust.
"Total Collateral Value" means, on any date, an amount equal to
the lesser of (a) the Deemed Collateral Value for the Monthly Calculation
Date immediately preceding such date and (b) the Structuring Collateral
Value for the Monthly Calculation Date immediately preceding such date.
"Transaction" has the meaning assigned to such term in Section 4.15
of the Indenture.
"Transferee Letter" means a letter substantially in the form of
Exhibit K to the Indenture.
"Trapping Event" shall have the meaning given to such term in
Section 5.3(d)(iii) of the Indenture.
"Tribunal" means any court or any governmental department,
commission, board, bureau, agency or instrumentality of the United States
of America or of any State, commonwealth, territory, possession, county,
parish, municipality or other governmental subdivision within the United
States of America or under the jurisdiction of the United States of
America, whether now or hereafter constituted or existing.
"Triggering Event", at any time, has the meaning assigned to such
term in the Line of Credit Agreement at such time.
"Trustee" means the Person named as "Trustee" in the recitals to
the Indenture, in its capacity as trustee under the Indenture, together
with its successors in such capacity.
"Trustee's Expenses" means any fees, expenses, and damages of, or
compensation to, the Trustee (including, without limitation, the reasonable
fees and disbursements of counsel to the Trustee) incurred pursuant to the
Indenture or owing to the Trustee as part of the Secured Obligations.
"Trustor" means the Issuer, as trustor under the Deed of Trust.
"Unallocated Payment" has the meaning given to such term in Section
5.5 of the Indenture.
"Uniform Commercial Code" means the Uniform Commercial Code as now
or hereafter in effect in the State of California.
"Unlegended Definitive Note" means a Definitive Note which does not
bear the Securities Legend.
"Unrestricted Global Notes" has the meaning ascribed to such term
in Section 2.1 of the Indenture.
"Up-Front Payment" has the meaning set forth in the definition of
Pay-as-You-Harvest- Sale.
"U.S. Government Obligations" shall have the meaning set forth in
Section 8.4 of the Indenture.
"Yield Taxes" means all yield, severance, excise, sales and other
taxes imposed on the cutting, harvesting, severing or sale of Company
Timber from the Company Owned Timberlands or the Company Timber Rights
Property subject to the Lien of the Deed of Trust (excluding income taxes
and franchise taxes).
<PAGE>
SCHEDULE B
MINIMUM PRINCIPAL AMORTIZATION AND SCHEDULED AMORTIZATION SCHEDULES
<TABLE>
<CAPTION>
CLASS A-1 TIMBER NOTES
------------------------------------------------------------------------------------
(in thousands) MINIMUM PRINCIPAL
AMORTIZATION SCHEDULED AMORTIZATION
----------------------------------------- -----------------------------------------
Note Principal Principal Principal Principal
Payment Date Year Payment Balance Payment Balance
- ---------------------------- -------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Initial 0.0 ---- $152,600 ---- $152,600
January 20, 1999 0.5 $65 152,535 $4,964 147,636
July 20, 1999 1.0 72 152,464 2,183 145,454
January 20, 2000 1.5 9,686 142,777 12,564 132,889
July 20, 2000 2.0 32 142,746 2,515 130,374
January 20, 2001 2.5 9,632 133,114 12,726 117,649
July 20, 2001 3.0 96 133,018 2,811 114,838
January 20, 2002 3.5 9,718 123,300 13,058 101,779
July 20, 2002 4.0 316 122,984 3,291 98,489
January 20, 2003 4.5 10,006 112,979 13,624 84,864
July 20, 2003 5.0 1,674 111,304 4,906 79,958
January 20, 2004 5.5 11,751 99,553 15,630 64,328
July 20, 2004 6.0 2,274 97,279 5,808 58,520
January 20, 2005 6.5 12,503 84,776 16,702 41,817
July 20, 2005 7.0 3,817 80,959 7,645 34,172
January 20, 2006 7.5 14,457 66,502 18,948 15,225
July 20, 2006 8.0 5,514 60,989 9,643 5,581
January 20, 2007 8.5 16,581 44,408 5,581 0
July 20, 2007 9.0 7,375 37,032 0 0
January 20, 2008 9.5 18,890 18,142 0 0
July 20, 2008 10.0 1,300 16,842 0 0
January 20, 2009 10.5 10,837 6,005 0 0
July 20, 2009 11.0 2,598 3,406 0 0
January 20, 2010 11.5 3,406 0 0 0
July 20, 2010 12.0 0 0 0 0
January 20, 2011 12.5 0 0 0 0
July 20, 2011 13.0 0 0 0 0
January 20, 2012 13.5 0 0 0 0
July 20, 2012 14.0 0 0 0 0
January 20, 2013 14.5 0 0 0 0
July 20, 2013 15.0 0 0 0 0
January 20, 2014 15.5 0 0 0 0
July 20, 2014 16.0 0 0 0 0
January 20, 2015 16.5 0 0 0 0
July 20, 2015 17.0 0 0 0 0
January 20, 2016 17.5 0 0 0 0
July 20, 2016 18.0 0 0 0 0
January 20, 2017 18.5 0 0 0 0
July 20, 2017 19.0 0 0 0 0
January 20, 2018 19.5 0 0 0 0
July 20, 2018 20.0 0 0 0 0
January 20, 2019 20.5 0 0 0 0
July 20, 2019 21.0 0 0 0 0
January 20, 2020 21.5 0 0 0 0
July 20, 2020 22.0 0 0 0 0
January 20, 2021 22.5 0 0 0 0
July 20, 2021 23.0 0 0 0 0
January 20, 2022 23.5 0 0 0 0
July 20, 2022 24.0 0 0 0 0
January 20, 2023 24.5 0 0 0 0
July 20, 2023 25.0 0 0 0 0
January 20, 2024 25.5 0 0 0 0
July 20, 2024 26.0 0 0 0 0
January 20, 2025 26.5 0 0 0 0
July 20, 2025 27.0 0 0 0 0
January 20, 2026 27.5 0 0 0 0
July 20, 2026 28.0 0 0 0 0
January 20, 2027 28.5 0 0 0 0
July 20, 2027 29.0 0 0 0 0
January 20, 2028 29.5 0 0 0 0
July 20, 2028 30.0 0 0 0 0
------------------- -------------------
Total $152,600 $152,600
=================== ===================
Weighted Average Life 6.9 Years 5.0 Years
=================== ===================
<CAPTION>
CLASS A-2 TIMBER NOTES
------------------------------------------------------------------------------------
(in thousands) MINIMUM PRINCIPAL
AMORTIZATION SCHEDULED AMORTIZATION
----------------------------------------- -----------------------------------------
Note Principal Principal Principal Principal
Payment Date Year Payment Balance Payment Balance
- ---------------------------- -------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Initial 0.0 ---- $218,400 ---- $218,400
January 20, 1999 0.5 $0 218,400 $0 218,400
July 20, 1999 1.0 0 218,400 0 218,400
January 20, 2000 1.5 0 218,400 0 218,400
July 20, 2000 2.0 0 218,400 0 218,400
January 20, 2001 2.5 0 218,400 0 218,400
July 20, 2001 3.0 0 218,400 0 218,400
January 20, 2002 3.5 0 218,400 0 218,400
July 20, 2002 4.0 0 218,400 0 218,400
January 20, 2003 4.5 0 218,400 0 218,400
July 20, 2003 5.0 0 218,400 0 218,400
January 20, 2004 5.5 0 218,400 0 218,400
July 20, 2004 6.0 0 218,400 0 218,400
January 20, 2005 6.5 0 218,400 0 218,400
July 20, 2005 7.0 0 218,400 0 218,400
January 20, 2006 7.5 0 218,400 0 218,400
July 20, 2006 8.0 0 218,400 0 218,400
January 20, 2007 8.5 0 218,400 15,784 202,616
July 20, 2007 9.0 0 218,400 11,810 190,806
January 20, 2008 9.5 0 218,400 23,959 166,847
July 20, 2008 10.0 0 218,400 5,710 161,136
January 20, 2009 10.5 0 218,400 15,808 145,328
July 20, 2009 11.0 0 218,400 7,374 137,955
January 20, 2010 11.5 9,107 209,293 17,850 120,105
July 20, 2010 12.0 4,011 205,282 9,174 110,931
January 20, 2011 12.5 14,377 190,905 20,089 90,842
July 20, 2011 13.0 5,627 185,278 11,189 79,654
January 20, 2012 13.5 16,413 168,866 22,508 57,145
July 20, 2012 14.0 7,406 161,460 13,379 43,766
January 20, 2013 14.5 18,630 142,830 25,110 18,656
July 20, 2013 15.0 9,361 133,469 15,753 2,903
January 20, 2014 15.5 21,044 112,425 2,903 0
July 20, 2014 16.0 11,508 100,917 0 0
January 20, 2015 16.5 23,670 77,247 0 0
July 20, 2015 17.0 13,863 63,384 0 0
January 20, 2016 17.5 26,525 36,859 0 0
July 20, 2016 18.0 16,441 20,418 0 0
January 20, 2017 18.5 20,418 0 0 0
July 20, 2017 19.0 0 0 0 0
January 20, 2018 19.5 0 0 0 0
July 20, 2018 20.0 0 0 0 0
January 20, 2019 20.5 0 0 0 0
July 20, 2019 21.0 0 0 0 0
January 20, 2020 21.5 0 0 0 0
July 20, 2020 22.0 0 0 0 0
January 20, 2021 22.5 0 0 0 0
July 20, 2021 23.0 0 0 0 0
January 20, 2022 23.5 0 0 0 0
July 20, 2022 24.0 0 0 0 0
January 20, 2023 24.5 0 0 0 0
July 20, 2023 25.0 0 0 0 0
January 20, 2024 25.5 0 0 0 0
July 20, 2024 26.0 0 0 0 0
January 20, 2025 26.5 0 0 0 0
July 20, 2025 27.0 0 0 0 0
January 20, 2026 27.5 0 0 0 0
July 20, 2026 28.0 0 0 0 0
January 20, 2027 28.5 0 0 0 0
July 20, 2027 29.0 0 0 0 0
January 20, 2028 29.5 0 0 0 0
July 20, 2028 30.0 0 0 0 0
------------------- -------------------
Total $218,400 $218,400
=================== ===================
Weighted Average Life 15.6 Years 12.0 Years
=================== ===================
<CAPTION>
CLASS A-3 TIMBER NOTES
------------------------------------------------------------------------------------
(in thousands) MINIMUM PRINCIPAL
AMORTIZATION SCHEDULED AMORTIZATION
----------------------------------------- -----------------------------------------
Note Principal Principal Principal Principal
Payment Date Year Payment Balance Payment Balance
- ---------------------------- -------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Initial 0.0 ---- $489,000 ---- $489,000
January 20, 1999 0.5 $0 489,000 $0 489,000
July 20, 1999 1.0 0 489,000 0 489,000
January 20, 2000 1.5 0 489,000 0 489,000
July 20, 2000 2.0 0 489,000 0 489,000
January 20, 2001 2.5 0 489,000 0 489,000
July 20, 2001 3.0 0 489,000 0 489,000
January 20, 2002 3.5 0 489,000 0 489,000
July 20, 2002 4.0 0 489,000 0 489,000
January 20, 2003 4.5 0 489,000 0 489,000
July 20, 2003 5.0 0 489,000 0 489,000
January 20, 2004 5.5 0 489,000 0 489,000
July 20, 2004 6.0 0 489,000 0 489,000
January 20, 2005 6.5 0 489,000 0 489,000
July 20, 2005 7.0 0 489,000 0 489,000
January 20, 2006 7.5 0 489,000 0 489,000
July 20, 2006 8.0 0 489,000 0 489,000
January 20, 2007 8.5 0 489,000 0 489,000
July 20, 2007 9.0 0 489,000 0 489,000
January 20, 2008 9.5 0 489,000 0 489,000
July 20, 2008 10.0 0 489,000 0 489,000
January 20, 2009 10.5 0 489,000 0 489,000
July 20, 2009 11.0 0 489,000 0 489,000
January 20, 2010 11.5 0 489,000 0 489,000
July 20, 2010 12.0 0 489,000 0 489,000
January 20, 2011 12.5 0 489,000 0 489,000
July 20, 2011 13.0 0 489,000 0 489,000
January 20, 2012 13.5 0 489,000 0 489,000
July 20, 2012 14.0 0 489,000 0 489,000
January 20, 2013 14.5 0 489,000 0 489,000
July 20, 2013 15.0 0 489,000 0 489,000
January 20, 2014 15.5 0 489,000 489,000 0
July 20, 2014 16.0 0 489,000 0 0
January 20, 2015 16.5 0 489,000 0 0
July 20, 2015 17.0 0 489,000 0 0
January 20, 2016 17.5 0 489,000 0 0
July 20, 2016 18.0 0 489,000 0 0
January 20, 2017 18.5 9,210 479,790 0 0
July 20, 2017 19.0 19,262 460,529 0 0
January 20, 2018 19.5 33,002 427,526 0 0
July 20, 2018 20.0 6,240 421,286 0 0
January 20, 2019 20.5 15,427 405,859 0 0
July 20, 2019 21.0 7,657 398,202 0 0
January 20, 2020 21.5 17,213 380,989 0 0
July 20, 2020 22.0 9,206 371,783 0 0
January 20, 2021 22.5 19,148 352,635 0 0
July 20, 2021 23.0 10,899 341,736 0 0
January 20, 2022 23.5 21,243 320,493 0 0
July 20, 2022 24.0 12,747 307,746 0 0
January 20, 2023 24.5 23,511 284,235 0 0
July 20, 2023 25.0 14,762 269,473 0 0
January 20, 2024 25.5 25,965 243,509 0 0
July 20, 2024 26.0 16,957 226,551 0 0
January 20, 2025 26.5 28,619 197,933 0 0
July 20, 2025 27.0 19,348 178,585 0 0
January 20, 2026 27.5 31,488 147,097 0 0
July 20, 2026 28.0 21,948 125,149 0 0
January 20, 2027 28.5 34,589 90,561 0 0
July 20, 2027 29.0 24,775 65,786 0 0
January 20, 2028 29.5 37,939 27,846 0 0
July 20, 2028 30.0 27,846 0 0 0
------------------- -------------------
Total $489,000 $489,000
=================== ===================
Weighted Average Life 25.2 Years 15.5 Years
=================== ===================
</TABLE>
<PAGE>
SCHEDULE C
STRUCTURING SCHEDULE
<TABLE>
<CAPTION>
A B C D E F G
- ------------- ----------- ------------ --------- ----- --------------- -----------
Structuring
Deemed
Production Structuring Remaining
Month Structuring Mbfe Harvest
(Period Harvest Price Operating Yield Capital Quantity
Ending) (Mbfe) ($ per Mbfe) Costs(1) Taxes Expenditures(2) (Mbfe)(3)
- ------------- ----------- ------------ --------- ----- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Initial (as of
Closing) 3,397,801
Jul-98 6,743 $567 $195 $111 $203 3,391,058
Aug-98 19,969 567 526 329 553 3,371,089
Sep-98 17,287 567 526 284 553 3,353,801
Oct-98 15,464 567 526 254 553 3,338,338
Nov-98 6,742 567 526 111 553 3,331,595
Dec-98 3,178 567 526 52 553 3,328,417
Jan-99 1,998 619 540 36 566 3,326,419
Feb-99 4,031 619 540 72 566 3,322,387
Mar-99 7,128 619 540 128 566 3,315,259
Apr-99 17,195 619 540 309 566 3,298,064
May-99 15,954 619 540 286 566 3,282,110
Jun-99 18,728 619 540 336 566 3,263,382
Jul-99 18,391 619 540 330 566 3,244,992
Aug-99 19,969 619 540 358 566 3,225,022
Sep-99 17,287 619 540 310 566 3,207,735
Oct-99 15,464 619 540 277 566 3,192,272
Nov-99 6,742 619 540 121 566 3,185,529
Dec-99 3,178 619 540 57 566 3,182,351
Jan-00 1,998 618 566 36 595 3,180,353
Feb-00 4,031 618 566 72 595 3,176,321
Mar-00 7,128 618 566 128 595 3,169,193
Apr-00 17,195 618 566 308 595 3,151,998
May-00 15,954 618 566 286 595 3,136,044
Jun-00 18,728 618 566 336 595 3,117,316
Jul-00 18,391 618 566 330 595 3,098,925
Aug-00 19,969 618 566 358 595 3,078,956
Sep-00 17,287 618 566 310 595 3,061,669
Oct-00 15,464 618 566 277 595 3,046,205
Nov-00 6,742 618 566 121 595 3,039,463
Dec-00 3,178 618 566 57 595 3,036,284
Jan-01 1,998 619 595 36 624 3,034,286
Feb-01 4,031 619 595 72 624 3,030,255
Mar-01 7,128 619 595 128 624 3,023,127
Apr-01 17,195 619 595 309 624 3,005,931
May-01 15,954 619 595 286 624 2,989,978
Jun-01 18,728 619 595 336 624 2,971,250
Jul-01 18,391 619 595 330 624 2,952,859
Aug-01 19,969 619 595 358 624 2,932,890
Sep-01 17,287 619 595 310 624 2,915,602
Oct-01 15,464 619 595 278 624 2,900,139
Nov-01 6,742 619 595 121 624 2,893,397
Dec-01 3,178 619 595 57 624 2,890,218
Jan-02 1,998 623 624 36 656 2,888,220
Feb-02 4,031 623 624 73 656 2,884,188
Mar-02 7,128 623 624 129 656 2,877,060
Apr-02 17,195 623 624 311 656 2,859,865
May-02 15,954 623 624 288 656 2,843,911
Jun-02 18,728 623 624 338 656 2,825,183
Jul-02 18,391 623 624 332 656 2,806,793
Aug-02 19,969 623 624 361 656 2,786,823
Sep-02 17,287 623 624 312 656 2,769,536
Oct-02 15,464 623 624 279 656 2,754,073
Nov-02 6,742 623 624 122 656 2,747,330
Dec-02 3,178 623 624 57 656 2,744,152
Jan-03 1,998 645 655 37 688 2,742,154
Feb-03 4,031 645 655 75 688 2,738,122
Mar-03 7,128 645 655 133 688 2,730,994
Apr-03 17,195 645 655 321 688 2,713,799
May-03 15,954 645 655 298 688 2,697,845
Jun-03 18,728 645 655 350 688 2,679,117
Jul-03 18,391 645 655 344 688 2,660,726
Aug-03 19,969 645 655 373 688 2,640,757
Sep-03 17,287 645 655 323 688 2,623,470
Oct-03 15,464 645 655 289 688 2,608,006
Nov-03 6,742 645 655 126 688 2,601,264
Dec-03 3,178 645 655 59 688 2,598,086
Jan-04 1,998 653 688 38 723 2,596,087
Feb-04 4,031 653 688 76 723 2,592,056
Mar-04 7,128 653 688 135 723 2,584,928
Apr-04 17,195 653 688 326 723 2,567,733
May-04 15,954 653 688 302 723 2,551,779
Jun-04 18,728 653 688 355 723 2,533,051
Jul-04 18,391 653 688 348 723 2,514,660
Aug-04 19,969 653 688 378 723 2,494,691
Sep-04 17,287 653 688 327 723 2,477,404
Oct-04 15,464 653 688 293 723 2,461,940
Nov-04 6,742 653 688 128 723 2,455,198
Dec-04 3,178 653 688 60 723 2,452,019
Jan-05 1,998 676 722 39 759 2,450,021
Feb-05 4,031 676 722 79 759 2,445,990
Mar-05 7,128 676 722 140 759 2,438,862
Apr-05 17,195 676 722 337 759 2,421,666
May-05 15,954 676 722 313 759 2,405,712
Jun-05 18,728 676 722 367 759 2,386,984
Jul-05 18,391 676 722 360 759 2,368,594
Aug-05 19,969 676 722 391 759 2,348,625
Sep-05 17,287 676 722 339 759 2,331,337
Oct-05 15,464 676 722 303 759 2,315,874
Nov-05 6,742 676 722 132 759 2,309,131
Dec-05 3,178 676 722 62 759 2,305,953
Jan-06 1,998 699 758 41 797 2,303,955
Feb-06 4,031 699 758 82 797 2,299,923
Mar-06 7,128 699 758 145 797 2,292,795
Apr-06 17,195 699 758 349 797 2,275,600
May-06 15,954 699 758 324 797 2,259,646
Jun-06 18,728 699 758 380 797 2,240,918
Jul-06 18,391 699 758 373 797 2,222,527
Aug-06 19,969 699 758 405 797 2,202,558
Sep-06 17,287 699 758 351 797 2,185,271
Oct-06 15,464 699 758 314 797 2,169,807
Nov-06 6,742 699 758 137 797 2,163,065
Dec-06 3,178 699 758 64 797 2,159,887
Jan-07 1,998 724 796 42 837 2,157,888
Feb-07 4,031 724 796 85 837 2,153,857
Mar-07 7,128 724 796 150 837 2,146,729
Apr-07 17,195 724 796 361 837 2,129,534
May-07 15,954 724 796 335 837 2,113,580
Jun-07 18,728 724 796 393 837 2,094,852
Jul-07 18,391 724 796 386 837 2,076,461
Aug-07 19,969 724 796 419 837 2,056,492
Sep-07 17,287 724 796 363 837 2,039,205
Oct-07 15,464 724 796 325 837 2,023,741
Nov-07 6,742 724 796 142 837 2,016,999
Dec-07 3,178 724 796 67 837 2,013,820
Jan-08 1,627 749 792 35 809 2,012,193
Feb-08 3,283 749 792 71 809 2,008,911
Mar-08 5,804 749 792 126 809 2,003,107
Apr-08 14,001 749 792 304 809 1,989,105
May-08 12,990 749 792 282 809 1,976,115
Jun-08 15,249 749 792 331 809 1,960,866
Jul-08 14,975 749 792 325 809 1,945,891
Aug-08 16,260 749 792 353 809 1,929,631
Sep-08 14,076 749 792 306 809 1,915,555
Oct-08 12,591 749 792 274 809 1,902,964
Nov-08 5,490 749 792 119 809 1,897,474
Dec-08 2,588 749 792 56 809 1,894,886
Jan-09 1,627 776 831 37 850 1,893,259
Feb-09 3,283 776 831 74 850 1,889,977
Mar-09 5,804 776 831 131 850 1,884,173
Apr-09 14,001 776 831 315 850 1,870,171
May-09 12,990 776 831 292 850 1,857,181
Jun-09 15,249 776 831 343 850 1,841,932
Jul-09 14,975 776 831 337 850 1,826,957
Aug-09 16,260 776 831 366 850 1,810,697
Sep-09 14,076 776 831 317 850 1,796,621
Oct-09 12,591 776 831 283 850 1,784,030
Nov-09 5,490 776 831 123 850 1,778,540
Dec-09 2,588 776 831 58 850 1,775,952
Jan-10 1,627 803 873 38 892 1,774,325
Feb-10 3,283 803 873 76 892 1,771,042
Mar-10 5,804 803 873 135 892 1,765,238
Apr-10 14,001 803 873 326 892 1,751,237
May-10 12,990 803 873 302 892 1,738,247
Jun-10 15,249 803 873 355 892 1,722,997
Jul-10 14,975 803 873 349 892 1,708,023
Aug-10 16,260 803 873 378 892 1,691,763
Sep-10 14,076 803 873 328 892 1,677,687
Oct-10 12,591 803 873 293 892 1,665,096
Nov-10 5,490 803 873 128 892 1,659,606
Dec-10 2,588 803 873 60 892 1,657,018
Jan-11 1,627 831 916 39 937 1,655,391
Feb-11 3,283 831 916 79 937 1,652,108
Mar-11 5,804 831 916 140 937 1,646,304
Apr-11 14,001 831 916 337 937 1,632,303
May-11 12,990 831 916 313 937 1,619,312
Jun-11 15,249 831 916 367 937 1,604,063
Jul-11 14,975 831 916 361 937 1,589,089
Aug-11 16,260 831 916 392 937 1,572,829
Sep-11 14,076 831 916 339 937 1,558,753
Oct-11 12,591 831 916 303 937 1,546,161
Nov-11 5,490 831 916 132 937 1,540,671
Dec-11 2,588 831 916 62 937 1,538,083
Jan-12 1,627 860 962 41 983 1,536,456
Feb-12 3,283 860 962 82 983 1,533,174
Mar-12 5,804 860 962 145 983 1,527,370
Apr-12 14,001 860 962 349 983 1,513,369
May-12 12,990 860 962 324 983 1,500,378
Jun-12 15,249 860 962 380 983 1,485,129
Jul-12 14,975 860 962 373 983 1,470,154
Aug-12 16,260 860 962 405 983 1,453,894
Sep-12 14,076 860 962 351 983 1,439,818
Oct-12 12,591 860 962 314 983 1,427,227
Nov-12 5,490 860 962 137 983 1,421,737
Dec-12 2,588 860 962 65 983 1,419,149
Jan-13 1,627 890 1,010 42 1,033 1,417,522
Feb-13 3,283 890 1,010 85 1,033 1,414,240
Mar-13 5,804 890 1,010 150 1,033 1,408,436
Apr-13 14,001 890 1,010 361 1,033 1,394,434
May-13 12,990 890 1,010 335 1,033 1,381,444
Jun-13 15,249 890 1,010 394 1,033 1,366,195
Jul-13 14,975 890 1,010 386 1,033 1,351,220
Aug-13 16,260 890 1,010 420 1,033 1,334,960
Sep-13 14,076 890 1,010 363 1,033 1,320,884
Oct-13 12,591 890 1,010 325 1,033 1,308,293
Nov-13 5,490 890 1,010 142 1,033 1,302,803
Dec-13 2,588 890 1,010 67 1,033 1,300,215
Jan-14 1,627 921 1,060 43 1,084 1,298,588
Feb-14 3,283 921 1,060 88 1,084 1,295,305
Mar-14 5,804 921 1,060 155 1,084 1,289,501
Apr-14 14,001 921 1,060 374 1,084 1,275,500
May-14 12,990 921 1,060 347 1,084 1,262,510
Jun-14 15,249 921 1,060 407 1,084 1,247,261
Jul-14 14,975 921 1,060 400 1,084 1,232,286
Aug-14 16,260 921 1,060 434 1,084 1,216,026
Sep-14 14,076 921 1,060 376 1,084 1,201,950
Oct-14 12,591 921 1,060 336 1,084 1,189,359
Nov-14 5,490 921 1,060 147 1,084 1,183,869
Dec-14 2,588 921 1,060 69 1,084 1,181,281
Jan-15 1,627 953 1,113 45 1,138 1,179,654
Feb-15 3,283 953 1,113 91 1,138 1,176,371
Mar-15 5,804 953 1,113 160 1,138 1,170,567
Apr-15 14,001 953 1,113 387 1,138 1,156,566
May-15 12,990 953 1,113 359 1,138 1,143,575
Jun-15 15,249 953 1,113 422 1,138 1,128,326
Jul-15 14,975 953 1,113 414 1,138 1,113,352
Aug-15 16,260 953 1,113 450 1,138 1,097,092
Sep-15 14,076 953 1,113 389 1,138 1,083,016
Oct-15 12,591 953 1,113 348 1,138 1,070,425
Nov-15 5,490 953 1,113 152 1,138 1,064,935
Dec-15 2,588 953 1,113 72 1,138 1,062,347
Jan-16 1,627 987 1,169 47 1,195 1,060,720
Feb-16 3,283 987 1,169 94 1,195 1,057,437
Mar-16 5,804 987 1,169 166 1,195 1,051,633
Apr-16 14,001 987 1,169 401 1,195 1,037,632
May-16 12,990 987 1,169 372 1,195 1,024,641
Jun-16 15,249 987 1,169 436 1,195 1,009,392
Jul-16 14,975 987 1,169 428 1,195 994,418
Aug-16 16,260 987 1,169 465 1,195 978,158
Sep-16 14,076 987 1,169 403 1,195 964,081
Oct-16 12,591 987 1,169 360 1,195 951,490
Nov-16 5,490 987 1,169 157 1,195 946,000
Dec-16 2,588 987 1,169 74 1,195 943,412
Jan-17 1,627 1,021 1,227 48 1,255 941,785
Feb-17 3,283 1,021 1,227 97 1,255 938,503
Mar-17 5,804 1,021 1,227 172 1,255 932,699
Apr-17 14,001 1,021 1,227 415 1,255 918,697
May-17 12,990 1,021 1,227 385 1,255 905,707
Jun-17 15,249 1,021 1,227 452 1,255 890,458
Jul-17 14,975 1,021 1,227 443 1,255 875,483
Aug-17 16,260 1,021 1,227 482 1,255 859,223
Sep-17 14,076 1,021 1,227 417 1,255 845,147
Oct-17 12,591 1,021 1,227 373 1,255 832,556
Nov-17 5,490 1,021 1,227 163 1,255 827,066
Dec-17 2,588 1,021 1,227 77 1,255 824,478
Jan-18 1,080 1,057 1,148 33 1,095 823,398
Feb-18 2,179 1,057 1,148 67 1,095 821,220
Mar-18 3,852 1,057 1,148 118 1,095 817,368
Apr-18 9,292 1,057 1,148 285 1,095 808,076
May-18 8,621 1,057 1,148 264 1,095 799,454
Jun-18 10,120 1,057 1,148 310 1,095 789,334
Jul-18 9,938 1,057 1,148 305 1,095 779,395
Aug-18 10,791 1,057 1,148 331 1,095 768,604
Sep-18 9,342 1,057 1,148 286 1,095 759,262
Oct-18 8,356 1,057 1,148 256 1,095 750,906
Nov-18 3,644 1,057 1,148 112 1,095 747,262
Dec-18 1,718 1,057 1,148 53 1,095 745,545
Jan-19 1,080 1,094 1,205 34 1,149 744,465
Feb-19 2,179 1,094 1,205 69 1,149 742,286
Mar-19 3,852 1,094 1,205 122 1,149 738,434
Apr-19 9,292 1,094 1,205 295 1,149 729,142
May-19 8,621 1,094 1,205 274 1,149 720,521
Jun-19 10,120 1,094 1,205 321 1,149 710,400
Jul-19 9,938 1,094 1,205 315 1,149 700,462
Aug-19 10,791 1,094 1,205 342 1,149 689,671
Sep-19 9,342 1,094 1,205 296 1,149 680,329
Oct-19 8,356 1,094 1,205 265 1,149 671,973
Nov-19 3,644 1,094 1,205 116 1,149 668,329
Dec-19 1,718 1,094 1,205 54 1,149 666,611
Jan-20 1,080 1,132 1,265 35 1,207 665,532
Feb-20 2,179 1,132 1,265 72 1,207 663,353
Mar-20 3,852 1,132 1,265 126 1,207 659,501
Apr-20 9,292 1,132 1,265 305 1,207 650,209
May-20 8,621 1,132 1,265 283 1,207 641,587
Jun-20 10,120 1,132 1,265 332 1,207 631,467
Jul-20 9,938 1,132 1,265 326 1,207 621,529
Aug-20 10,791 1,132 1,265 354 1,207 610,737
Sep-20 9,342 1,132 1,265 307 1,207 601,396
Oct-20 8,356 1,132 1,265 274 1,207 593,039
Nov-20 3,644 1,132 1,265 120 1,207 589,396
Dec-20 1,718 1,132 1,265 56 1,207 587,678
Jan-21 1,080 1,172 1,328 37 1,267 586,598
Feb-21 2,179 1,172 1,328 74 1,267 584,420
Mar-21 3,852 1,172 1,328 131 1,267 580,568
Apr-21 9,292 1,172 1,328 316 1,267 571,275
May-21 8,621 1,172 1,328 293 1,267 562,654
Jun-21 10,120 1,172 1,328 344 1,267 552,534
Jul-21 9,938 1,172 1,328 338 1,267 542,595
Aug-21 10,791 1,172 1,328 367 1,267 531,804
Sep-21 9,342 1,172 1,328 317 1,267 522,462
Oct-21 8,356 1,172 1,328 284 1,267 514,106
Nov-21 3,644 1,172 1,328 124 1,267 510,462
Dec-21 1,718 1,172 1,328 58 1,267 508,745
Jan-22 1,080 1,213 1,395 38 1,331 507,665
Feb-22 2,179 1,213 1,395 77 1,331 505,486
Mar-22 3,852 1,213 1,395 135 1,331 501,634
Apr-22 9,292 1,213 1,395 327 1,331 492,342
May-22 8,621 1,213 1,395 303 1,331 483,721
Jun-22 10,120 1,213 1,395 356 1,331 473,600
Jul-22 9,938 1,213 1,395 350 1,331 463,662
Aug-22 10,791 1,213 1,395 380 1,331 452,871
Sep-22 9,342 1,213 1,395 329 1,331 443,529
Oct-22 8,356 1,213 1,395 294 1,331 435,172
Nov-22 3,644 1,213 1,395 128 1,331 431,529
Dec-22 1,718 1,213 1,395 60 1,331 429,811
Jan-23 1,080 1,255 1,464 39 1,397 428,731
Feb-23 2,179 1,255 1,464 79 1,397 426,553
Mar-23 3,852 1,255 1,464 140 1,397 422,701
Apr-23 9,292 1,255 1,464 338 1,397 413,409
May-23 8,621 1,255 1,464 314 1,397 404,787
Jun-23 10,120 1,255 1,464 368 1,397 394,667
Jul-23 9,938 1,255 1,464 362 1,397 384,729
Aug-23 10,791 1,255 1,464 393 1,397 373,937
Sep-23 9,342 1,255 1,464 340 1,397 364,595
Oct-23 8,356 1,255 1,464 304 1,397 356,239
Nov-23 3,644 1,255 1,464 133 1,397 352,595
Dec-23 1,718 1,255 1,464 63 1,397 350,878
Jan-24 1,080 1,299 1,537 41 1,467 349,798
Feb-24 2,179 1,299 1,537 82 1,467 347,620
Mar-24 3,852 1,299 1,537 145 1,467 343,768
Apr-24 9,292 1,299 1,537 350 1,467 334,475
May-24 8,621 1,299 1,537 325 1,467 325,854
Jun-24 10,120 1,299 1,537 381 1,467 315,733
Jul-24 9,938 1,299 1,537 374 1,467 305,795
Aug-24 10,791 1,299 1,537 407 1,467 295,004
Sep-24 9,342 1,299 1,537 352 1,467 285,662
Oct-24 8,356 1,299 1,537 315 1,467 277,306
Nov-24 3,644 1,299 1,537 137 1,467 273,662
Dec-24 1,718 1,299 1,537 65 1,467 271,945
Jan-25 1,080 1,345 1,614 42 1,540 270,865
Feb-25 2,179 1,345 1,614 85 1,540 268,686
Mar-25 3,852 1,345 1,614 150 1,540 264,834
Apr-25 9,292 1,345 1,614 362 1,540 255,542
May-25 8,621 1,345 1,614 336 1,540 246,921
Jun-25 10,120 1,345 1,614 395 1,540 236,800
Jul-25 9,938 1,345 1,614 388 1,540 226,862
Aug-25 10,791 1,345 1,614 421 1,540 216,071
Sep-25 9,342 1,345 1,614 364 1,540 206,729
Oct-25 8,356 1,345 1,614 326 1,540 198,372
Nov-25 3,644 1,345 1,614 142 1,540 194,729
Dec-25 1,718 1,345 1,614 67 1,540 193,011
Jan-26 1,080 1,392 1,695 44 1,617 191,931
Feb-26 2,179 1,392 1,695 88 1,617 189,753
Mar-26 3,852 1,392 1,695 155 1,617 185,901
Apr-26 9,292 1,392 1,695 375 1,617 176,609
May-26 8,621 1,392 1,695 348 1,617 167,987
Jun-26 10,120 1,392 1,695 408 1,617 157,867
Jul-26 9,938 1,392 1,695 401 1,617 147,929
Aug-26 10,791 1,392 1,695 436 1,617 137,137
Sep-26 9,342 1,392 1,695 377 1,617 127,795
Oct-26 8,356 1,392 1,695 337 1,617 119,439
Nov-26 3,644 1,392 1,695 147 1,617 115,795
Dec-26 1,718 1,392 1,695 69 1,617 114,078
Jan-27 1,080 1,441 1,779 45 1,698 112,998
Feb-27 2,179 1,441 1,779 91 1,698 110,819
Mar-27 3,852 1,441 1,779 161 1,698 106,967
Apr-27 9,292 1,441 1,779 388 1,698 97,675
May-27 8,621 1,441 1,779 360 1,698 89,054
Jun-27 10,120 1,441 1,779 423 1,698 78,933
Jul-27 9,938 1,441 1,779 415 1,698 68,995
Aug-27 10,791 1,441 1,779 451 1,698 58,204
Sep-27 9,342 1,441 1,779 390 1,698 48,862
Oct-27 8,356 1,441 1,779 349 1,698 40,506
Nov-27 3,644 1,441 1,779 152 1,698 36,862
Dec-27 1,718 1,441 1,779 72 1,698 35,144
Jan-28 1,080 1,491 1,868 47 1,783 34,065
Feb-28 2,179 1,491 1,868 94 1,783 31,886
Mar-28 3,852 1,491 1,868 167 1,783 28,034
Apr-28 9,292 1,491 1,868 402 1,783 18,742
May-28 8,621 1,491 1,868 373 1,783 10,120
Jun-28 10,120 1,491 1,868 438 1,783 0
-----------
Total 3,397,801
<CAPTION>
A H I J K L
- --------------- ----------- ----------- ----------- ----------- ---------------
Column I = Column J + Column K
------------------------------
Production Collateral Structuring Discounted Minimum
Month Value Collateral Servicing Structuring Principal
(Period Ending) Factor(4) Value Obligation Balance Amortization(5)
- --------------- ----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Initial (as of
Closing 0.288676505 $980,865 $120,865 $860,000
Jul-98 0.290031776 983,515 121,421 862,093 $0
Aug-98 0.290521597 979,374 121,649 857,726 0
Sep-98 0.291193866 976,606 121,877 854,729 0
Oct-98 0.291992156 974,768 122,108 852,661 0
Nov-98 0.293449557 977,655 122,339 855,316 0
Dec-98 0.295187594 982,507 122,572 859,935 65
Jan-99 0.297002218 987,954 122,794 865,160 0
Feb-99 0.298651949 992,237 123,017 869,221 0
Mar-99 0.300039888 994,710 123,241 871,469 0
Apr-99 0.300539809 991,200 123,466 867,733 0
May-99 0.301134942 988,358 123,693 864,665 0
Jun-99 0.301461804 983,785 123,922 859,864 72
Jul-99 0.301901962 979,669 124,151 855,518 0
Aug-99 0.302183164 974,547 124,383 850,165 0
Sep-99 0.302680474 970,919 124,615 846,304 0
Oct-99 0.303326344 968,300 124,849 843,451 0
Nov-99 0.304762489 970,830 125,085 845,745 0
Dec-99 0.306534076 975,499 125,322 850,177 9,686
Jan-00 0.308435596 980,934 125,533 855,401 0
Feb-00 0.310172725 985,208 125,746 859,462 0
Mar-00 0.311648450 987,674 125,960 861,714 0
Apr-00 0.312235503 984,166 126,176 857,990 0
May-00 0.312918292 981,325 126,393 854,933 0
Jun-00 0.313332573 976,757 126,611 850,146 32
Jul-00 0.313864518 972,643 126,831 845,812 0
Aug-00 0.314237793 967,524 127,052 840,473 0
Sep-00 0.314827462 963,897 127,274 836,624 0
Oct-00 0.315566171 961,279 127,498 833,782 0
Nov-00 0.317096426 963,803 127,723 836,080 0
Dec-00 0.318963207 968,463 127,949 840,514 9,632
Jan-01 0.320960328 973,886 128,149 845,737 0
Feb-01 0.322792590 978,144 128,350 849,794 0
Mar-01 0.324363057 980,591 128,552 852,039 0
Apr-01 0.325041435 977,052 128,755 848,297 0
May-01 0.325816390 974,184 128,960 845,224 0
Jun-01 0.326321749 969,583 129,166 840,418 96
Jul-01 0.326949956 965,437 129,373 836,064 0
Aug-01 0.327419322 960,285 129,581 830,704 0
Sep-01 0.328106018 956,627 129,791 826,836 0
Oct-01 0.328942700 953,980 130,002 823,977 0
Nov-01 0.330574634 956,483 130,214 826,269 0
Dec-01 0.332545244 961,128 130,428 830,700 9,718
Jan-02 0.334646569 966,533 130,613 835,919 0
Feb-02 0.336581569 970,765 130,800 839,965 0
Mar-02 0.338252870 973,174 130,988 842,186 0
Apr-02 0.339023486 969,561 131,177 838,385 0
May-02 0.339892045 966,623 131,367 835,256 0
Jun-02 0.340488292 961,942 131,558 830,384 316
Jul-02 0.341213624 957,716 131,750 825,966 0
Aug-02 0.341778989 952,478 131,944 820,534 0
Sep-02 0.342563821 948,743 132,138 816,604 0
Oct-02 0.343500420 946,025 132,334 813,691 0
Nov-02 0.345240593 948,490 132,532 815,958 0
Dec-02 0.347323571 953,109 132,730 820,379 10,006
Jan-03 0.349527418 958,458 132,899 825,559 0
Feb-03 0.351551687 962,591 133,068 829,523 0
Mar-03 0.353291647 964,837 133,239 831,599 0
Apr-03 0.354060690 960,849 133,411 827,439 0
May-03 0.354934284 957,558 133,583 823,974 0
Jun-03 0.355513092 952,461 133,757 818,704 1,674
Jul-03 0.356231153 947,834 133,932 813,902 0
Aug-03 0.356775333 942,157 134,108 808,049 0
Sep-03 0.357555096 938,035 134,285 803,750 0
Oct-03 0.358497694 934,964 134,463 800,501 0
Nov-03 0.360307953 937,256 134,643 802,614 0
Dec-03 0.362488362 941,776 134,823 806,953 11,751
Jan-04 0.364809792 947,078 134,972 812,106 0
Feb-04 0.366947017 951,147 135,122 816,026 0
Mar-04 0.368793174 953,304 135,272 818,031 0
Apr-04 0.369643334 949,145 135,424 813,721 0
May-04 0.370600875 945,691 135,577 810,115 0
Jun-04 0.371255538 940,409 135,730 804,679 2,274
Jul-04 0.372058131 935,600 135,885 799,715 0
Aug-04 0.372682351 929,727 136,040 793,687 0
Sep-04 0.373547981 925,429 136,196 789,233 0
Oct-04 0.374580757 922,195 136,354 785,842 0
Nov-04 0.376504630 924,393 136,512 787,881 0
Dec-04 0.378809215 928,847 136,671 792,176 12,503
Jan-05 0.381248587 934,067 136,797 797,270 0
Feb-05 0.383488246 938,008 136,924 801,084 0
Mar-05 0.385412828 939,969 137,052 802,917 0
Apr-05 0.386259338 935,391 137,180 798,211 0
May-05 0.387220761 931,542 137,309 794,232 0
Jun-05 0.387852709 925,798 137,439 788,359 3,817
Jul-05 0.388645047 920,542 137,570 782,972 0
Aug-05 0.389242411 914,184 137,702 776,483 0
Sep-05 0.390099815 909,454 137,834 771,620 0
Oct-05 0.391137183 905,824 137,967 767,857 0
Nov-05 0.393141191 907,815 138,101 769,713 0
Dec-05 0.395558235 912,139 138,236 773,902 14,457
Jan-06 0.398121397 917,254 138,336 778,918 0
Feb-06 0.400467023 921,043 138,436 782,607 0
Mar-06 0.402470023 922,781 138,537 784,244 0
Apr-06 0.403300805 917,751 138,639 779,112 0
May-06 0.404254907 913,473 138,741 774,732 0
Jun-06 0.404848738 907,233 138,844 768,389 5,514
Jul-06 0.405616900 901,495 138,947 762,547 0
Aug-06 0.406170656 894,615 139,052 755,563 0
Sep-06 0.407005640 889,418 139,156 750,261 0
Oct-06 0.408035144 885,358 139,262 746,096 0
Nov-06 0.410118531 887,113 139,368 747,745 0
Dec-06 0.412652286 891,282 139,475 751,808 16,581
Jan-07 0.415345218 896,269 139,544 756,724 0
Feb-07 0.417799896 899,881 139,614 760,267 0
Mar-07 0.419879965 901,368 139,685 761,684 0
Apr-07 0.420678568 895,849 139,756 756,093 0
May-07 0.421609946 891,106 139,827 751,279 0
Jun-07 0.422144944 884,331 139,899 744,432 7,375
Jul-07 0.422869927 878,073 139,971 738,102 0
Aug-07 0.423357432 870,631 140,044 730,587 0
Sep-07 0.424150529 864,930 140,117 724,813 0
Oct-07 0.425154853 860,403 140,190 720,213 0
Nov-07 0.427315113 861,894 140,265 721,630 0
Dec-07 0.429969420 865,881 140,339 725,542 18,890
Jan-08 0.432817997 870,913 140,418 730,495 0
Feb-08 0.435453667 874,788 140,498 734,290 0
Mar-08 0.437758287 876,877 140,578 736,299 0
Apr-08 0.438924421 873,067 140,658 732,409 0
May-08 0.440216196 869,918 140,739 729,179 0
Jun-08 0.441163423 865,062 140,820 724,242 1,300
Jul-08 0.442286315 860,641 140,902 719,739 0
Aug-08 0.443208243 855,229 140,985 714,244 0
Sep-08 0.444408470 851,289 141,068 710,221 0
Oct-08 0.445802411 848,346 141,151 707,195 0
Nov-08 0.448217018 850,480 141,235 709,245 0
Dec-08 0.451069144 854,725 141,320 713,405 10,837
Jan-09 0.454080177 859,691 141,366 718,326 0
Feb-09 0.456861489 863,457 141,412 722,046 0
Mar-09 0.459286357 865,375 141,458 723,917 0
Apr-09 0.460484884 861,186 141,504 719,681 0
May-09 0.461817575 857,679 141,551 716,128 0
Jun-09 0.462777447 852,404 141,598 710,806 2,598
Jul-09 0.463928534 847,578 141,645 705,932 0
Aug-09 0.464861403 841,723 141,693 700,030 0
Sep-09 0.466092806 837,392 141,741 695,651 0
Oct-09 0.467532046 834,091 141,789 692,302 0
Nov-09 0.470073055 836,044 141,838 694,206 0
Dec-09 0.473086562 840,179 141,886 698,293 12,514
Jan-10 0.476271799 845,061 141,894 703,167 0
Feb-10 0.479209435 848,700 141,902 706,798 0
Mar-10 0.481762800 850,426 141,910 708,517 0
Apr-10 0.482990800 845,831 141,917 703,914 0
May-10 0.484361302 841,939 141,925 700,014 0
Jun-10 0.485325721 836,215 141,933 694,282 4,011
Jul-10 0.486497500 830,949 141,941 689,008 0
Aug-10 0.487429778 824,616 141,949 682,667 0
Sep-10 0.488681617 819,855 141,957 677,898 0
Oct-10 0.490155827 816,156 141,965 674,191 0
Nov-10 0.492823248 817,892 141,973 675,919 0
Dec-10 0.496003491 821,887 141,982 679,905 14,377
Jan-11 0.499371106 826,654 141,946 684,708 0
Feb-11 0.502469250 830,133 141,911 688,223 0
Mar-11 0.505150195 831,631 141,875 689,756 0
Apr-11 0.506391658 826,585 141,839 684,745 0
May-11 0.507785869 822,264 141,803 680,461 0
Jun-11 0.508736263 816,045 141,767 674,278 5,627
Jul-11 0.509913698 810,298 141,730 668,568 0
Aug-11 0.510827939 803,445 141,693 661,751 0
Sep-11 0.512087198 798,217 141,656 656,561 0
Oct-11 0.513586519 794,088 141,619 652,469 0
Nov-11 0.516385790 795,581 141,582 653,999 0
Dec-11 0.519744030 799,410 141,544 657,866 16,413
Jan-12 0.523306567 804,038 141,460 662,578 0
Feb-12 0.526574163 807,330 141,376 665,954 0
Mar-12 0.529386298 808,569 141,291 667,277 0
Apr-12 0.530626302 803,033 141,206 661,827 0
May-12 0.532030543 798,247 141,120 657,127 0
Jun-12 0.532946537 791,494 141,034 650,460 7,406
Jul-12 0.534112071 785,227 140,947 644,280 0
Aug-12 0.534986128 777,813 140,860 636,953 0
Sep-12 0.536234447 772,080 140,772 631,308 0
Oct-12 0.537743130 767,482 140,684 626,798 0
Nov-12 0.540677080 768,701 140,595 628,106 0
Dec-12 0.544224218 772,335 140,505 631,830 18,630
Jan-13 0.547995506 776,796 140,367 636,429 0
Feb-13 0.551441731 779,871 140,228 639,643 0
Mar-13 0.554387328 780,819 140,088 640,730 0
Apr-13 0.555604155 774,754 139,948 634,806 0
May-13 0.556998215 769,462 139,806 629,655 0
Jun-13 0.557850793 762,133 139,664 622,469 9,361
Jul-13 0.558978795 755,303 139,521 615,783 0
Aug-13 0.559780870 747,285 139,377 607,909 0
Sep-13 0.560991289 741,005 139,231 601,773 0
Oct-13 0.562485692 735,896 139,086 596,811 0
Nov-13 0.565555161 736,807 138,939 597,868 0
Dec-13 0.569302693 740,216 138,791 601,425 21,044
Jan-14 0.573298080 744,478 138,592 605,886 0
Feb-14 0.576932113 747,303 138,392 608,912 0
Mar-14 0.580011188 747,925 138,190 609,735 0
Apr-14 0.581172970 741,286 137,987 603,299 0
May-14 0.582526829 735,446 137,783 597,662 0
Jun-14 0.583274046 727,495 137,578 589,917 11,508
Jul-14 0.584326662 720,058 137,372 582,686 0
Aug-14 0.585010361 711,388 137,164 574,224 0
Sep-14 0.586142794 704,514 136,955 567,560 0
Oct-14 0.587587145 698,852 136,744 562,108 0
Nov-14 0.590789592 699,417 136,533 562,885 0
Dec-14 0.594749455 702,566 136,320 566,247 23,670
Jan-15 0.598986104 706,596 136,052 570,544 0
Feb-15 0.602816689 709,136 135,784 573,353 0
Mar-15 0.606025438 709,393 135,513 573,881 0
Apr-15 0.607084668 702,133 135,241 566,893 0
May-15 0.608353110 695,698 134,967 560,731 0
Jun-15 0.608933055 687,075 134,691 552,384 13,863
Jul-15 0.609853298 678,981 134,414 544,567 0
Aug-15 0.610349354 669,609 134,135 535,474 0
Sep-15 0.611342989 662,094 133,854 528,240 0
Oct-15 0.612682216 655,830 133,572 522,258 0
Nov-15 0.616009251 656,010 133,288 522,722 0
Dec-15 0.620193454 658,860 133,002 525,859 26,525
Jan-16 0.624690704 662,622 132,658 529,963 0
Feb-16 0.628725274 664,837 132,313 532,524 0
Mar-16 0.632053321 664,688 131,965 532,723 0
Apr-16 0.632937485 656,756 131,616 525,140 0
May-16 0.634050828 649,675 131,264 518,411 0
Jun-16 0.634369482 640,328 130,910 509,418 16,441
Jul-16 0.635069166 631,524 130,554 500,970 0
Aug-16 0.635270923 621,395 130,195 491,200 0
Sep-16 0.636030758 613,185 129,834 483,351 0
Oct-16 0.637177698 606,268 129,472 476,797 0
Nov-16 0.640610543 606,018 129,106 476,911 0
Dec-16 0.645030273 608,530 128,739 479,790 29,627
Jan-17 0.649810055 611,982 128,311 483,670 0
Feb-17 0.654053067 613,831 127,880 485,950 0
Mar-17 0.657478516 613,229 127,447 485,782 0
Apr-17 0.658073333 604,570 127,011 477,559 0
May-17 0.658920528 596,789 126,573 470,216 0
Jun-17 0.658829338 586,660 126,131 460,529 19,262
Jul-17 0.659166202 577,089 125,687 451,402 0
Aug-17 0.658901731 566,144 125,240 440,904 0
Sep-17 0.659272084 557,182 124,791 432,391 0
Oct-17 0.660081758 549,555 124,338 425,217 0
Nov-17 0.663580646 548,825 123,883 424,942 0
Dec-17 0.668242518 550,951 123,425 427,526 33,002
Jan-18 0.673291549 554,387 123,043 431,344 0
Feb-18 0.677914362 556,717 122,659 434,057 0
Mar-18 0.681911198 557,372 122,273 435,099 0
Apr-18 0.683726454 552,503 121,884 430,618 0
May-18 0.685775069 548,246 121,493 426,752 0
Jun-18 0.687144086 542,386 121,100 421,286 6,240
Jul-18 0.688869247 536,902 120,704 416,198 0
Aug-18 0.690189934 530,483 120,305 410,178 0
Sep-18 0.692035640 525,437 119,904 405,532 0
Oct-18 0.694250990 521,317 119,501 401,816 0
Nov-18 0.698476643 521,945 119,095 402,850 0
Dec-18 0.703573545 524,546 118,687 405,859 15,427
Jan-19 0.709008468 527,832 118,219 409,613 0
Feb-19 0.713971990 529,972 117,747 412,224 0
Mar-19 0.718244748 530,377 117,273 413,103 0
Apr-19 0.720108521 525,061 116,979 408,265 0
May-19 0.722226190 520,379 116,317 404,062 0
Jun-19 0.723586357 514,036 115,834 398,202 7,657
Jul-19 0.725347992 508,079 115,348 392,731 0
Aug-19 0.726655389 501,153 114,859 386,294 0
Sep-19 0.728538925 495,646 114,367 381,279 0
Oct-19 0.730828903 491,097 113,872 377,225 0
Nov-19 0.735356257 491,460 113,374 378,085 0
Dec-19 0.740855039 493,862 112,873 380,989 17,213
Jan-20 0.746732438 496,974 112,309 384,665 0
Feb-20 0.752083784 498,897 111,741 387,156 0
Mar-20 0.756666253 499,022 111,170 387,852 0
Apr-20 0.758564598 493,225 110,595 382,630 0
May-20 0.760740775 488,082 110,017 378,065 0
Jun-20 0.762063269 481,218 109,435 371,783 9,206
Jul-20 0.763842847 474,750 108,849 365,901 0
Aug-20 0.765105583 467,279 108,260 359,018 0
Sep-20 0.767005664 461,274 107,667 353,606 0
Oct-20 0.769356499 456,259 107,071 349,188 0
Nov-20 0.774226293 456,326 106,471 349,855 0
Dec-20 0.780192258 458,502 105,867 352,635 19,148
Jan-21 0.786587646 461,411 105,196 356,215 0
Feb-21 0.792389251 463,088 104,521 358,567 0
Mar-21 0.797325511 462,901 103,842 359,059 0
Apr-21 0.799236214 456,584 103,159 353,425 0
May-21 0.801453098 450,941 102,471 348,470 0
Jun-21 0.802693977 443,515 101,779 341,736 10,899
Jul-21 0.804461727 436,497 101,083 335,414 0
Aug-21 0.805631105 428,438 100,383 328,055 0
Sep-21 0.807512857 421,895 99,678 322,217 0
Oct-21 0.809900075 416,374 98,969 317,405 0
Nov-21 0.815167143 416,112 98,256 317,856 0
Dec-21 0.821691099 418,031 97,538 320,493 21,243
Jan-22 0.828710296 420,707 96,749 323,958 0
Feb-22 0.835049139 422,106 95,956 326,150 0
Mar-22 0.840399790 421,573 95,157 326,416 0
Apr-22 0.842287135 414,693 94,354 320,339 0
May-22 0.844514881 408,509 93,546 314,963 0
Jun-22 0.845604910 400,479 92,733 307,746 12,747
Jul-22 0.847311845 392,866 91,914 300,952 0
Aug-22 0.848309252 384,174 91,091 293,084 0
Sep-22 0.850113751 377,050 90,262 286,788 0
Oct-22 0.852493449 370,982 89,429 281,553 0
Nov-22 0.858236248 370,354 88,590 281,764 0
Dec-22 0.865452651 371,981 87,746 284,235 23,511
Jan-23 0.873253590 374,391 86,827 287,564 0
Feb-23 0.880258927 375,477 85,903 289,574 0
Mar-23 0.886113215 374,561 84,972 289,588 0
Apr-23 0.887918169 367,073 84,037 283,037 0
May-23 0.890105710 360,303 83,095 277,209 0
Jun-23 0.890930236 351,621 82,147 269,473 14,762
Jul-23 0.892491967 343,367 81,194 262,173 0
Aug-23 0.893182722 333,994 80,234 253,760 0
Sep-23 0.894804621 326,242 79,269 246,973 0
Oct-23 0.897094227 319,580 78,298 241,282 0
Nov-23 0.903434544 318,547 77,321 241,226 0
Dec-23 0.911559829 319,846 76,337 243,509 25,965
Jan-24 0.920398864 321,954 75,275 246,679 0
Feb-24 0.928280133 322,688 74,206 248,482 0
Mar-24 0.934782298 321,348 73,130 248,218 0
Apr-24 0.936402314 313,203 72,048 241,156 0
May-24 0.938457932 305,800 70,959 234,841 0
Jun-24 0.938812349 296,414 69,863 226,551 16,957
Jul-24 0.940071954 287,470 68,761 218,709 0
Aug-24 0.940203365 277,364 67,651 209,713 0
Sep-24 0.941435706 268,932 66,535 202,397 0
Oct-24 0.943464624 261,628 65,412 196,216 0
Nov-24 0.950614033 260,147 64,282 195,865 0
Dec-24 0.960039932 261,078 63,145 197,933 28,619
Jan-25 0.970385420 262,843 61,924 200,919 0
Feb-25 0.979525973 263,185 60,695 202,490 0
Mar-25 0.986942044 261,376 59,459 201,917 0
Apr-25 0.988184180 252,523 58,216 194,307 0
May-25 0.989928421 244,434 56,964 187,469 0
Jun-25 0.989402394 234,291 55,705 178,585 19,348
Jul-25 0.990028637 224,600 54,438 170,161 0
Aug-25 0.989051610 213,705 53,164 160,541 0
Sep-25 0.989417024 204,541 51,881 152,660 0
Oct-25 0.990766572 196,541 50,591 145,950 0
Nov-25 0.999159390 194,565 49,292 145,273 0
Dec-25 1.010734120 195,083 47,986 147,097 31,488
Jan-26 1.023612706 196,463 46,590 149,873 0
Feb-26 1.034859582 196,367 45,186 151,181 0
Mar-26 1.043792034 194,042 43,774 150,268 0
Apr-26 1.044244669 184,423 42,353 142,070 0
May-26 1.045271229 175,592 40,923 134,670 0
Jun-26 1.042860824 164,633 39,484 125,149 21,948
Jul-26 1.041974715 154,138 38,036 116,102 0
Aug-26 1.038330500 142,394 36,579 105,815 0
Sep-26 1.036332005 132,438 35,113 97,325 0
Oct-26 1.035549303 123,685 33,638 90,047 0
Nov-26 1.046365171 121,164 32,154 89,010 0
Dec-26 1.062622822 121,222 30,661 90,561 34,589
Jan-27 1.081168558 122,170 29,074 93,096 0
Feb-27 1.097164423 121,587 27,477 94,110 0
Mar-27 1.109615182 118,693 25,871 92,822 0
Apr-27 1.108231265 108,247 24,254 83,993 0
May-27 1.107357338 98,614 22,627 75,987 0
Jun-27 1.099357987 86,776 20,990 65,786 24,775
Jul-27 1.093022953 75,413 19,344 56,070 0
Aug-27 1.078197082 62,755 17,686 45,069 0
Sep-27 1.063108198 51,946 16,019 35,926 0
Oct-27 1.046200625 42,377 14,342 28,035 0
Nov-27 1.064956260 39,256 12,654 26,603 0
Dec-27 1.104052714 38,801 10,955 27,846 37,939
Jan-28 1.152693585 39,266 9,157 30,109 0
Feb-28 1.196231198 38,143 7,348 30.795 0
Mar-28 1.235048478 34,623 5,528 29,095 0
Apr-28 1.242405179 23,285 3,697 19,588 0
May-28 1.263344950 12,786 1,854 10,931 0
Jun-28 0.000000000 0 0 0 27,846
--------
860,000
<FN>
ALL DOLLARS IN THOUSANDS, EXCEPT FOR COLUMN C AND COLUMN H
(1) Operating Costs include administrative expenses, property taxes, the
Services Fee and certain amounts reimbursable under the New Services
Agreement.
(2) A portion of Capital Expenditures is reimbursable under the New
Services Agreement.
(3) The Structured Harvest Quantity is 3,397,801 Mbfe. In all subsequent
periods the column represents the Deemed Remaining Harvest Quantity,
which is equal to the previous period of Column G less current period
Column B.
(4) Amount in column I divided by amount in Column G., expressed in units
of dollars (in thousands) per Mbfe.
(5) Payments to Holders on Timber Notes are due on the 20th day of the
subsequent month.
</TABLE>
<PAGE>
EXHIBIT A-1-1
(FORM OF FACE OF NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS, AS SET FORTH
HEREIN, WITHOUT SURRENDER OF THIS NOTE. ACCORDINGLY, THE UNPAID PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL
AMOUNT SET FORTH BELOW (DUE TO PRINCIPAL PAYMENTS BEFORE OR AFTER THE DATE
OF THIS NOTE). ANYONE ACQUIRING BENEFICIAL OWNERSHIP OF THIS NOTE MAY
ASCERTAIN THE CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE.
No. A-1-__ $________
CUSIP No. U78476AA3
SCOTIA PACIFIC COMPANY LLC
6.55% Class A-1 Timber Collateralized Notes, due 2028
Scotia Pacific Company LLC, a Delaware limited liability company,
promises to pay to ________, or registered assigns, the principal sum of
_______ Dollars (or such other amount (not in excess of One Hundred Sixty
Three Million Seven Hundred Thousand ($163,700,000) Dollars) as shall equal
the unpaid principal amount of this Note) on July 20, 2028 (the "Final
Maturity Date") and, on each Note Payment Date, such amounts as provided in
the Indenture.
Note Payment Dates: January 20th and July 20th
Record Dates: January 5th and July 5th
Note Rate: 6.55%
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which further provisions are incorporated and
shall for all purposes have the same effect as if set forth at this place.
Capitalized terms used and not defined in this Note which are defined in
the Indenture referred to herein have the meanings assigned to them in the
Indenture.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: ______,____
SCOTIA PACIFIC COMPANY LLC
By________________________________
President or Vice President
By________________________________
Secretary or Assistance Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee,
certifies that this is one
of the Class A-1 Timber Notes referred
to in the Indenture.
by________________________________
Authorized Signatory
6.55% Class A-1 Timber Collateralized Notes, due 2028
1. Interest; Principal; Premium
SCOTIA PACIFIC COMPANY LLC, a Delaware limited liability company
(such limited liability company, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Issuer"),
promises to pay to the registered Holder hereof, or to its registered
assigns, the initial principal amount indicated on the face hereof (or such
lesser amount as shall equal the unpaid principal amount of this Note) on
the Final Maturity Date indicated on the face hereof and, on each Note
Payment Date that precedes the Final Maturity Date, (i) the principal
amount required to be paid on such date by Sections 2.11 and 5.7 of the
Indenture, (ii) interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal balance hereof, from and including
the most recent Note Payment Date on which interest has been duly paid to
but excluding such Note Payment Date at the rate per annum indicated on the
face hereof, (iii) without duplication of any amount payable pursuant to
clause (ii), interest (computed on the basis of a 360-day year of twelve
30-day months) on any principal of this Note, and, to the extent lawful,
interest payable under the foregoing clause (ii), that is not paid on the
date such principal or interest becomes due and payable, for the period
from and including the date such principal or interest becomes due and
payable to but excluding the date such principal or interest is paid in
full, at the Default Rate, (iv) any Premium required to be paid on such
date by Sections 2.12 and 5.7 of the Indenture, and (v) any interest
(computed on the basis of a 360-day year of twelve 30-day months) required
to be paid on such date by Sections 2.12 and 5.7 of the Indenture on any
Premium payable on this Note. If the date scheduled to be a Note Payment
Date is not a Business Day, the next succeeding day that is a Business Day
shall be the Note Payment Date, but all calculations of interest and other
items will be as of the 20th day of the applicable month. As provided in
Section 2.12(b) of the Indenture, for the purposes of Sections 2.11(e),
2.12(b), 2.12(c) and 2.12(d) of the Indenture, if any portion of the
principal amount of any Note remains unpaid after the final Maturity Date,
and, if the Notes shall not have been accelerated pursuant to Section 7.2
of the Indenture, the last day of each month that occurs after such Final
Maturity Date and prior to the date on which the entire unpaid principal
amount of such Note is paid shall be deemed to constitute a Note Payment
Date.
2. Method of Payment
The Issuer will pay the amounts payable on the Notes on each Note
Payment Date to the persons who are registered Holders of Notes at the
close of business on the fifth day of the month in which such Note Payment
Date occurs (the "Record Date"), even if Notes are canceled after the
Record Date and on or before such Note Payment Date. Holders need not
surrender Notes to a Paying Agent to collect principal or other amounts
payable in respect of the Notes, except that Notes must be surrendered to a
Paying Agent after due notice to collect the final installment of principal
thereon. The Issuer will pay all amounts payable on the Notes in money of
the United States that at the time of payment is legal tender for payment
of public and private debts. Payments on Definitive Notes will be made (i)
by a U.S. dollar check drawn on a bank in New York City or Boston,
Massachusetts mailed to the Holder at such Holder's registered address or
(ii) upon application by a Holder of at least U.S. $5,000,000 in principal
amount of Definitive Notes to a Paying Agent not later than five Business
Days prior to the related Record Date, by wire transfer in immediately
available funds to a U.S. dollar account maintained by such Holder with a
bank in New York City or Boston, Massachusetts. Payments to Holders of the
Global Notes will be made (i) by a U.S. dollar check drawn on a bank in New
York City or Boston, Massachusetts delivered to the registered owner of
such Global Notes, at its registered address or (ii) by wire transfer in
immediately available funds to a U.S. dollar account maintained by such
registered owner with a bank in New York City or Boston, Massachusetts.
However, the final distribution with respect to each Class of Timber Notes
will be made only against surrender of the Timber Notes of such Class at
the corporate trust office of a Paying Agent, in Boston, Massachusetts or
New York, New York.
3. Paying Agent and Registrar
The Trustee, together with its affiliate, State Street Bank and
Trust Company, N.A. will initially act as sole Paying Agents and the
Trustee, initially, will act as Registrar. The Issuer may appoint and
change any Registrar without notice. The Issuer may act as Registrar. The
Issuer may appoint one or more other paying agents.
4. Indenture; Deed of Trust
The Issuer has issued the Notes under an Indenture dated as of
July 20, 1998 (the "Indenture"), between the Issuer and State Street Bank
and Trust Company, a Massachusetts trust company, as Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). The Notes are subject to all such terms, and Noteholders are
referred to the Indenture and the TIA for a statement of those terms.
The Notes and the obligations of the Issuer pursuant to the
Indenture and the Deed of Trust are secured by a Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Proceeds
dated on or prior to July 20, 1998 (the "Deed of Trust") by the Issuer, as
trustor, in favor of a trustee under the Deed of Trust, for the benefit of
State Street Bank and Trust Company, in its capacity as collateral agent
for the Holders of the Timber Notes and the Liquidity Providers pursuant to
the Deed of Trust. Noteholders are referred to the Deed of Trust for a
statement of the terms thereof. Subject to certain exceptions set forth in
the Deed of Trust, (i) the Deed of Trust may be amended with the written
consent of the Majority Secured Parties (as defined in the Deed of Trust)
and Rating Agency Confirmation or with the written consent of the
Supermajority Holders (after notice of the Rating Agency Evaluation) and
Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Secured
Parties. Subject to certain exceptions set forth in the Deed of Trust, the
Collateral Agent and the Issuer may amend the Deed of Trust to cure any
ambiguity, omission, defect or inconsistency, to add to the covenants of
the Issuer for the benefit of the Collateral Agent or the Secured Parties
or to surrender any right or power conferred upon the Issuer or to make any
change that does not adversely affect the rights of any Noteholder or any
Liquidity Provider. The Indenture and the Deed of Trust impose certain
restrictions upon, among other things, the ability of the Issuer to incur
Indebtedness, to enter into agreements other than the Operative Documents,
to create Liens on the Mortgaged Property, and to enter into transactions
with Affiliates.
5. Collateral
Pursuant to the Deed of Trust, the Issuer has pledged the
Mortgaged Property. Upon the satisfaction of certain conditions set forth
in the Indenture, the Issuer may issue Additional Timber Notes that will be
equally and ratably secured with the Notes by the Mortgaged Property. The
Notes do not constitute obligations of The Pacific Lumber Company ("Pacific
Lumber"), and the Notes are not guaranteed by Pacific Lumber or any other
Person.
6. Optional Redemption or Prepayment
The Issuer may redeem the Notes of any Class, in whole, but not
in part, at any time, provided that no Notes of a Class having an earlier
Scheduled Maturity Date (or, in the case of redemption of the Class A-3
Notes, no Notes) remain outstanding (after giving effect to all principal
payments (including payments of principal in the redemption) occurring on
the redemption date) following such redemption, at a redemption price equal
to (i) all unpaid principal amounts thereof as of the redemption date, (ii)
all accrued and unpaid Premium thereon as of the redemption date, (iii) all
accrued and unpaid Regular Interest, Default Interest and interest on
Premium thereon as of the redemption date and (iv) a redemption premium
computed as provided in the definition of Prepayment Premium Amount in
Schedule A to the Indenture, as if the excess of (a) the aggregate
outstanding principal amount of the Notes of such Class to be redeemed over
(b) the Scheduled Amortization Amount for such Class of Notes as of the
redemption date, constituted an "Excess Payment" as set forth in such
definition. The issuer may also make optional partial or total prepayments
of principal on any Note Payment Date as provided in the Indenture.
7. Notice of Redemption
Notice of redemption will be mailed at least 15 days (or 30 days
if legally required by DTC) but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at his or her registered
address. If money sufficient to pay the redemption price of all Notes
called for redemption is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after
the redemption date interest shall cease to accrue on the Notes called for
redemption.
8. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations
of $100,000 original principal amount or any integral multiple of $1,000 in
excess thereof. A Holder may transfer or exchange Notes for Notes of the
same Class in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate certificates, opinions,
endorsements and transfer documents and to pay any taxes and fees required
by law or permitted by the Indenture. The Registrar need not transfer or
exchange (i) any Notes called for redemption or (ii) any Notes for a period
of 15 days before a Note Payment Date.
9. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal of, Premium, if any, or
interest on any Note remains unclaimed for two years, the Trustee or Paying
Agent shall pay the money back to the Issuer at its request unless an
abandoned property law designates another person. After any such payment,
Holders entitled to the money must look only to the Issuer and not to the
Trustee for payment.
11. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the
Majority Holders and Rating Agency Confirmation or with the written consent
of the Supermajority Holders (after notice of the Rating Agency Evaluation)
and Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Holders.
Subject to certain exceptions set forth in the Indenture, without the
consent of any Noteholder, the Issuer and the Trustee may amend the
Indenture or the Notes to cure any ambiguity, omission, defect or
inconsistency, to make any change that does not adversely affect the rights
of any Noteholder, to add to the covenants of the Issuer for the benefit of
the Holders or to surrender any right or power conferred upon the Issuer,
to comply with the TIA, to comply with the provisions of Section 4.13 of
the Indenture (in connection with certain consolidations or mergers), to
provide for uncertificated Notes in addition to or in place of certificated
Notes and, subject to certain limitations set forth in the Indenture, in
connection with the issuance of any Additional Timber Notes.
12. Defaults and Remedies
The occurrence of any of the events enumerated in Section 7.1 of
the Indenture shall constitute an Event of Default.
If an Event of Default under Section 7.1(11) of the Indenture
shall occur, the Indenture provides that an amount equal to all amounts
payable with respect to the Notes and any Additional Timber Notes shall,
without any demand, presentment or notice, become immediately due any
payable. If any Event of Default described in any of Section 7.1(1)
through (5) shall occur and be continuing, the Trustee may, or, if the
Holders of 25% in aggregate outstanding principal amount of the Notes and
any Additional Timber Notes so elect, shall, declare all amounts payable
with respect to the Notes and any Additional Timber Notes to be immediately
due and payable, and upon any such declaration of acceleration such amount
shall become immediately due and payable. If any Event of Default
described in causes (6) through (10) or in clause (12) of Section 7.1 of
the Indenture shall occur and be continuing, if the Majority Holders so
elect, the Trustee shall declare all amounts payable with respect to the
Notes and any Additional Timber Notes to be immediately due and payable,
and upon any such declaration of acceleration such amount shall become
immediately due and payable. If certain conditions set forth in Section
7.1(d) of the Indenture have been satisfied, the Majority Holders may
rescind and annul a declaration of acceleration.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Notes unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Notes and any Additional Timber Notes may direct the Trustee in its
exercise of any trust or power; provided, however, that the Liquidity
Providers have the right to vote pro rata (as provided in the Indenture)
with the Holders of the Notes and any Additional Timber Notes in directing
the Trustee or the Collateral Agent with respect to whether and how to
exercise rights against the Mortgaged Property under the Deed of Trust.
The Trustee may withhold from Noteholders notice of any continuing Default
known to the Trustee (except a Default in payment of principal or interest)
if it determines that withholding notice is in their interest.
Acceptance of this Note constitutes the waiver of certain rights
of setoff, banker's lien, or the like against property of, or any amounts
owing to, the Company as set forth in Section 7.9 of the Indenture.
13. Trustee Dealings with the Issuer
Subject to certain limitations imposed by the TIA if and when the
Indenture is qualified under the TIA, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with and collect obligations owed to it by the
Issuer or its Affiliates and may otherwise deal with the Issuer of its
Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, manager, officer, employee, member or stockholder, as
such, of the Issuer or the Trustee shall not have any liability for any
obligations of the Issuer or the Trustee under the Notes or the Indenture
or the Deed of Trust or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each
Noteholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent appointed by the Trustee and acceptable
to the Issuer) manually signs the certificate of authentication on the
other side of this Note.
16. Abbreviations
Customary abbreviations may be used in the name of a Noteholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entirety), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
17. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Noteholders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Noteholder upon written request
and without charge a copy of the Indenture, the Deed of Trust, the New
Services Agreement and the New Master Purchase Agreement. Requests may be
made to:
Scotia Pacific Company LLC
5847 San Felipe
Suite 2610
Houston, Texas 77257
Attention: Secretary
18. Transfer Restrictions
TRANSFERS AND EXCHANGES OF THIS NOTE ARE SUBJECT TO RESTRICTIONS
AS PROVIDED IN THE INDENTURE UNTIL THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE.)
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature
guaranteed:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint___________________________________ attorney or
agent to transfer this Note on the books of the Issuer. The attorney or
agent may substitute another to act for him.
___________________________________________________________________________
Date:
Your
Signature:_________________________________________________________________
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:_______________________________________________________
(Signature must be guaranteed by a member firm of the
New York Stock Exchange, commercial bank or trust
company or another entity with membership in an
approved signature guarantee medallion program pursuant
to Securities and Exchange Commission Rule 17Ad-15.)
IMPORTANT NOTICE: WHEN YOU SIGN YOUR NAME TO THIS ASSIGNMENT FROM WITHOUT
FILLING IN THE NAME OF YOUR "ASSIGNEE" OR "ATTORNEY OR AGENT", THIS NOTE
BECOMES FULLY NEGOTIABLE, SIMILAR TO A CHECK ENDORSED IN BLANK. THEREFORE,
TO SAFEGUARD A SIGNED NOTE, IT IS RECOMMENDED THAT YOU EITHER (i) FILL IN
THE NAME OF THE NEW OWNER IN THE "ASSIGNEE" BLANK, OR (ii) IF YOU ARE
SENDING THE SIGNED NOTE TO YOUR BANK OR BROKER, FILL IN THE NAME OF THE
BANK OR BROKER IN THE "ATTORNEY OR AGENT" BLANK. ALTERNATIVELY, INSTEAD OF
USING THIS ASSIGNMENT FORM, YOU MAY SIGN A SEPARATE "POWER OF ATTORNEY"
FORM AND THEN MAIL THE UNSIGNED NOTE AND THE SIGNED "POWER OF ATTORNEY" IN
SEPARATE ENVELOPES. FOR ADDED PROTECTION, USE CERTIFIED OR REGISTERED MAIL
FOR A NOTE.
<PAGE>
EXHIBIT A-2-1
(FORM OF FACE OF NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS, AS SET FORTH
HEREIN, WITHOUT SURRENDER OF THIS NOTE. ACCORDINGLY, THE UNPAID PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL
AMOUNT SET FORTH BELOW (DUE TO PRINCIPAL PAYMENTS BEFORE OR AFTER THE DATE
OF THIS NOTE). ANYONE ACQUIRING BENEFICIAL OWNERSHIP OF THIS NOTE MAY
ASCERTAIN THE CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE.
No. A-2-__ $________
CUSIP No. U78476AB1
SCOTIA PACIFIC COMPANY LLC
7.11% Class A-2 Timber Collateralized Notes, due 2028
Scotia Pacific Company LLC, a Delaware limited liability company,
promises to pay to _________, or registered assigns, the principal sum of
_________ Dollars (or such other amount (not in excess of Two Hundred Forty
Three Million Two Hundred Thousand ($243,200,000) Dollars) as shall equal
the unpaid principal amount of this Note) on July 20, 2028 (the "Final
Maturity Date") and, on each Note Payment Date, such amounts as provided in
the Indenture.
Note Payment Dates: January 20th and July 20th
Record Dates: January 5th and July 5th
Note Rate: 7.11%
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which further provisions are incorporated and
shall for all purposes have the same effect as if set forth at this place.
Capitalized terms used and not defined in this Note which are defined in
the Indenture referred to herein have the meanings assigned to them in the
Indenture.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: ________,_____
SCOTIA PACIFIC COMPANY LLC
By___________________________________________
President or Vice President
By___________________________________________
Secretary or Assistance Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee,
certifies that this is one
of the Class A-2 Timber Notes referred
to in the Indenture.
by__________________________________
Authorized Signatory
7.11% Class A-2 Timber Collateralized Notes, due 2028
1. Interest; Principal; Premium
SCOTIA PACIFIC COMPANY LLC, a Delaware limited liability company
(such limited liability company, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Issuer"),
promises to pay to the registered Holder hereof, or to its registered
assigns, the initial principal amount indicated on the face hereof (or such
lesser amount as shall equal the unpaid principal amount of this Note) on
the Final Maturity Date indicated on the face hereof and, on each Note
Payment Date that precedes the Final Maturity Date, (i) the principal
amount required to be paid on such date by Sections 2.11 and 5.7 of the
Indenture, (ii) interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal balance hereof, from and including
the most recent Note Payment Date on which interest has been duly paid to
but excluding such Note Payment Date at the rate per annum indicated on the
face hereof, (iii) without duplication of any amount payable pursuant to
clause (ii), interest (computed on the basis of a 360-day year of twelve
30-day months) on any principal of this Note, and, to the extent lawful,
interest payable under the foregoing clause (ii), that is not paid on the
date such principal or interest becomes due and payable, for the period
from and including the date such principal or interest becomes due and
payable to but excluding the date such principal or interest is paid in
full, at the Default Rate, (iv) any Premium required to be paid on such
date by Sections 2.12 and 5.7 of the Indenture, and (v) any interest
(computed on the basis of a 360-day year of twelve 30-day months) required
to be paid on such date by Sections 2.12 and 5.7 of the Indenture on any
Premium payable on this Note. If the date scheduled to be a Note Payment
Date is not a Business Day, the next succeeding day that is a Business Day
shall be the Note Payment Date, but all calculations of interest and other
items will be as of the 20th day of the applicable month. As provided in
Section 2.12(b) of the Indenture, for the purposes of Sections 2.11(e),
2.12(b), 2.12(c) and 2.12(d) of the Indenture, if any portion of the
principal amount of any Note remains unpaid after the final Maturity Date,
and, if the Notes shall not have been accelerated pursuant to Section 7.2
of the Indenture, the last day of each month that occurs after such Final
Maturity Date and prior to the date on which the entire unpaid principal
amount of such Note is paid shall be deemed to constitute a Note Payment
Date.
2. Method of Payment
The Issuer will pay the amounts payable on the Notes on each Note
Payment Date to the persons who are registered Holders of Notes at the
close of business on the fifth day of the month in which such Note Payment
Date occurs (the "Record Date"), even if Notes are canceled after the
Record Date and on or before such Note Payment Date. Holders need not
surrender Notes to a Paying Agent to collect principal or other amounts
payable in respect of the Notes, except that Notes must be surrendered to a
Paying Agent after due notice to collect the final installment of principal
thereon. The Issuer will pay all amounts payable on the Notes in money of
the United States that at the time of payment is legal tender for payment
of public and private debts. Payments on Definitive Notes will be made (i)
by a U.S. dollar check drawn on a bank in New York City or Boston,
Massachusetts mailed to the Holder at such Holder's registered address or
(ii) upon application by a Holder of at least U.S. $5,000,000 in principal
amount of Definitive Notes to a Paying Agent not later than five Business
Days prior to the related Record Date, by wire transfer in immediately
available funds to a U.S. dollar account maintained by such Holder with a
bank in New York City or Boston, Massachusetts. Payments to Holders of the
Global Notes will be made (i) by a U.S. dollar check drawn on a bank in New
York City or Boston, Massachusetts delivered to the registered owner of
such Global Notes, at its registered address or (ii) by wire transfer in
immediately available funds to a U.S. dollar account maintained by such
registered owner with a bank in New York City or Boston, Massachusetts.
However, the final distribution with respect to each Class of Timber Notes
will be made only against surrender of the Timber Notes of such Class at
the corporate trust office of a Paying Agent, in Boston, Massachusetts or
New York, New York.
3. Paying Agent and Registrar
The Trustee, together with its affiliate, State Street Bank and
Trust Company, N.A. will initially act as sole Paying Agents and the
Trustee, initially, will act as Registrar. The Issuer may appoint and
change any Registrar without notice. The Issuer may act as Registrar. The
Issuer may appoint one or more other paying agents.
4. Indenture; Deed of Trust
The Issuer has issued the Notes under an Indenture dated as of
July 20, 1998 (the "Indenture"), between the Issuer and State Street Bank
and Trust Company, a Massachusetts trust company, as Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). The Notes are subject to all such terms, and Noteholders are
referred to the Indenture and the TIA for a statement of those terms.
The Notes and the obligations of the Issuer pursuant to the
Indenture and the Deed of Trust are secured by a Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Proceeds
dated on or prior to July 20, 1998 (the "Deed of Trust") by the Issuer, as
trustor, in favor of a trustee under the Deed of Trust, for the benefit of
State Street Bank and Trust Company, in its capacity as collateral agent
for the Holders of the Timber Notes and the Liquidity Providers pursuant to
the Deed of Trust. Noteholders are referred to the Deed of Trust for a
statement of the terms thereof. Subject to certain exceptions set forth in
the Deed of Trust, (i) the Deed of Trust may be amended with the written
consent of the Majority Secured Parties (as defined in the Deed of Trust)
and Rating Agency Confirmation or with the written consent of the
Supermajority Holders (after notice of the Rating Agency Evaluation) and
Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Secured
Parties. Subject to certain exceptions set forth in the Deed of Trust, the
Collateral Agent and the Issuer may amend the Deed of Trust to cure any
ambiguity, omission, defect or inconsistency, to add to the covenants of
the Issuer for the benefit of the Collateral Agent or the Secured Parties
or to surrender any right or power conferred upon the Issuer or to make any
change that does not adversely affect the rights of any Noteholder or any
Liquidity Provider. The Indenture and the Deed of Trust impose certain
restrictions upon, among other things, the ability of the Issuer to incur
Indebtedness, to enter into agreements other than the Operative Documents,
to create Liens on the Mortgaged Property, and to enter into transactions
with Affiliates.
5. Collateral
Pursuant to the Deed of Trust, the Issuer has pledged the
Mortgaged Property. Upon the satisfaction of certain conditions set forth
in the Indenture, the Issuer may issue Additional Timber Notes that will be
equally and ratably secured with the Notes by the Mortgaged Property. The
Notes do not constitute obligations of The Pacific Lumber Company ("Pacific
Lumber"), and the Notes are not guaranteed by Pacific Lumber or any other
Person.
6. Optional Redemption or Prepayment
The Issuer may redeem the Notes of any Class, in whole, but not
in part, at any time, provided that no Notes of a Class having an earlier
Scheduled Maturity Date (or, in the case of redemption of the Class A-3
Notes, no Notes) remain outstanding (after giving effect to all principal
payments (including payments of principal in the redemption) occurring on
the redemption date) following such redemption, at a redemption price equal
to (i) all unpaid principal amounts thereof as of the redemption date, (ii)
all accrued and unpaid Premium thereon as of the redemption date, (iii) all
accrued and unpaid Regular Interest, Default Interest and interest on
Premium thereon as of the redemption date and (iv) a redemption premium
computed as provided in the definition of Prepayment Premium Amount in
Schedule A to the Indenture, as if the excess of (a) the aggregate
outstanding principal amount of the Notes of such Class to be redeemed over
(b) the Scheduled Amortization Amount for such Class of Notes as of the
redemption date, constituted an "Excess Payment" as set forth in such
definition. The issuer may also make optional partial or total prepayments
of principal on any Note Payment Date as provided in the Indenture.
7. Notice of Redemption
Notice of redemption will be mailed at least 15 days (or 30 days
if legally required by DTC) but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at his or her registered
address. If money sufficient to pay the redemption price of all Notes
called for redemption is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after
the redemption date interest shall cease to accrue on the Notes called for
redemption.
8. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations
of $100,000 original principal amount or any integral multiple of $1,000 in
excess thereof. A Holder may transfer or exchange Notes for Notes of the
same Class in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate certificates, opinions,
endorsements and transfer documents and to pay any taxes and fees required
by law or permitted by the Indenture. The Registrar need not transfer or
exchange (i) any Notes called for redemption or (ii) any Notes for a period
of 15 days before a Note Payment Date.
9. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal of, Premium, if any, or
interest on any Note remains unclaimed for two years, the Trustee or Paying
Agent shall pay the money back to the Issuer at its request unless an
abandoned property law designates another person. After any such payment,
Holders entitled to the money must look only to the Issuer and not to the
Trustee for payment.
11. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the
Majority Holders and Rating Agency Confirmation or with the written consent
of the Supermajority Holders (after notice of the Rating Agency Evaluation)
and Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Holders.
Subject to certain exceptions set forth in the Indenture, without the
consent of any Noteholder, the Issuer and the Trustee may amend the
Indenture or the Notes to cure any ambiguity, omission, defect or
inconsistency, to make any change that does not adversely affect the rights
of any Noteholder, to add to the covenants of the Issuer for the benefit of
the Holders or to surrender any right or power conferred upon the Issuer,
to comply with the TIA, to comply with the provisions of Section 4.13 of
the Indenture (in connection with certain consolidations or mergers), to
provide for uncertificated Notes in addition to or in place of certificated
Notes and, subject to certain limitations set forth in the Indenture, in
connection with the issuance of any Additional Timber Notes.
12. Defaults and Remedies
The occurrence of any of the events enumerated in Section 7.1 of
the Indenture shall constitute an Event of Default.
If an Event of Default under Section 7.1(11) of the Indenture
shall occur, the Indenture provides that an amount equal to all amounts
payable with respect to the Notes and any Additional Timber Notes shall,
without any demand, presentment or notice, become immediately due any
payable. If any Event of Default described in any of Section 7.1(1)
through (5) shall occur and be continuing, the Trustee may, or, if the
Holders of 25% in aggregate outstanding principal amount of the Notes and
any Additional Timber Notes so elect, shall, declare all amounts payable
with respect to the Notes and any Additional Timber Notes to be immediately
due and payable, and upon any such declaration of acceleration such amount
shall become immediately due and payable. If any Event of Default
described in causes (6) through (10) or in clause (12) of Section 7.1 of
the Indenture shall occur and be continuing, if the Majority Holders so
elect, the Trustee shall declare all amounts payable with respect to the
Notes and any Additional Timber Notes to be immediately due and payable,
and upon any such declaration of acceleration such amount shall become
immediately due and payable. If certain conditions set forth in Section
7.1(d) of the Indenture have been satisfied, the Majority Holders may
rescind and annul a declaration of acceleration.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Notes unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Notes and any Additional Timber Notes may direct the Trustee in its
exercise of any trust or power; provided, however, that the Liquidity
Providers have the right to vote pro rata (as provided in the Indenture)
with the Holders of the Notes and any Additional Timber Notes in directing
the Trustee or the Collateral Agent with respect to whether and how to
exercise rights against the Mortgaged Property under the Deed of Trust.
The Trustee may withhold from Noteholders notice of any continuing Default
known to the Trustee (except a Default in payment of principal or interest)
if it determines that withholding notice is in their interest.
Acceptance of this Note constitutes the waiver of certain rights
of setoff, banker's lien, or the like against property of, or any amounts
owing to, the Company as set forth in Section 7.9 of the Indenture.
13. Trustee Dealings with the Issuer
Subject to certain limitations imposed by the TIA if and when the
Indenture is qualified under the TIA, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with and collect obligations owed to it by the
Issuer or its Affiliates and may otherwise deal with the Issuer of its
Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, manager, officer, employee, member or stockholder, as
such, of the Issuer or the Trustee shall not have any liability for any
obligations of the Issuer or the Trustee under the Notes or the Indenture
or the Deed of Trust or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each
Noteholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent appointed by the Trustee and acceptable
to the Issuer) manually signs the certificate of authentication on the
other side of this Note.
16. Abbreviations
Customary abbreviations may be used in the name of a Noteholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entirety), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
17. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Noteholders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Noteholder upon written request
and without charge a copy of the Indenture, the Deed of Trust, the New
Services Agreement and the New Master Purchase Agreement. Requests may be
made to:
Scotia Pacific Company LLC
5847 San Felipe
Suite 2610
Houston, Texas 77257
Attention: Secretary
18. Transfer Restrictions
TRANSFERS AND EXCHANGES OF THIS NOTE ARE SUBJECT TO RESTRICTIONS
AS PROVIDED IN THE INDENTURE UNTIL THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE.)
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature
guaranteed:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ___________________________________ attorney or
agent to transfer this Note on the books of the Issuer. The attorney or
agent may substitute another to act for him.
Date:
Your Signature:____________________________________________________________
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:_______________________________________________________
(Signature must be guaranteed by a member firm of the
New York Stock Exchange, commercial bank or trust
company or another entity with membership in an
approved signature guarantee medallion program pursuant
to Securities and Exchange Commission Rule 17Ad-15.)
IMPORTANT NOTICE: WHEN YOU SIGN YOUR NAME TO THIS ASSIGNMENT FROM WITHOUT
FILLING IN THE NAME OF YOUR "ASSIGNEE" OR "ATTORNEY OR AGENT", THIS NOTE
BECOMES FULLY NEGOTIABLE, SIMILAR TO A CHECK ENDORSED IN BLANK. THEREFORE,
TO SAFEGUARD A SIGNED NOTE, IT IS RECOMMENDED THAT YOU EITHER (i) FILL IN
THE NAME OF THE NEW OWNER IN THE "ASSIGNEE" BLANK, OR (ii) IF YOU ARE
SENDING THE SIGNED NOTE TO YOUR BANK OR BROKER, FILL IN THE NAME OF THE
BANK OR BROKER IN THE "ATTORNEY OR AGENT" BLANK. ALTERNATIVELY, INSTEAD OF
USING THIS ASSIGNMENT FORM, YOU MAY SIGN A SEPARATE "POWER OF ATTORNEY"
FORM AND THEN MAIL THE UNSIGNED NOTE AND THE SIGNED "POWER OF ATTORNEY" IN
SEPARATE ENVELOPES. FOR ADDED PROTECTION, USE CERTIFIED OR REGISTERED MAIL
FOR A NOTE.
<PAGE>
EXHIBIT A-3-1
(FORM OF FACE OF NOTE)
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS, AS SET FORTH
HEREIN, WITHOUT SURRENDER OF THIS NOTE. ACCORDINGLY, THE UNPAID PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE INITIAL PRINCIPAL
AMOUNT SET FORTH BELOW (DUE TO PRINCIPAL PAYMENTS BEFORE OR AFTER THE DATE
OF THIS NOTE). ANYONE ACQUIRING BENEFICIAL OWNERSHIP OF THIS NOTE MAY
ASCERTAIN THE CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE.
No. A-3-__ $_______
CUSIP No. U78476AC9
SCOTIA PACIFIC COMPANY LLC
7.71% Class A-3 Timber Collateralized Notes, due 2028
Scotia Pacific Company LLC, a Delaware limited liability company,
promises to pay to ________, or registered assigns, the principal sum of
___________ Dollars (or such other amount (not in excess of Four Hundred
Sixty Three Million Three Hundred Forty Eight Thousand ($463,348,000)
Dollars) as shall equal the unpaid principal amount of this Note) on July
20, 2028 (the "Final Maturity Date") and, on each Note Payment Date, such
amounts as provided in the Indenture.
Note Payment Dates: January 20th and July 20th
Record Dates: January 5th and July 5th
Note Rate: 7.71%
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which further provisions are incorporated and
shall for all purposes have the same effect as if set forth at this place.
Capitalized terms used and not defined in this Note which are defined in
the Indenture referred to herein have the meanings assigned to them in the
Indenture.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
Dated: ________,_____
SCOTIA PACIFIC COMPANY LLC
By _________________________________
President or Vice President
By _________________________________
Secretary or Assistance Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST COMPANY
as Trustee,
certifies that this is one
of the Class A-3 Timber Notes referred
to in the Indenture.
by _________________________________
Authorized Signatory
7.71% Class A-3 Timber Collateralized Notes, due 2028
1. Interest; Principal; Premium
SCOTIA PACIFIC COMPANY LLC, a Delaware limited liability company
(such limited liability company, and its successors and assigns under the
Indenture hereinafter referred to, being herein called the "Issuer"),
promises to pay to the registered Holder hereof, or to its registered
assigns, the initial principal amount indicated on the face hereof (or such
lesser amount as shall equal the unpaid principal amount of this Note) on
the Final Maturity Date indicated on the face hereof and, on each Note
Payment Date that precedes the Final Maturity Date, (i) the principal
amount required to be paid on such date by Sections 2.11 and 5.7 of the
Indenture, (ii) interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal balance hereof, from and including
the most recent Note Payment Date on which interest has been duly paid to
but excluding such Note Payment Date at the rate per annum indicated on the
face hereof, (iii) without duplication of any amount payable pursuant to
clause (ii), interest (computed on the basis of a 360-day year of twelve
30-day months) on any principal of this Note, and, to the extent lawful,
interest payable under the foregoing clause (ii), that is not paid on the
date such principal or interest becomes due and payable, for the period
from and including the date such principal or interest becomes due and
payable to but excluding the date such principal or interest is paid in
full, at the Default Rate, (iv) any Premium required to be paid on such
date by Sections 2.12 and 5.7 of the Indenture, and (v) any interest
(computed on the basis of a 360-day year of twelve 30-day months) required
to be paid on such date by Sections 2.12 and 5.7 of the Indenture on any
Premium payable on this Note. If the date scheduled to be a Note Payment
Date is not a Business Day, the next succeeding day that is a Business Day
shall be the Note Payment Date, but all calculations of interest and other
items will be as of the 20th day of the applicable month. As provided in
Section 2.12(b) of the Indenture, for the purposes of Sections 2.11(e),
2.12(b), 2.12(c) and 2.12(d) of the Indenture, if any portion of the
principal amount of any Note remains unpaid after the final Maturity Date,
and, if the Notes shall not have been accelerated pursuant to Section 7.2
of the Indenture, the last day of each month that occurs after such Final
Maturity Date and prior to the date on which the entire unpaid principal
amount of such Note is paid shall be deemed to constitute a Note Payment
Date.
2. Method of Payment
The Issuer will pay the amounts payable on the Notes on each Note
Payment Date to the persons who are registered Holders of Notes at the
close of business on the fifth day of the month in which such Note Payment
Date occurs (the "Record Date"), even if Notes are canceled after the
Record Date and on or before such Note Payment Date. Holders need not
surrender Notes to a Paying Agent to collect principal or other amounts
payable in respect of the Notes, except that Notes must be surrendered to a
Paying Agent after due notice to collect the final installment of principal
thereon. The Issuer will pay all amounts payable on the Notes in money of
the United States that at the time of payment is legal tender for payment
of public and private debts. Payments on Definitive Notes will be made (i)
by a U.S. dollar check drawn on a bank in New York City or Boston,
Massachusetts mailed to the Holder at such Holder's registered address or
(ii) upon application by a Holder of at least U.S. $5,000,000 in principal
amount of Definitive Notes to a Paying Agent not later than five Business
Days prior to the related Record Date, by wire transfer in immediately
available funds to a U.S. dollar account maintained by such Holder with a
bank in New York City or Boston, Massachusetts. Payments to Holders of the
Global Notes will be made (i) by a U.S. dollar check drawn on a bank in New
York City or Boston, Massachusetts delivered to the registered owner of
such Global Notes, at its registered address or (ii) by wire transfer in
immediately available funds to a U.S. dollar account maintained by such
registered owner with a bank in New York City or Boston, Massachusetts.
However, the final distribution with respect to each Class of Timber Notes
will be made only against surrender of the Timber Notes of such Class at
the corporate trust office of a Paying Agent, in Boston, Massachusetts or
New York, New York.
3. Paying Agent and Registrar
The Trustee, together with its affiliate, State Street Bank and
Trust Company, N.A. will initially act as sole Paying Agents and the
Trustee, initially, will act as Registrar. The Issuer may appoint and
change any Registrar without notice. The Issuer may act as Registrar. The
Issuer may appoint one or more other paying agents.
4. Indenture; Deed of Trust
The Issuer has issued the Notes under an Indenture dated as of
July 20, 1998 (the "Indenture"), between the Issuer and State Street Bank
and Trust Company, a Massachusetts trust company, as Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
SectionSection 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). The Notes are subject to all such terms, and Noteholders are
referred to the Indenture and the TIA for a statement of those terms.
The Notes and the obligations of the Issuer pursuant to the
Indenture and the Deed of Trust are secured by a Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Proceeds
dated on or prior to July 20, 1998 (the "Deed of Trust") by the Issuer, as
trustor, in favor of a trustee under the Deed of Trust, for the benefit of
State Street Bank and Trust Company, in its capacity as collateral agent
for the Holders of the Timber Notes and the Liquidity Providers pursuant to
the Deed of Trust. Noteholders are referred to the Deed of Trust for a
statement of the terms thereof. Subject to certain exceptions set forth in
the Deed of Trust, (i) the Deed of Trust may be amended with the written
consent of the Majority Secured Parties (as defined in the Deed of Trust)
and Rating Agency Confirmation or with the written consent of the
Supermajority Holders (after notice of the Rating Agency Evaluation) and
Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Secured
Parties. Subject to certain exceptions set forth in the Deed of Trust, the
Collateral Agent and the Issuer may amend the Deed of Trust to cure any
ambiguity, omission, defect or inconsistency, to add to the covenants of
the Issuer for the benefit of the Collateral Agent or the Secured Parties
or to surrender any right or power conferred upon the Issuer or to make any
change that does not adversely affect the rights of any Noteholder or any
Liquidity Provider. The Indenture and the Deed of Trust impose certain
restrictions upon, among other things, the ability of the Issuer to incur
Indebtedness, to enter into agreements other than the Operative Documents,
to create Liens on the Mortgaged Property, and to enter into transactions
with Affiliates.
5. Collateral
Pursuant to the Deed of Trust, the Issuer has pledged the
Mortgaged Property. Upon the satisfaction of certain conditions set forth
in the Indenture, the Issuer may issue Additional Timber Notes that will be
equally and ratably secured with the Notes by the Mortgaged Property. The
Notes do not constitute obligations of The Pacific Lumber Company ("Pacific
Lumber"), and the Notes are not guaranteed by Pacific Lumber or any other
Person.
6. Optional Redemption or Prepayment
The Issuer may redeem the Notes of any Class, in whole, but not
in part, at any time, provided that no Notes of a Class having an earlier
Scheduled Maturity Date (or, in the case of redemption of the Class A-3
Notes, no Notes) remain outstanding (after giving effect to all principal
payments (including payments of principal in the redemption) occurring on
the redemption date) following such redemption, at a redemption price equal
to (i) all unpaid principal amounts thereof as of the redemption date, (ii)
all accrued and unpaid Premium thereon as of the redemption date, (iii) all
accrued and unpaid Regular Interest, Default Interest and interest on
Premium thereon as of the redemption date and (iv) a redemption premium
computed as provided in the definition of Prepayment Premium Amount in
Schedule A to the Indenture, as if the excess of (a) the aggregate
outstanding principal amount of the Notes of such Class to be redeemed over
(b) the Scheduled Amortization Amount for such Class of Notes as of the
redemption date, constituted an "Excess Payment" as set forth in such
definition. The issuer may also make optional partial or total prepayments
of principal on any Note Payment Date as provided in the Indenture.
7. Notice of Redemption
Notice of redemption will be mailed at least 15 days (or 30 days
if legally required by DTC) but not more than 60 days before the redemption
date to each Holder of Notes to be redeemed at his or her registered
address. If money sufficient to pay the redemption price of all Notes
called for redemption is deposited with the Paying Agent on or before the
redemption date and certain other conditions are satisfied, on and after
the redemption date interest shall cease to accrue on the Notes called for
redemption.
8. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations
of $100,000 original principal amount or any integral multiple of $1,000 in
excess thereof. A Holder may transfer or exchange Notes for Notes of the
same Class in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate certificates, opinions,
endorsements and transfer documents and to pay any taxes and fees required
by law or permitted by the Indenture. The Registrar need not transfer or
exchange (i) any Notes called for redemption or (ii) any Notes for a period
of 15 days before a Note Payment Date.
9. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal of, Premium, if any, or
interest on any Note remains unclaimed for two years, the Trustee or Paying
Agent shall pay the money back to the Issuer at its request unless an
abandoned property law designates another person. After any such payment,
Holders entitled to the money must look only to the Issuer and not to the
Trustee for payment.
11. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the
Majority Holders and Rating Agency Confirmation or with the written consent
of the Supermajority Holders (after notice of the Rating Agency Evaluation)
and Rating Agency Evaluation and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Majority Holders.
Subject to certain exceptions set forth in the Indenture, without the
consent of any Noteholder, the Issuer and the Trustee may amend the
Indenture or the Notes to cure any ambiguity, omission, defect or
inconsistency, to make any change that does not adversely affect the rights
of any Noteholder, to add to the covenants of the Issuer for the benefit of
the Holders or to surrender any right or power conferred upon the Issuer,
to comply with the TIA, to comply with the provisions of Section 4.13 of
the Indenture (in connection with certain consolidations or mergers), to
provide for uncertificated Notes in addition to or in place of certificated
Notes and, subject to certain limitations set forth in the Indenture, in
connection with the issuance of any Additional Timber Notes.
12. Defaults and Remedies
The occurrence of any of the events enumerated in Section 7.1 of
the Indenture shall constitute an Event of Default.
If an Event of Default under Section 7.1(11) of the Indenture
shall occur, the Indenture provides that an amount equal to all amounts
payable with respect to the Notes and any Additional Timber Notes shall,
without any demand, presentment or notice, become immediately due any
payable. If any Event of Default described in any of Section 7.1(1)
through (5) shall occur and be continuing, the Trustee may, or, if the
Holders of 25% in aggregate outstanding principal amount of the Notes and
any Additional Timber Notes so elect, shall, declare all amounts payable
with respect to the Notes and any Additional Timber Notes to be immediately
due and payable, and upon any such declaration of acceleration such amount
shall become immediately due and payable. If any Event of Default
described in causes (6) through (10) or in clause (12) of Section 7.1 of
the Indenture shall occur and be continuing, if the Majority Holders so
elect, the Trustee shall declare all amounts payable with respect to the
Notes and any Additional Timber Notes to be immediately due and payable,
and upon any such declaration of acceleration such amount shall become
immediately due and payable. If certain conditions set forth in Section
7.1(d) of the Indenture have been satisfied, the Majority Holders may
rescind and annul a declaration of acceleration.
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Notes unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Notes and any Additional Timber Notes may direct the Trustee in its
exercise of any trust or power; provided, however, that the Liquidity
Providers have the right to vote pro rata (as provided in the Indenture)
with the Holders of the Notes and any Additional Timber Notes in directing
the Trustee or the Collateral Agent with respect to whether and how to
exercise rights against the Mortgaged Property under the Deed of Trust.
The Trustee may withhold from Noteholders notice of any continuing Default
known to the Trustee (except a Default in payment of principal or interest)
if it determines that withholding notice is in their interest.
Acceptance of this Note constitutes the waiver of certain rights
of setoff, banker's lien, or the like against property of, or any amounts
owing to, the Company as set forth in Section 7.9 of the Indenture.
13. Trustee Dealings with the Issuer
Subject to certain limitations imposed by the TIA if and when the
Indenture is qualified under the TIA, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with and collect obligations owed to it by the
Issuer or its Affiliates and may otherwise deal with the Issuer of its
Affiliates with the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, manager, officer, employee, member or stockholder, as
such, of the Issuer or the Trustee shall not have any liability for any
obligations of the Issuer or the Trustee under the Notes or the Indenture
or the Deed of Trust or for any claim based on, in respect of or by reason
of such obligations or their creation. By accepting a Note, each
Noteholder waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
15. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent appointed by the Trustee and acceptable
to the Issuer) manually signs the certificate of authentication on the
other side of this Note.
16. Abbreviations
Customary abbreviations may be used in the name of a Noteholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by
the entirety), JT TEN (=joint tenants with right of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
17. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP
numbers to be printed on the Notes and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Noteholders. No
representation is made as to the accuracy of such numbers either as printed
on the Notes or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Issuer will furnish to any Noteholder upon written request
and without charge a copy of the Indenture, the Deed of Trust, the New
Services Agreement and the New Master Purchase Agreement. Requests may be
made to:
Scotia Pacific Company LLC
5847 San Felipe
Suite 2610
Houston, Texas 77257
Attention: Secretary
18. Transfer Restrictions
TRANSFERS AND EXCHANGES OF THIS NOTE ARE SUBJECT TO RESTRICTIONS
AS PROVIDED IN THE INDENTURE UNTIL THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE.)
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature
guaranteed:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ___________________________________ attorney or
agent to transfer this Note on the books of the Issuer. The attorney or
agent may substitute another to act for him.
Date:
Your Signature:____________________________________________________________
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:_______________________________________________________
(Signature must be guaranteed by a member firm of the
New York Stock Exchange, commercial bank or trust
company or another entity with membership in an
approved signature guarantee medallion program pursuant
to Securities and Exchange Commission Rule 17Ad-15.)
IMPORTANT NOTICE: WHEN YOU SIGN YOUR NAME TO THIS ASSIGNMENT FROM WITHOUT
FILLING IN THE NAME OF YOUR "ASSIGNEE" OR "ATTORNEY OR AGENT", THIS NOTE
BECOMES FULLY NEGOTIABLE, SIMILAR TO A CHECK ENDORSED IN BLANK. THEREFORE,
TO SAFEGUARD A SIGNED NOTE, IT IS RECOMMENDED THAT YOU EITHER (i) FILL IN
THE NAME OF THE NEW OWNER IN THE "ASSIGNEE" BLANK, OR (ii) IF YOU ARE
SENDING THE SIGNED NOTE TO YOUR BANK OR BROKER, FILL IN THE NAME OF THE
BANK OR BROKER IN THE "ATTORNEY OR AGENT" BLANK. ALTERNATIVELY, INSTEAD OF
USING THIS ASSIGNMENT FORM, YOU MAY SIGN A SEPARATE "POWER OF ATTORNEY"
FORM AND THEN MAIL THE UNSIGNED NOTE AND THE SIGNED "POWER OF ATTORNEY" IN
SEPARATE ENVELOPES. FOR ADDED PROTECTION, USE CERTIFIED OR REGISTERED MAIL
FOR A NOTE.
<PAGE>
EXHIBIT B-1
TO INDENTURE
FORM OF REPORT OF
INDEPENDENT ACCOUNTANTS
[Letterhead of Accountants]
____________, _______
State Street Bank and Trust Company
as Trustee under the Indenture
referred to below
Two International Place, 4th Floor
Boston, Massachusetts 02110
Scotia Pacific Company LLC
P.O. Box 712
Scotia, California 95565
Ladies and Gentlemen:
This letter is delivered pursuant to Section 4.6(a) of the
Indenture dated as of July 20, 1998 (as amended, supplemented and otherwise
modified and in effect on the date of this letter, the "Indenture") between
Scotia Pacific Company LLC, a Delaware limited liability company (the
"Issuer"), and State Street Bank and Trust Company, as trustee.
Capitalized terms used but not defined herein have the respective
meanings given to such terms in the Indenture.
We confirm that we are independent public accountants with respect
to the Issuer, within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934 and the applicable rules and regulations
thereunder. We have read such provisions of the Indenture, the Deed of
Trust and the New Services Agreement as we have deemed necessary for the
purposes of delivering this letter.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of the Issuer as of December 31, ____
[insert last date of most recent fiscal year] and the related statements of
operations, cash flows and changes in member's capital for [relevant period
described] [insert last date of most recently audited balance sheet] and
have issued our report thereon dated __________, ____. We have not audited
any financial statements of the Issuer as of any date or for any period
subsequent to December 31, ___ [insert last day of most recent fiscal
year].
The sufficiency of the agreed-upon procedures we have been
requested to perform, as set forth in subsequent paragraphs of this report,
is the sole responsibility of the Issuer and the Trustee. Consequently, we
make no representation regarding the sufficiency of the procedures
described below either for the purposes for which this report has been
requested or for any other purpose. Further, we make no representations
regarding questions of legal interpretation, nor do we provide any
assurance as to any matters relating to the Issuer's solvency, adequacy of
capital or ability to pay its debts.
Pursuant to Section 4.6(a) of the Indenture, we have performed the
procedures enumerated below:
1. We read the Monthly Trustee Certificates (which are attached
hereto as Annex A) and the Note Payment Trustee Certificates
(which are attached hereto as Annex B) issued by the Issuer to
the Trustee in respect of the Monthly Periods from [insert
first day of the fiscal year referred to above except with
respect to its fiscal year 1998, insert July 20, 1998] through
[insert last day of fiscal year referred to above]. For each
such Certificate, we recalculated the amounts deposited in and
withdrawn from the Collection Account, the Expense Reserve,
the Liquidity Account, if any, and the Payment Account, which were
established pursuant to the Indenture and found them to
be mathematically correct. Our recalculations of such amounts
was based on the procedures provided by the Issuer and set
forth in Annex C hereto.
2. We compared our recalculations of the amounts described above
to the amounts set forth in Annex A and Annex B and found them
to be in agreement[, except as described below].
3. We compared the amounts indicated in the Monthly Trustee
Certificates with respect to Mbfe of Timber sold by the Issuer
during the Monthly Periods covered by each such Monthly
Trustee Certificate to the Issuer's books and records for such
Monthly Period (including records with respect to MBF, net
Scribner Scale, of Company Timber sold), and found them to be
in agreement, [except as described below].
4. We did not perform any procedures with respect to portions of
the Monthly Trustee Certificates, which contain the Issuer's
estimates of amounts to be deposited or interest that will be
earned in succeeding months.
[list exceptions, if any]
Because the procedures described above do not constitute an audit
made in accordance with generally accepted auditing standards, we do not
express an opinion on any of the items referred to above. In addition, we
make no representations, and express no opinion as to, (a) questions of
legal interpretation of the Operative Documents, (b) the sufficiency of the
foregoing procedures for your purposes, (c) the sufficiency of the
requirements set forth in Section 4.6(a) of the Indenture, (d) the
methodology set forth in the Indenture or (e) the assumptions set forth in
the attached Annex C. Had we performed additional procedures, or had we
made an audit in accordance with generally accepted auditing standards,
other matters might have come to our attention that would have been
reported to you.
This letter is intended solely for the management of the Issuer and
the Trustee, and should not be used for any other purpose. We have no
responsibility to update this report to reflect any events or circumstances
occurring after the date of this letter. We also understand that the
Issuer will be providing a copy of this letter to various Rating Agencies
pursuant to Section 4.6(a) of the Indenture. Our work was specifically
performed to satisfy the requirements of the Indenture, and accordingly, we
make no representation regarding the sufficiency of the procedures
performed for the Rating Agencies' purposes. Distribution of this letter
to the Rating Agencies does not establish any privity between our Firm and
them.
Very truly yours,
<PAGE>
Annex C to Exhibit
B-1 to Indenture
Agreed Upon Procedures
I. Monthly Trustee Certificate Procedures
1. Compared the opening balances in the Collection Account, the
Payment Account, the Liquidity Account, if any, and the Expense Reserve to
amounts shown on bank statements from the Trustee.
2. Compared the amount deposited in the Expense Reserve to (i)
accrued and unpaid Yield Taxes as reflected on the Issuer's books and
records and (ii) additional known expenses reflected on a schedule prepared
by the Issuer. Compared the Services Fee included in clause (ii) of this
Item 2 to the amount payable under the New Services Agreement, including
recomputation of the adjustment provided in Section 5.1(a) of the New
Services Agreement.
3. Compared the Trustee's, Collateral Agent's and Liquidity
Providers' Expenses to the amounts payable under the fee agreement between
the Trustee and the Issuer, the fee agreement between the Collateral Agent
and the Issuer and the Line of Credit Agreement, respectively.
4. Recomputed the Required Liquidity Amount. Compared the
opening balance in the Liquidity Account to amounts reflected on bank
statements from the Trustee. Recomputed the amount required to be
deposited to or released from the Liquidity Account and compared the amount
deposited or released to such recomputed amount. Recomputed the amount of
deposit with respect to the Line of Credit Agreement as provided in clause
(vi) of Section 5.3(c) of the Indenture and compared the amount deposited
to the Payment Account in respect of clause (vi) of Section 5.3(c) of the
Indenture to such recomputed amount. [This Item 4 is applicable only if
there is a Termination Advance under a Line of Credit Agreement which has
not been replaced.]
5. Recomputed the Targeted Monthly Deposit Amount and compared
the amount deposited to the Payment Account in respect of the Targeted
Monthly Deposit Amount to such recomputed amount.
6. Recomputed the Premium Provision and compared the amount
deposited to the Payment Account in respect of the Premium Provision to
such recomputed amount.
7. Recomputed the interest and principal payment to the Liquidity
Providers pursuant to clause (vi) of Section 5.3(c) and compared the amount
withdrawn from the Collection Account in respect thereof to such recomputed
amount.
8. Made inquiries of Responsible Officers of the Issuer as to
whether or not a Cash Retention Event or Trapping Event existed on (or a
Line of Credit Acceleration occurred prior to) such Monthly Deposit Date.
9. Recomputed the amount of Excess Funds. If the Monthly Trustee
Certificate reflected any Additional Liquidity Provider Fees or
Supplemental Liquidity Provider Interest owing, recomputed the amount
thereof and compared such recomputed amount to the amount withdrawn from
the Collection Account in respect thereof. If any Section 6.1 Notes were
in existence on such Monthly Deposit Date, recomputed the amount of Excess
Funds as if such Section 6.1 Notes were cash, and compared the amount of
such recomputed Excess Funds (based on such assumption) to the amount of
such Section 6.1 Notes. Compared the amount released to the Issuer (or, if
any Section 6.1 Notes were in existence, the sum of the amount released to
the Issuer and the face amount of and accrued interest on such Section 6.1
Notes distributed to the Issuer) to such recomputed amounts. Compared the
amount, if any, paid by Pacific Lumber to the Issuer in respect of any
Section 6.1 Notes to such recomputed amounts.
10. Reviewed the Monthly Production reports delivered by Pacific
Lumber pursuant to the New Master Purchase Agreement for the Monthly
Periods for which Monthly Trustee Certificates were reviewed. Compared the
net Scribner scale production data in the Monthly Production Reports to a
schedule prepared by Pacific Lumber. Recomputed the Mbfe production data
in the Monthly Production Reports. Compared the Mbfe production data in
each Monthly Trustee Certificate to the Mbfe production data in the related
Monthly Production Report.
II. Note Payment Trustee Certificate Procedures.
1. Compared the opening balances in the Liquidity Account and the
Payment Account to amounts shown on bank statements of the Trustee.
2. Recomputed the amount required to be deposited to or released
from the Liquidity Account and deposited to the Payment Account in respect
thereof to such recomputed amount. [This Item 2 is applicable only if
there is a Termination Advance under a Line of Credit Agreement which has
not been replaced.]
3. Compared the amount indicated in the Note Payment Certificate
as an optional deposit to the Payment Account to amounts shown on bank
statements of the Trustee.
4. Recomputed the amounts of interest (including interest on past
due principal and interest but excluding interest on Premium) payable on
the Timber Notes and to the Liquidity Providers and compared the amount
withdrawn from the Payment Account in respect thereof to such recomputed
amount.
5. Recomputed the Minimum Principal Amortization Amount and
compared the amount withdrawn from the Payment Account in respect thereof
to such recomputed amount.
6. Recomputed the Line of Credit Amortization Amount, if any, and
compared the amount withdrawn from the Payment Account in respect thereof.
[This Item 6 is applicable only if there is a Termination Advance under a
Line of Credit Agreement which has not been replaced.]
7. Recomputed the Depletion Amortization Amount and compared the
amount withdrawn from the Payment Account in respect thereof to such
recomputed amount.
8. Recomputed the Required Liquidity Amount (after giving effect
to principal payments being made on such date). Recomputed the amount, if
any, required to be deposited to the Liquidity Account and compared the
amount deposited to the Liquidity Account from the Payment Account to such
recomputed amount. [This Item 8 is applicable only if there is a
Termination Advance under a Line of Credit Agreement which has not been
replaced.]
9. Recomputed the amount of interest on Premium payable on the
Timber Notes and compared the amount withdrawn from the Payment Account in
respect thereof to such recomputed amount.
10. Recomputed the Premium payable on the Timber Notes and
compared the amount withdrawn from the Payment Account to such recomputed
amount.
11. Made inquiries of Responsible Officer's of the Issuer as to
whether or not a Cash Retention Event or a Trapping Event existed on such
Note Payment Date.
12. Recomputed the amount distributable pursuant to clause (ix) or
(x) of Section 5.7(b). Compared the amounts distributed pursuant to such
clauses to such recomputed amount.
III. General Provisions
1. Terms used but not defined in this Annex C shall have the
meaning set forth in Schedule A to the Indenture.
2. This Annex C may be modified by the Issuer, the independent
accountants and the Trustee if (i) such modification has been approved by a
resolution of the Board of Managers of the Issuer, including all
Independent Managers and (ii) either (A) such modification is (1) to cure
any ambiguity, omission, defect or inconsistency in the agreed upon
procedures, or to add additional procedures or (2) is necessary to take
account of the issuance of Additional Timber Notes (provided, that no such
modification may adversely affect the interests of Noteholders) or (B) such
modification shall have received Rating Agency Approval and (iii) the
Issuer shall have delivered to the Trustee an Officer's Certificate as to
compliance with the preceding clauses (i) and (ii).
<PAGE>
EXHIBIT B-2
TO INDENTURE
FORM OF REPORT OF
INDEPENDENT ACCOUNTANTS
[Letterhead of Accountants]
__________, ______
State Street Bank and Trust Company
as Trustee under the Indenture
referred to below
Two International Place, 4th Floor
Boston, Massachusetts 02110
Scotia Pacific Company LLC
P.O. Box 712
Scotia, California 95565
Ladies and Gentlemen:
This letter is delivered pursuant to Section 4.6(a) of the
Indenture dated as of July 20, 1998 (as amended, supplemented and otherwise
modified and in effect on the date of this letter, the "Indenture") between
Scotia Pacific Company LLC, a Delaware limited liability company (the
"Issuer"), and State Street Bank and Trust Company, as trustee (the
"Trustee").
We confirm that we are independent public accountants with respect
to the Issuer, within the meaning of the Securities Act of 1933 and the
Securities Act of 1934 and the applicable rules and regulations thereunder.
We have audited, in accordance with generally accepted auditing
standards, the balance sheet of the Issuer as of December 31, ____ [insert
last day of most recent fiscal year] and the related statements of
operations, cash flows and changes in members' capital for the year then
ended [describe period covered] [date of most recent audited balance sheet]
and have issued our report thereon dated __________, ____.
In connection with out audit, nothing came to our attention that
caused us to believe that the Issuer was not in compliance with any of the
terms, covenants, provisions or conditions of Section 7.1 of Article Seven
of the Indenture, insofar as they relate to accounting matters, [except as
described below]. However, our audit was not directed primarily toward
obtaining knowledge of such noncompliance.
[describe exceptions, if any]
This letter is intended solely for the management of the Issuer and
the Trustee and shall not be used for any other purposes. We have no
responsibility to update this report to reflect any events or circumstances
occurring after the date of this letter. We also understand that the
Issuer will be providing a copy of this letter to various Rating Agencies
pursuant to Section 4.6(a) of the Indenture. Our work was specifically
performed to satisfy the requirements of the Indenture, and accordingly, we
make no representation regarding the sufficiency of the procedures
performed for the Rating Agencies' purposes. Distribution of this letter
to the Rating Agencies does not establish any privity between our Firm and
them.
Very truly yours,
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, 34th Floor
Los Angeles, California 90071
Attention: Howard N. Weinberg
- ---------------------------------------------------------------------------
DEED OF TRUST, SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PROCEEDS
Dated July 20, 1998
From
SCOTIA PACIFIC COMPANY LLC
(Trustor and Debtor)
Mailing Address:
P.0. Box 712
Scotia, California 95565
To
FIDELITY NATIONAL TITLE INSURANCE COMPANY
(Deed of Trust Trustee)
Mailing Address:
17911 Von Karman Avenue, Suite 300
Irvine, California 92614
Attn: Senior Underwriter
For the Benefit of
STATE STREET BANK AND TRUST COMPANY
(Beneficiary and Collateral Agent
for the Secured Parties)
Mailing Address:
Two International Place, 4th Floor
Boston, MA 02110
Attn: Corporate Trust Administration
(Scotia Pacific Company LLC - Timber Collateralized Notes)
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
[ATTENTION OF RECORDING OFFICERS: This instrument is a Deed of Trust and
Assignment of both real and personal property and is, among other things, a
Security Agreement, Financing Statement and Fixture Filing under the
Uniform Commercial Code. This instrument covers timber, among other
things. This instrument creates a lien on rights in, or relating to, lands
of the Trustor, Pacific Lumber Company, Salmon Creek Corporation and City
Garbage of Eureka that are described in the Real Property Description (as
set forth in Exhibit A to this instrument) and, where applicable, is to be
indexed with respect to all lands described in said Real Property
Description.]
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I--DEFINITIONS 3
Section 1.1 Certain Defined Terms 3
Section 1.2 Certain References 3
ARTICLE II--ASSIGNMENT OF PROCEEDS 3
Section 2.1 Assignment 3
Section 2.2 Certain Covenants of the Trustor 4
Section 2.3 Assigned Proceeds Paid to the Trustor 5
Section 2.4 Trust Funds 6
Section 2.5 Cumulative Rights 6
Section 2.6 Funds Received 6
ARTICLE III--SECURITY AGREEMENT 7
Section 3.1 Grant of Security Interest 7
Section 3.2 Certain Covenants of the Trustor 7
ARTICLE IV--CONDEMNATION AND CASUALTY LOSS 10
Section 4.1 Condemnation 10
Section 4.2 Casualty Loss 11
ARTICLE V--CERTAIN RELEASES 12
Section 5.1 Dispositions With Express Release 12
Section 5.2 Dispositions Without Express Release 13
ARTICLE VI--REPRESENTATIONS AND WARRANTIES 15
Section 6.1 Representations and Warranties 15
Section 6.2 Warranties Survive 19
ARTICLE VII--COVENANTS 20
Section 7.1 Affirmative Covenants 20
Section 7.2 Negative Covenants 28
Section 7.3 Covenants Survive 28
Section 7.4 Obligations of the Services Provider under
the New Services Agreement 29
ARTICLE VIII--REMEDIES; POWER OF SALE 29
Section 8.1 Events of Breach 29
Section 8.2 Right to Cure 29
Section 8.3 Power of Sale; Foreclosure 30
Section 8.4 Bid at Sale 33
Section 8.5 Sale of Mortgaged Property; Application
of Proceeds 33
Section 8.6 Right to Possession 35
Section 8.7 Remedies Cumulative 37
Section 8.8 Non-Waiver 37
Section 8.9 Power of Attorney 38
Section 8.10 Voluntary Appearance; Receivers 38
Section 8.11 Retention of Possession 39
Section 8.12 Suits by Collateral Agent 39
Section 8.13 Waiver of Certain Rights 39
Section 8.14 Limitation on Indemnities 40
ARTICLE IX--THE DEED OF TRUST TRUSTEE 40
Section 9.1 Certain Rights of the Deed of Trust Trustee 40
Section 9.2 Compensation and Indemnity 41
Section 9.3 Removal or Substitution of the
Deed of Trust Trustee 41
ARTICLE X--MISCELLANEOUS 43
Section 10.1 Severability 43
Section 10.2 Captions 43
Section 10.3 Service of Notices and Demands 43
Section 10.4 Governing Law; Submission to Jurisdiction;
Waiver of Objection to Venue 44
Section 10.5 Effect of Other Security, Releases 44
Section 10.6 No Election of Remedies 45
Section 10.7 Binding Effect; Collateral Agent 45
Section 10.8 Amendments 45
Section 10.9 General Provisions as to Certificates
and Opinions 47
Section 10.10 Certificates and Opinions as Conditions
Precedent 49
Section 10.11 Recordation 49
Section 10.12 Partial Releases 50
Section 10.13 Counterpart Execution 50
Section 10.14 Limitations on Bankruptcy Petition Against
the Trustor 50
Section 10.15 Attorneys' Fees 50
Section 10.16 Entire Agreement 50
Section 10.17 When Timber Notes Disregarded 50
Section 10.18 No Recourse Against Others 50
Section 10.19 Benefits of Deed of Trust 51
Section 10.20 Indenture 51
Schedule A Definitions
Exhibit A Real Property Description
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PROCEEDS
THIS DEED OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE
FILING AND ASSIGNMENT, dated as of July 20, 1998 (herein, together with all
amendments and supplements hereto, called this "Deed of Trust"), is made by
Scotia Pacific Company LLC, a Delaware limited liability company, having an
address at P.O. Box 712, 125 Main Street, Second Floor, Scotia, California
95565 (herein, together with any entity succeeding thereto by merger,
consolidation or acquisition of its assets substantially as an entirety,
called the "Trustor"), to Fidelity National Title Insurance Company, a
California corporation, having an address at 17911 Von Karman Avenue Suite
300, Irvine, California 92614 Attn: Senior Underwriter (herein, together
with its successors and assigns, called the "Deed of Trust Trustee"), as
trustee, for the benefit of State Street Bank and Trust Company, a
Massachusetts trust company, having an office at Two International Place,
4th Floor, Boston, MA 02110, Attn: Corporate Trust Administration (Scotia
Pacific Company LLC Timber Collateralized Notes) (herein, together with its
successors and assigns, called the "Collateral Agent"), as beneficiary
hereunder and collateral agent for the benefit of the Secured Parties.
W I T N E S S E T H:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that the Trustor, in
consideration of the premises and to secure the Secured Obligations
hereinafter set forth, and for other good and valuable consideration
(including, without limitation, the extensions of credit to the Trustor
evidenced by the Timber Notes, any Additional Timber Notes, the Line of
Credit Agreement), the receipt and sufficiency of which are hereby
acknowledged, has bargained, sold, granted, mortgaged, warranted, conveyed,
transferred and assigned, and by these presents does hereby covenant,
agree, grant, warrant, bargain, sell, convey, assign, transfer, mortgage,
pledge, set over and confirm unto the Deed of Trust Trustee, and its
successors and assigns forever, in trust with the power of sale and right
of entry, for the benefit and security of the Collateral Agent, as
collateral agent for the Secured Parties, all of Trustor's estate, right,
title and interest in, to and under any and all of the Mortgaged Property,
whether now owned or hereafter acquired.
TO HAVE AND TO HOLD the Mortgaged Property, unto the Deed of Trust
Trustee and its successors and assigns, IN TRUST FOREVER, with power of
sale and right of entry, upon the terms and trusts herein set forth, for
the benefit and security of the Collateral Agent, as collateral agent for
the Secured Parties, and each of them, in accordance with the terms of this
Deed of Trust; and the Trustor does hereby bind itself and its successors,
assigns and judicially appointed legal representatives to warrant and
forever defend title to all and singular the Mortgaged Property unto the
Deed of Trust Trustee and the Collateral Agent against every Person
whomsoever lawfully claiming or to claim the same, or any part thereof,
subject only to Permitted Encumbrances.
PROVIDED, and these presents are upon the condition, that if the
Trustor shall perform and pay or cause to be performed and paid, in full,
or shall provide, as provided in Section 13.1 (Discharge) or Article 8
(Defeasance or Covenant Defeasance) of the Indenture and as provided in the
Line of Credit Agreement, for the payment or performance in full of the
Secured Obligations, then this Deed of Trust and the lien of this Deed of
Trust and the estate and rights hereby granted shall cease, terminate, be
void and be of no further effect and shall be released at the Trustor's
cost and expense; provided that the Trustor's obligation to indemnify and
hold harmless the Deed of Trust Trustee and the Collateral Agent (and their
respective agents, successors and assigns) and the Secured Parties pursuant
to the provisions hereof shall survive any such termination.
FOR THE PURPOSE OF SECURING the payment or performance in full when
due, whether at stated maturity, by acceleration or otherwise, of all
indebtedness, liabilities and obligations of Trustor whether now existing
or hereafter arising, under, with respect to, or in connection with any of
the following (collectively, the "Secured Obligations"):
(a) the indebtedness evidenced by the Timber Notes and any
Additional Timber Notes (including, without limitation, all payments of
principal of, premium or interest on and any other amounts owing with
respect to the Timber Notes and any Additional Timber Notes);
(b) the indebtedness evidenced by the Line of Credit Agreement
(including, without limitation, all payments of principal of, premium or
interest on and any other amounts owing with respect to the Line of Credit
Agreement);
(c) any and all amounts, indebtedness, liabilities, covenants,
agreements and obligations arising, or for which or for the performance of
which the Trustor may become indebted or obligated, under or pursuant to
the provisions of this Deed of Trust, the Timber Notes, any Additional
Timber Notes, the Line of Credit Agreement, or the Indenture (including,
without limitation, all obligations to pay costs and expenses as provided
herein); and
(d) any and all renewals, amendments, substitutions,
replacements, rearrangements and extensions of any of the foregoing items.
The initial principal amount of obligations secured by this Deed of
Trust is Nine Hundred Thirty Million Seven Hundred and Eighty Nine Thousand
Five Hundred Dollars ($930,789,500.00). As provided above, this Deed of
Trust secures all future advances and obligations constituting Secured
Obligations. The total amount of Secured Obligations may decrease or
increase from time to time.
ARTICLE I--DEFINITIONS
Section 1.1 Certain Defined Terms. Each term defined in
Schedule A attached hereto is incorporated herein by reference and shall,
when used herein, unless the context otherwise requires, have the meaning
therein specified, with such definition to be applicable to the masculine,
feminine and neuter gender, and the singular and the plural forms of such
term.
Section 1.2 Certain References. All references in this Deed
of Trust to an "Article" or "Section" shall be to an Article or Section of
this Deed of Trust, unless the context otherwise requires. Unless the
context otherwise requires, the words "this Deed of Trust", "hereof,"
"hereunder," "herein," "hereby" and words of similar import shall refer to
this Deed of Trust as a whole and not to a particular Article, Section,
clause or other subdivision hereof. The term "Trustor" as used herein
shall include not only Scotia Pacific Company LLC, but also its successors,
judicially appointed legal representatives and assigns.
ARTICLE II--ASSIGNMENT OF PROCEEDS
Section 2.1 Assignment. Without limiting any of the other
provisions of this Deed of Trust, additionally to secure the payment or
performance when due of the Secured Obligations and to provide an
additional means of paying the Secured Obligations, the Trustor, effective
as of the date hereof, has assigned, transferred, pledged, granted, set
over and conveyed, absolutely and unconditionally, and does hereby assign,
transfer, pledge, grant, set over and convey, absolutely and
unconditionally, primarily and on parity with all other Mortgaged Property,
and not secondarily, unto the Collateral Agent, as collateral agent for the
Secured Parties, all of the Trustor's right, title and interest in and to
all the following (collectively, the "Assigned Proceeds"):
(a) all Harvested Timber and all Proceeds now or hereafter
receivable, owing, deliverable or otherwise attributable to, from or on
account of any of the Company Timber;
(b) all Proceeds now or hereafter receivable, owing,
deliverable, performable or otherwise attributable to, from or on account
of the rights, titles and interests of the Trustor under the Subject
Contracts;
(c) the Accounts and all monies, investments and securities
from time to time held by the Collateral Agent in any Account under the
terms of this Deed of Trust or the Indenture, all interest and Proceeds
derived from such monies, investments and securities and all the Trustor's
rights in any monies held in any Account;
(d) the right, power and authority to make claim and demand
for and receive performance and payment on, under or pursuant to any of the
Subject Contracts, to bring actions and proceedings thereunder for the
enforcement thereof and to exercise all remedies, powers, privileges and
options and to do any and all things that the Trustor is or may become
entitled to do under the Subject Contracts;
(e) (i) all rents, issues, profits, revenues, royalties,
bonuses, rights and benefits due, payable or accruing, including, without
limitation, all amounts payable pursuant to any Purchase Agreement or Lump
Sum Sale or Pay-As-You-Harvest Sale, all deposits of money as advance rent,
for security or as earnest money or a down payment for the purchase of all
or any part of the Company Timber, under any and all present and future
leases, contracts or other agreements related to the harvesting, ownership,
occupancy or use of the Company Owned Timberlands or the Company Timber
Rights (collectively, the "Agreements"), and (ii) all such Agreements; and
(f) all other Proceeds now or hereafter receivable, owing,
deliverable, performable, produced, processed or otherwise attributable to,
from, under or on account of any of the Mortgaged Property.
Collateral Agent hereby grants to the Trustor the right, except
that such right may be suspended by written notice from the Collateral
Agent to the Trustor given during the continuance of a Trapping Event, to
demand, collect, receive and perform the Assigned Proceeds as and when the
same become due and payable, to endorse and deposit any checks and drafts
payable to the Trustor received from or in connection with the Assigned
Proceeds and to execute any direction, certificate, release, receipt,
payment order, transfer order, relinquishment or other instrument that may
be required, necessary or appropriate to collect and receive the Assigned
Proceeds. Notwithstanding the foregoing, the existence of the foregoing
right in favor of Trustor shall not operate to subordinate this assignment
to any subsequent assignment, in whole or in part, by Trustor, and any such
subsequent assignment shall be subject to the rights of the Deed of Trust
Trustee and Collateral Agent under this Deed of Trust.
Section 2.2 Certain Covenants of the Trustor. The Trustor
covenants and agrees with the Deed of Trust Trustee and the Collateral
Agent as follows:
(a) Trustor shall execute such assignments of the Assigned
Proceeds as Collateral Agent from time to time may reasonably request in
order to effect the provisions of Section 2.1.
(b) During the continuance of a Trapping Event, after
notice from the Collateral Agent to the Trustor, the Trustor hereby
irrevocably authorizes and directs all Assigned Proceeds Obligors, upon
receipt by them of written notice from the Collateral Agent (with a copy to
the Trustor), to pay, perform and deliver all Assigned Proceeds directly to
the Collateral Agent at the Collateral Agent's address referred to in the
preamble hereof or to such other location as the Collateral Agent may from
time to time direct. All orders, receipts and other instruments that the
Collateral Agent may from time to time execute and deliver for the purpose
of collecting or giving receipt for such Assigned Proceeds may be relied
upon in all respects by all Assigned Proceeds Obligors and the same shall
be binding upon the Trustor. No Assigned Proceeds Obligor paying,
performing, or delivering any Assigned Proceeds to the Collateral Agent
pursuant to the written directions of the Collateral Agent shall have any
responsibility to review the application of any Assigned Proceeds paid,
performed or delivered to the Collateral Agent but shall be fully protected
for the same.
(c) Without limiting any other provision of this Article
II, during the continuance of a Trapping Event, after notice from the
Collateral Agent to the Trustor,
(i) the Trustor shall promptly execute, upon demand by
the Collateral Agent, all necessary, convenient or appropriate instruments
(including, without limitation, transfer orders, and payment orders) as may
be requested by the Collateral Agent incident to having all Assigned
Proceeds paid, performed or delivered directly to the Collateral Agent;
(ii) the Collateral Agent is irrevocably authorized, to
collect, receive and give receipt for all such Assigned Proceeds; and
(iii) the Collateral Agent may bring suit against any
third party for collection of any Assigned Proceeds, either in its own name
or in the name of the Trustor.
Section 2.3 Assigned Proceeds Paid to the Trustor. Any
Assigned Proceeds Obligor may continue to pay, perform, and deliver
Assigned Proceeds on a current basis to the Trustor until such time as
written demand has been made upon such Assigned Proceeds Obligor by the
Collateral Agent (following notice to the Trustor from the Collateral Agent
during the continuance of a Trapping Event) that payment, performance, and
delivery of Assigned Proceeds be made directly to the Collateral Agent. The
failure to give any such notification shall not in any way waive the right
of the Collateral Agent to receive any payments, performance, and delivery
not theretofore paid, performed, or delivered to the Trustor before the
giving of written notice or affect or impair the security interest herein
granted in the Mortgaged Property, including, without limitation, the
Assigned Proceeds. In the event any Assigned Proceeds Obligor makes
payment, performance or delivery of Assigned Proceeds directly to the
Collateral Agent, and then, at the request of the Collateral Agent,
payment, performance and delivery of Assigned Proceeds are, for a period or
periods of time thereafter, made to the Trustor, the Collateral Agent shall
nevertheless have the right, effective upon written notice to such Assigned
Proceeds Obligor (following notice from the Collateral Agent to the Trustor
during the continuance of a Trapping Event) to require that future
payments, performance and delivery of Assigned Proceeds be again made to
the Collateral Agent.
Section 2.4 Trust Funds. If under any Subject Contract any
Assigned Proceeds are required to be paid directly to the Trustor by a
purchaser of Company Timber or other Assigned Proceeds Obligor so that
under such Subject Contract payment cannot be made directly to the
Collateral Agent (after the Collateral Agent has given the written notice
contemplated by Section 2.3 hereof) in the absence of foreclosure, or if
for any other reason any Assigned Proceeds are paid to the Trustor (after
the Collateral Agent has given the written notice contemplated by Section
2.3 hereof), then the Trustor's interest in all Assigned Proceeds under
such Subject Contract and in all other Assigned Proceeds that for any
reason may be paid to the Trustor, when received by the Trustor, shall
constitute trust funds in the Trustor's hands to be held by the Trustor
separate and apart from its other property (and the Trustor grants to the
Collateral Agent, as beneficiary for the benefit of the Secured Parties, a
security interest in all the Trustor's interest in such Assigned Proceeds)
and shall be immediately paid over to the Collateral Agent for deposit in
the appropriate Account.
Section 2.5 Cumulative Rights. Nothing herein contained shall
detract from or limit the absolute obligation of the Trustor to make
payment of or to perform when due the Secured Obligations, regardless of
whether the Assigned Proceeds are sufficient to pay the same, and the
rights, remedies and security provided under this Article II shall be
cumulative of all other rights, remedies and security of any and every
character now or hereafter existing under this Deed of Trust or otherwise
to secure the payment or performance when due of the Secured Obligations.
Section 2.6 Funds Received. The Collateral Agent shall
(except as otherwise provided in Section 7.7 of the Indenture) deposit into
the Collection Account all funds (i.e., cash, checks, wired funds, demand
deposits or other cash equivalents) received by the Collateral Agent from
any purchaser of Company Timber or other Assigned Proceeds Obligor.
ARTICLE III--SECURITY AGREEMENT
Section 3.1 Grant of Security Interest. Without limiting any
of the other provisions of this Deed of Trust and additionally to secure
the payment or performance when due of the Secured Obligations, and
cumulative of any and all other rights and remedies herein provided, the
Trustor, as debtor, hereby expressly grants to the Collateral Agent for the
benefit of the Secured Parties, a security interest in and to all the
Collateral Mortgaged Property. To the extent any property covered by this
Deed of Trust consists of rights in action or personal property covered by
the Uniform Commercial Code, this Deed of Trust constitutes a security
agreement and financing statement and is intended upon recordation to
create a perfected security interest in such property in favor of the
Collateral Agent. This Deed of Trust also constitutes a security
agreement, fixture filing and financing statement pursuant to the Uniform
Commercial Code in the Official Records of Humboldt County, California with
respect to any and all fixtures included within the term Mortgaged
Property, including, without limitation, Company Timber to be cut, and with
respect to any goods or any other personal property that may now or
hereafter become fixtures, and is intended when recorded to create a
perfected security interest in such property in favor of the Collateral
Agent for the benefit of the Secured Parties.
Section 3.2 Certain Covenants of the Trustor. The Trustor
covenants and agrees with the Deed of Trust Trustee and the Collateral
Agent, for the benefit of the Secured Parties, that:
(a) In addition to any other remedies granted in this Deed
of Trust to the Deed of Trust Trustee and the Collateral Agent (including
specifically, but not limited to, the right to proceed against all the
Mortgaged Property, both real and personal property, in accordance with the
rights and remedies in respect of those portions of the Mortgaged Property
that are real property pursuant to Section 9-501(4) of the Uniform
Commercial Code), if a Trapping Event has occurred and is continuing and if
an Acceleration Event exists the Collateral Agent may proceed under the
Uniform Commercial Code as to all or any part of the Collateral Mortgaged
Property, and shall have and may exercise with respect to the Collateral
Mortgaged Property all the rights, remedies and powers of a secured party
under the Uniform Commercial Code, including, without limitation, the right
and power to sell, at one or more public or private sales, or otherwise
dispose of, lease or utilize the Collateral Mortgaged Property and any part
or parts thereof in any manner authorized or permitted under the Uniform
Commercial Code after default by a debtor, and to apply the Proceeds
thereof, first, to payment of any costs and expenses and attorneys' fees,
charges and disbursements thereby incurred by the Collateral Agent, and,
second (except as otherwise provided in Section 7.7 of the Indenture), as a
deposit to the Collection Account.
(b) If a Trapping Event has occurred and is continuing and
if an Acceleration Event exists, the Collateral Agent, after notice to the
Trustor, shall have the right, by any lawful means, to take possession of
the Collateral Mortgaged Property or any part thereof and to enter, in any
lawful manner, upon any premises where same may be situated for such
purpose and to take any lawful action deemed necessary or appropriate or
desirable by the Collateral Agent, at its option and in its discretion, to
repair, refurbish or otherwise prepare the Collateral Mortgaged Property
for sale, lease or other use or disposition as herein authorized.
(c) To the fullest extent permitted by law (except as
otherwise provided in this Deed of Trust or in the Indenture), the Trustor
expressly and irrevocably waives (i) any notice of sale or other
disposition of the Collateral Mortgaged Property, (ii) any other rights or
remedies of a debtor or formalities prescribed by law relative to (A) the
sale or disposition of the Collateral Mortgaged Property or (B) exercise of
any other right or remedy of the Collateral Agent existing if a Trapping
Event has occurred and is continuing and if an Acceleration Event exists,
and, to the extent any such notice is required and cannot be waived, the
Trustor agrees that to the fullest extent permitted by law, if such notice
is mailed or otherwise given to the Trustor in accordance with Section 10.3
hereof at least 10 days prior to the time of the sale or disposition, such
notice shall be deemed reasonable and shall fully satisfy any requirement
for giving of said notice.
(d) Without limiting the present assignment to the
Collateral Agent of Assigned Proceeds pursuant to Article II hereof, if a
Trapping Event has occurred and is continuing and if an Acceleration Event
exists, the Collateral Agent, after notice to the Trustor, is hereby
granted the express right, at its option, to transfer to itself or to its
nominee the Collateral Mortgaged Property, or any part thereof, to notify
any obligor or account debtor in respect of any Collateral Mortgaged
Property to make payment directly to the Collateral Agent and to receive
the Proceeds attributable or accruing thereto and to apply such Proceeds,
first, to payment of any costs and expenses and attorneys' fees, charges
and disbursements thereby incurred by the Collateral Agent, and, second
(except as otherwise provided in Section 7.7 of the Indenture), as a
deposit to the Collection Account. With respect to the Collateral
Mortgaged Property, the Trustor, for itself, its successors, assigns and
legal representatives, to the fullest extent permitted by law, hereby
expressly and specifically waives all rights to a marshaling of the assets
of the Trustor, including the Collateral Mortgaged Property, or to a sale
in inverse order of alienation.
(e) To the fullest extent permitted by applicable law, all
recitals in any instrument of assignment or any other instrument executed
by the Collateral Agent or made by the Collateral Agent incident to the
sale, transfer, assignment, lease or other disposition or utilization of
the Collateral Mortgaged Property or any part thereof hereunder and in
accordance herewith shall be full proof of the matters stated therein, no
other proof shall be requisite to establish full legal propriety of the
sale or other action or of any fact, condition or thing incident thereto,
and all prerequisites of such sale or other action and of any fact,
condition or thing incident thereto shall be presumed conclusively to have
been performed or to have occurred.
(f) If a Trapping Event has occurred and is continuing and
if an Acceleration Event exists, the Collateral Agent may, upon notice to
the Trustor require the Trustor to assemble such portion of the Collateral
Mortgaged Property as can be physically assembled without material damage
to such Collateral Mortgaged Property and make them available to the
Collateral Agent at a place to be reasonably designated by the Collateral
Agent. The Trustor shall be fully liable for all expenses of retaking,
holding, preparing for sale, lease or other use or disposition, selling,
leasing or otherwise using or disposing of the Collateral Mortgaged
Property that are incurred or paid by the Collateral Agent as authorized or
permitted hereunder, including, without limitation, all reasonable
attorneys' fees, charges and disbursements, all of which expenses and costs
shall constitute a part of the Secured Obligations.
(g) Certain of the Mortgaged Property is or may become
"fixtures" (as that term is defined in the Uniform Commercial Code) on the
real estate included in the Mortgaged Property, and this Deed of Trust upon
being filed for record in the real estate records shall operate also as a
financing statement upon such of the Mortgaged Property that are or may
become fixtures. This Deed of Trust covers Company Timber to be cut and
Harvested Timber, as well as Accounts resulting from the sale thereof, and
this Deed of Trust, upon being recorded in the real estate records, shall
operate also as a financing statement upon such of the Mortgaged Property
as constitute or may constitute Company Timber to be cut and Harvested
Timber, as well as accounts resulting from the sale thereof, in accordance
with Sections 9-402 and 9-403 of the Uniform Commercial Code. The Company
Timber subject to this Deed of Trust, including any Company Timber to be
cut and Harvested Timber, was grown, is now growing or is to be grown on
the land more particularly described in Exhibit A to this Deed of Trust.
The record owner of the Company Timber and the land described in Units 1
through 48 of Exhibit A is Scotia Pacific Company LLC, whose address is as
set forth on the cover page of this instrument. The record owner of the
land described in Units 50 through 66 of Exhibit A upon which some of the
Company Timber was grown, is now growing or is to be grown is The Pacific
Lumber Company, whose address is 125 Main Street, Scotia, California
95565. The record owner of the land described in Unit 67 of Exhibit A upon
which some of the Company Timber was grown, is now growing or is to be
grown is Salmon Creek Corporation, whose address is 125 Main Street,
Scotia, California 95565. The record owner of the land described in Unit
49 of Exhibit A upon which some of the Company Timber was grown, is now
growing or is to be grown is City Garbage of Eureka, whose address is 949
West Hawthorne St., Eureka, California 95501.
(h) Any copy of this Deed of Trust signed by the Trustor or
any photographic or other reproduction of this Deed of Trust may also serve
as a financing statement under the Uniform Commercial Code by the Trustor,
whose address is set forth in the preamble of this Deed of Trust, as
debtor, in favor of the Collateral Agent for the benefit of the Secured
Parties, as secured party, whose address is set forth in the preamble of
this Deed of Trust.
(i) The Collateral Agent is authorized to file, in
jurisdictions where this authorization will be given effect, a financing
statement signed only by the Collateral Agent covering the Collateral
Mortgaged Property. At the request of the Collateral Agent, the Trustor
will join the Collateral Agent in executing one or more financing
statements covering the Collateral Mortgaged Property pursuant to the
Uniform Commercial Code in form satisfactory to the Collateral Agent. The
Trustor will pay the cost of filing or refiling any such financing
statement (and any continuation statement relating thereto) and of filing
or refiling or recording or rerecording this Deed of Trust as a financing
statement in all public offices at any time and from time to time whenever
and wherever filing or recording of any financing statement or of this Deed
of Trust is deemed by the Collateral Agent to be necessary or desirable.
ARTICLE IV--CONDEMNATION AND CASUALTY LOSS
Section 4.1 Condemnation. If the Mortgaged Property, or any
part thereof, shall be condemned or taken for public use under the power of
eminent domain (excluding any sale to any governmental entity made pursuant
to the Headwaters Agreement [as defined in the Offering Memorandum] but
including any payment by a governmental entity in respect of an Agreement
Not to Cut and including the proceeds of any settlement, compromise or
adjustment between the condemning authority and Trustor and the proceeds
of any recovery by Trustor in any Takings Litigation) or if a settlement,
compromise or adjustment is consummated with the condemning authority, the
Collateral Agent shall be paid and shall have the right to demand and to
receive and give receipt for, in the name of the Trustor or in the name of
the Collateral Agent, all awards and damages for such taking of or injury
to the Mortgaged Property ("Condemnation Proceeds"). Upon receipt of
Condemnation Proceeds by the Collateral Agent, the Collateral Agent shall
deposit such funds into the Collection Account. Condemnation Proceeds,
together with any interest thereon, shall be transferred from the
Collection Account, on the next succeeding Monthly Deposit Date, as
follows:
(1) on receipt of an Officer's Certificate from the
Trustor, as directed in such Officer's Certificate to pay or
reimburse the Trustor (to the extent of such Condemnation
Proceeds) for any direct expenses incurred by the Trustor in
connection with such condemnation proceeding; and
(2) such proceeds, together with any interest earned
thereon, less any of such proceeds or interest earned thereon
distributed pursuant to clause (1), shall be included in the
Collection Account Disbursement Funds to be withdrawn from (or
reserved in) the Collection Account as part of the Collection
Account Disbursement on such Monthly Deposit Date in accordance
with the provisions of Section 5.3(c) of the Indenture.
Notwithstanding the foregoing provisions of this Section 4.1, except during
the continuance of an Event of Breach after notice from the Collateral
Agent to the Trustor, the Trustor may, in its discretion, settle,
compromise and adjust any and all claims or rights arising under or in
connection with any condemnation or eminent domain proceeding relating to
the Mortgaged Property, or any part thereof; provided, however, that the
proceeds of any such settlement, compromise or adjustment payable to
Trustor shall be paid to the Collateral Agent as contemplated by the
foregoing provisions of this Section 4.1. Nothing in the foregoing
paragraph shall be construed to limit the right of Trustor and its
affiliates, either before or after an Event of Breach, to make all
decisions concerning any settlement or compromise of any Takings Litigation
then pending.
Section 4.2 Casualty Loss. Should all or any portion of the
Mortgaged Property be destroyed, lost or damaged by an insured casualty, or
should insurance proceeds become payable to the Trustor for damage to or
loss or diminution in value of or income from any of the Mortgaged
Property, the Collateral Agent shall be paid and shall have the right to
collect, receive and give receipt for, in the name of the Trustor or the
Collateral Agent, any and all monies that may be payable to or collectable
by the Trustor upon any policy of insurance by reason of such damage, loss,
destruction or loss or diminution in value of or income from any of the
Mortgaged Property (including the proceeds of any settlement, compromise or
adjustment of any claim in respect of such insurance coverage). Upon
receipt of any such monies by the Collateral Agent, the Collateral Agent
shall deposit such funds into the Collection Account for distribution as
provided in the Indenture on the next succeeding Monthly Deposit Date. Such
proceeds, together with any interest earned thereon, shall be included in
the Collection Account Disbursement Funds to be withdrawn from (or reserved
in) the Collection Account as part of the Collection Account Disbursement
on such Monthly Deposit Date in accordance with the provisions of Section
5.3(c) of the Indenture. Notwithstanding the foregoing provisions of this
Section 4.2, except during the continuance of an Event of Breach after
notice from the Collateral Agent to the Trustor, the Trustor may, in its
discretion, settle, compromise and adjust any and all claims or rights
arising under or in connection with any insured casualty or any insurance
proceeds for damage to or loss or diminution in value of or income from any
of the Mortgaged Property, or any part thereof; provided, however, that the
proceeds of any such settlement, compromise or adjustment shall be paid to
the Collateral Agent as contemplated by the foregoing provisions of this
Section 4.2.
ARTICLE V--CERTAIN RELEASES
Section 5.1 Dispositions With Express Release. The Trustor
shall be permitted to do any of the following:
(a) sell or otherwise dispose of any Company Owned Timberlands
or Company Timber Rights only as provided in Section 6.1 of the Indenture
(including, without limitation, delivery by Trustor to Collateral Agent of
the Release Notice and satisfaction of all conditions set forth in Section
6.1 of the Indenture);
(b) enter into a Lump Sum Sale only as provided in Section 6.1
of the Indenture (including, without limitation, delivery by Trustor to
Collateral Agent of the Release Notice and satisfaction of all conditions
set forth in Section 6.1 of the Indenture);
(c) sell or otherwise dispose of any Pacific Lumber Timber
Rights Property only as provided in Sections 6.3 of the Indenture
(including, without limitation, delivery by Trustor to Collateral Agent of
the Pacific Lumber Timber Rights Property Release Notice and satisfaction
of all conditions set forth in Section 6.3 of the Indenture); and
(d) sell or otherwise dispose of Company Owned Timberlands (or
timber rights therein) or Company Timber Rights in exchange for Substitute
Timber Property, only as provided in Section 6.4 of the Indenture
(including, without limitation, delivery by Trustor to Collateral Agent of
the Release and Substitution Notice and satisfaction of all conditions set
forth in Section 6.4 of the Indenture).
Upon receipt of the notices required to be delivered pursuant to the
preceding sentence, the Collateral Agent shall direct the Deed of Trust
Trustee to release from the lien of this Deed of Trust (a) that portion of
the Company Owned Timberlands and/or the Company Timber Rights, as the case
may be, to be sold or otherwise disposed of as provided in this Section 5.1
and/or (b) the Company Timber to be cut pursuant to a Lump Sum Sale as
provided in this Section 5.1. Upon direction by the Collateral Agent, the
Deed of Trust Trustee shall execute and deliver to the Trustor, or to such
entity as the Trustor shall direct, any and all instruments reasonably
required to release and to evidence the release of such Company Owned
Timberlands, Company Timber Rights and/or Company Timber.
Section 5.2 Dispositions Without Express Release. In addition
to its rights under Sections 6.2 and 6.3 of the Indenture, the Trustor
shall have the right from time to time to do any of the following (except
that such right may be suspended by written notice from the Collateral
Agent to the Trustor given during the continuance of a Trapping Event)
without any release from or consent by the Collateral Agent, but subject to
compliance with all requirements, terms and conditions of this Section 5.2:
(a) Sell portions of the Company Owned Timberlands or
Company Timber Rights; provided that (i) the aggregate Mbfe of Company
Timber on Company Owned Timberlands, or subject to Company Timber Rights,
sold pursuant to this clause (a) shall not exceed 2,000 Mbfe and (ii) all
sales of Company Owned Timberlands or Company Timber Rights pursuant to
this clause (a) shall be for money which shall be, forthwith upon its
receipt by the Trustor, deposited in the Collection Account and will be
included in Collection Account Disbursement Funds to be withdrawn from (or
reserved in) the Collection Account as part of the Collection Account
Disbursement on the next succeeding Monthly Deposit Date in accordance with
the provisions of Section 5.3(c) of the Indenture.
(b) Abandon, surrender, terminate, release or amend any
right-of-way, easement, boundary agreement, license, permit, franchise,
certificate of public convenience and necessity, lease or similar right or
privilege subject to the lien of this Deed of Trust if (i) such right or
privilege is no longer necessary for (x) the cutting, harvesting, severing,
sale, marketing or disposal of Company Timber or (y) compliance by the
Trustor with, and will not materially adversely affect the ability of the
Trustor to perform, its covenants and obligations under this Deed of Trust,
the Timber Notes, any Additional Timber Notes, the Line of Credit
Agreement, or the Indenture or (ii) in the case of an amendment, the
amendment of such right or privilege will not materially adversely affect
the ability of the Trustor to perform its covenants and obligations under
this Deed of Trust, the Timber Notes, any Additional Timber Notes, the Line
of Credit Agreement, or the Indenture; provided that any amended right or
privilege shall forthwith, without further action, become subject to the
lien of this Deed of Trust to the same extent as those previously existing.
If the Trustor shall receive any money or property as consideration or
compensation for such abandonment, surrender, termination, release or
amendment, such money or property shall be subjected to the lien of this
Deed of Trust and such money, forthwith upon its receipt by the Trustor,
except for De Minimus Receipts, shall be deposited in the Collection
Account and shall be included in the Collection Account Disbursement Funds
to be withdrawn from (or reserved in) the Collection Account as part of the
Collection Account Disbursement on the next succeeding Monthly Deposit Date
in accordance with the provisions of Section 5.3(c) of the Indenture.
(c) Abandon, surrender, terminate, release or amend any
Subject Contract, if the abandonment, surrender, termination, release or
amendment of such Subject Contract will not materially adversely affect the
ability of the Trustor to perform its covenants and obligations under this
Deed of Trust, the Timber Notes, any Additional Timber Notes, the Line of
Credit Agreement or the Indenture; provided that (i) all right, title and
interest of Trustor in and to any amended Subject Contract shall forthwith,
without further action, become subject to the lien of this Deed of Trust to
the same extent as those previously existing and (ii) if the Trustor shall
receive any money or property as consideration or compensation for such
abandonment, surrender, termination, release or amendment, such money or
property shall be subject to the lien of this Deed of Trust and such money,
forthwith upon its receipt by the Trustor, shall be deposited in the
Collection Account and shall be included in the Collection Account
Disbursement Funds to be withdrawn from (or reserved in) the Collection
Account as part of the Collection Account Disbursement on the next
succeeding Monthly Deposit Date in accordance with the provisions of
Section 5.3(c) of the Indenture. Notwithstanding the foregoing, amendments
to the New Master Purchase Agreement, the New Services Agreement, and the
Conveyance Documents shall be governed in accordance with Section 4.12 of
the Indenture.
(d) Sell, abandon or otherwise dispose of, or alter or
modify, any Data Processing Equipment, any other machinery, equipment or
other tangible personal property (other than Company Timber, to which other
provisions of this Deed of Trust apply), any fixtures or improvements now
or hereafter situated upon any part of the Company Owned Timberlands, any
Data Processing Information, any other information, programs, know-how,
methods, methodology, or other intangible personal property (other than the
Subject Contracts, to which Section 5.2(c) of this Deed of Trust applies,
and the Accounts, to which the provisions of the Indenture apply), if the
sale, abandonment or other disposition, or the alteration or modification,
of the same will not materially adversely affect the ability of the Trustor
to perform its covenants and obligations under this Deed of Trust, the
Timber Notes, any Additional Timber Notes or the Indenture; provided that
(i) all right, title and interest of the Trustor in any new, altered or
modified Mortgaged Property shall forthwith, without further action, become
subject to the lien of this Deed of Trust to the same extent as those
previously existing and (ii) if the Trustor shall receive any money or
property as consideration or compensation for such sale, abandonment or
other disposition, or alteration or modification, such money or property
shall be subject to the lien of this Deed of Trust and such money,
forthwith upon its receipt by the Trustor, shall be deposited in the
Collection Account and shall be included in the Collection Account
Disbursement Funds to be withdrawn from (or reserved in) the Collection
Account as part of the Collection Account Disbursement on the next
succeeding Monthly Deposit Date in accordance with the provisions of
Section 5.3(c) of the Indenture.
Subject to satisfaction of all of the "Release Conditions"
(defined below), the Collateral Agent (a) shall execute and deliver to the
Trustor, from time to time, if requested by the Trustor, a written
instrument confirming that the Trustor is entitled to take an action
permitted to be taken by the Trustor under this Section 5.2 and to release
any Mortgaged Property from the lien of this Deed of Trust as contemplated
by the provisions of this Section 5.2 and (b) shall instruct the Deed of
Trust Trustee to execute partial reconveyances of the applicable portions
of the Mortgaged Property to be released pursuant to Section 5.2 of this
Deed of Trust; provided, however, that nothing in this paragraph shall
require the Trustor to obtain any such instrument.
As used in this Deed of Trust, "Release Conditions" means, with
respect to the release of any portion of the Mortgaged Property, receipt by
Collateral Agent of all of the following: (i) a written application from
the Trustor requesting a written instrument confirming that the Trustor is
entitled to release such portion of the Mortgaged Property from the lien of
this Deed of Trust and specifying the action to be taken; (ii) all money
required to be deposited or paid to the Collateral Agent in connection with
such action by the Trustor; (iii) all supplements and other documentation
necessary to subject to the lien of this Deed of Trust any money,
additions, and other property received, made or acquired by the Trustor in
connection with such action; (iv) an Officer's Certificate from the Trustor
stating that said action was duly taken in conformity with a designated
provision of this Section 5.2; and (v) an Opinion of Counsel stating that
all conditions precedent and other requirements under this Deed of Trust
and under the Indenture relating to the taking of such action by the
Trustor have been complied with.
ARTICLE VI--REPRESENTATIONS AND WARRANTIES
Section 6.1 Representations and Warranties. The Trustor
represents and warrants as of the Closing Date to the Collateral Agent, for
the benefit of the Secured Parties, as follows:
(a) The chief executive office of the Trustor is, and all
material business records relating to the Mortgaged Property are located at
125 Main Street, Second Floor, Scotia, California 95565, except that
certain business records relating to the Mortgaged Property may be located
at 5847 San Felipe, Suite 2610, Houston, Texas 77057.
(b) The Trustor has the lawful authority under its
organizational documents and applicable law to execute and deliver this
Deed of Trust and, on the Closing Date, to grant, bargain, sell, mortgage,
pledge, assign, transfer and convey all the Mortgaged Property and all
rights, titles, interests, estates, remedies, powers and privileges
appurtenant or incident thereto, in the manner and form hereby done or
provided to be done herein.
(c) The Trustor has good and marketable fee simple title
to, and is lawfully possessed of, the Mortgaged Property, subject only to
(i) the lien of this Deed of Trust and (ii) Permitted Encumbrances. This
Deed of Trust creates and constitutes a valid and enforceable first
priority Lien on the Mortgaged Property, subject only to Permitted
Encumbrances.
(d) All payments and obligations due and payable or
performable at or prior to the Closing Date under or on account of the
Mortgaged Property have been duly paid, performed or provided for, except
in each case where the failure to do so would not have a Material Adverse
Effect. Except for Permitted Encumbrances, all Trustor Taxes due and
payable at or prior to the Closing Date have been duly paid, and all
returns and reports required under any Tax Law with respect thereto have
been duly and timely filed except where such failure would not have a
Material Adverse Effect.
(e) Each of the New Master Purchase Agreement, the New
Services Agreement, the Conveyance Documents, and each other material
Subject Contract is presently valid, existing and in full force and effect,
the Trustor has no knowledge of material default or claimed material
default thereunder, and the Trustor has no knowledge of any event or
circumstance that with notice or passage of time or both is likely to
constitute a material default thereunder. The Mortgaged Property is
currently being held, used, harvested, operated and maintained in
compliance in all material respects with the Subject Contracts.
(f) The Trustor is not in violation of, and the
consummation of the transactions contemplated by the Operative Documents do
not cause the Trustor or the Mortgaged Property to be, in violation of any
term of any agreement, instrument, Environmental Law, General Law or Timber
Law applicable to the Trustor or any part of the Mortgaged Property, or the
cutting, harvesting, severing, sale, marketing, disposal or other handling
of Company Timber, materials, products, wastes or other substances in, on,
from, or attributable to any of the Mortgaged Property, that, individually
or in the aggregate, has or is likely to have a Material Adverse Effect;
the execution, delivery and performance by the Trustor of this Deed of
Trust and the other Operative Documents executed and delivered by the
Trustor and compliance by the Trustor with each provision hereof and
thereof applicable to the Trustor does not (i) violate or conflict with or
constitute a default under any such term, the non-compliance with which
would have a Material Adverse Effect, or (ii) create any Lien (other than
the Lien of the Deed of Trust or Permitted Encumbrances) upon any of the
Mortgaged Property pursuant to any such term.
(g) The Company Timber, taken as a whole, is in good
condition, is (except for sub-merchantable Company Timber) marketable, and
is substantially free from pests, blight, fungus, disease or other
condition which would have a Material Adverse Effect, and, other than as
disclosed in the Offering Memorandum, the Company Timber has not been
subjected in any material respect to damage or injury due to fire or other
catastrophic events during the past five (5) years. The Mortgaged Property
has been maintained, operated, harvested and developed in all material
respects in accordance with sound forestry practices for properties of the
same nature.
(h) The execution, delivery and performance of this Deed of
Trust and the other Operative Documents executed and delivered by the
Trustor have been duly authorized by all necessary limited liability
company action on its part and on the part of its members; and this Deed of
Trust and other Operative Documents executed and delivered by the Trustor
have been duly and validly executed and delivered by the Trustor and each
constitutes the legal, valid and binding obligation of the Trustor,
enforceable in accordance with its terms, except as such enforceability may
be limited by (i) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Except for (A) the recording of this Deed of Trust and
filing and/or recording of related financing statements with or in the
appropriate recording filing offices (which shall be completed), and (B)
filing with the California Department of Forestry of a notice of transfer
and/or amendments to Pacific Lumber's Timber Harvesting Plans being
transferred to the Trustor (which shall be completed), no consent, approval
or authorization of or registration, qualification, designation,
declaration or filing with any Tribunal is required, and no consent,
approval, authorization, waiver or notification of creditors or other
nongovernmental Persons is required on the part of the Trustor (other than
those which have been obtained or made and other than those which may be
required under state securities or blue sky laws), as a condition to (a)
the offer, issue, sale and delivery by the Trustor of the Timber Notes and
any Additional Timber Notes or (b) the execution, delivery, and performance
by the Trustor of this Deed of Trust, the Line of Credit Agreement and the
other Operative Documents.
(i) Except as disclosed or referred to in the Offering
Memorandum, and except for Permitted Encumbrances, there are no claims,
demands, suits, actions, proceedings or investigations pending or, to the
Trustor's knowledge, information or belief, threatened before any Tribunal
that is likely to result in an impairment or loss of the Trustor's title to
any part of the Mortgaged Property or that is likely to have a Material
Adverse Effect on the Trustor's use, maintenance or operation of any of the
Mortgaged Property or the harvesting, cutting, severing, transportation or
marketing of any material amount of Company Timber.
(j) Except as disclosed or referred to in the Offering
Memorandum, including matters alleged in the existing Takings Litigation
and other similar allegations that may affect portions of the Mortgaged
Property to which the existing Takings Litigation does not currently
relate, the Trustor has no knowledge or notice of any Agreement Not to Cut
or any actual or threatened condemnation or taking by eminent domain
(whether permanent, temporary, whole or partial) of all or any part of any
Mortgaged Property or of any estate in the lands affected by any Mortgaged
Property.
(k) Except as disclosed or referred to in the Offering
Memorandum, there are no claims, demands, suits, actions, proceedings or
investigations with respect to the Trustor or the Mortgaged Property that
are likely to result in a judgment, decree or order having, individually or
in the aggregate, a Material Averse Effect.
(l) The Trustor is not an "investment company" or a company
"controlled" by a company required to register as an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(m) (i) Except as disclosed or referred to in the Offering
Memorandum, or in respect of matters which are not likely to have a
Material Adverse Effect, the Trustor is and has been in compliance in all
material respects with all Environmental Laws in connection with its
ownership and use of the Mortgaged Property and the harvesting, cutting,
severing and marketing of Company Timber and the disposal or handling of
any materials, products, wastes or other substances in, on, from or
attributable to the Mortgaged Property; (ii) except as disclosed or
referred to in the Offering Memorandum, or in respect of matters which are
not likely to have a Material Adverse Effect, the Trustor has not received
(from Governmental Authorities or private parties) any citations,
complaints, consent orders, compliance schedules or other similar
enforcement orders, or any other written notice or communication, that
indicates or alleges that the Company Owned Timberlands are or may be
subject to any response, remedial action, penalty or fine or is not or may
not be (or that Pacific Lumber on the effective date of its conveyance of
any Company Owned Timberlands to the Trustor was not or may not have been
with respect to any such Company Owned Timberlands) in material compliance
with any such Environmental Laws; and (iii) as of the Closing Date, except
for matters that have not had, and are not likely to have, a Material
Adverse Effect (including without limitation any Incidental Waste Disposal)
and any suspected or known Hazardous Materials Contamination on lands
retained by Pacific Lumber adjoining the Company Owned Timberlands, which
are set forth on Schedule 1 to the New Environmental Indemnification
Agreement, there were no current or past spills, discharges or releases of
gas, liquid or gaseous hydrocarbons or products therefrom, contaminants,
pollutants and/or Hazardous Materials from, affecting or in any way related
to the Company Owned Timberlands that had not been (i) remedied and cleaned
up in accordance with applicable Environmental Law to the satisfaction of
any Governmental Authorities requiring clean-up, (ii) disclosed in writing
to the Collateral Agent prior to the Closing Date and (iii) disclosed to
all appropriate Governmental Authorities if required under any
Environmental Law to be disclosed.
(n) Except for Hazardous Materials contained in commercial
products used in the ordinary course of business and which are stored, used
and disposed of in accordance with applicable Environmental Laws, (i) there
are no Hazardous Materials now located on, at, in or under any of the
Company Owned Timberlands or any part thereof which could have a Material
Adverse Effect; (ii) no part of any of the Company Owned Timberlands is
being used or, to the best of the Trustor's knowledge, has been used at any
previous time for the disposal, storage, treatment, processing or other
handling of any Hazardous Material nor is any part of any Company Owned
Timberlands affected by any Hazardous Materials Contamination, other than
(x) such as do not, individually or in the aggregate, have a Material
Adverse Effect, (including without limitation any Incidental Waste
Disposal) and (y) suspected or known Hazardous Materials Contamination on
lands retained by Pacific Lumber adjoining the Company Owned Timberlands,
which are set forth on Schedule 1 to the New Environmental Indemnification
Agreement; (iii) to the best knowledge and belief of the Trustor, no
property adjoining any Company Owned Timberlands is being used, or has ever
been used at any previous time, for the disposal, storage, treatment,
processing or other handling of any Hazardous Material nor is any property
adjoining any Company Owned Timberlands affected by Hazardous Materials
Contamination, other than (x) such as do not, individually or in the
aggregate, have a Material Adverse Effect (including without limitation any
Incidental Waste Disposal), and (y) suspected or known Hazardous Materials
Contamination on lands retained by Pacific Lumber adjoining the Company
Owned Timberlands, which are set forth on Schedule 1 to the New
Environmental Indemnification Agreement; (iv) each Disposal Site now being
used, or, to the best of the Trustor's knowledge, that has been used, is or
has been properly licensed to the extent required by law; and (v) no
administrative order, consent order and agreement, litigation, settlement
or, to the best of the Trustor's knowledge, investigation, with respect to
Hazardous Materials or Hazardous Materials Contamination is in existence
or, to the best of the Trustor's knowledge, proposed, threatened or
anticipated, with respect to any of the Company Owned Timberlands. No part
of any Company Owned Timberlands is currently on, and to the Trustor's
knowledge has ever been on, CERCLA's Information System or National
Priority's List, or any other Federal or State "Superfund" or "Superlien"
list. The Trustor has not received any notice that any Disposal Site is
currently on, and to the Trustor's knowledge has ever been on, CERCLA's
Information System or National Priority's List, or any other Federal or
State "Superfund" or "Superlien" list.
Section 6.2 Warranties Survive. Without limiting any other
provision of this Deed of Trust, all representations and warranties
contained in this Article VI shall survive the execution and delivery of
this Deed of Trust and any exercise of any power of sale or foreclosure
sale (whether judicial or nonjudicial) under this Deed of Trust or
conveyance in lieu of foreclosure, but shall terminate upon the repayment
in full of the Secured Obligations and the full and final release and
discharge of this Deed of Trust and any other instruments now or hereafter
securing the Secured Obligations.
ARTICLE VII--COVENANTS
Section 7.1 Affirmative Covenants. As further assurance with
regard to the Secured Obligations, the Trustor hereby covenants, warrants
and agrees in favor of the Collateral Agent, for the benefit of the Secured
Parties, as follows:
(a) The Trustor shall perform the Secured Obligations
required to be performed by the Trustor pursuant to this Deed of Trust and
shall pay when due the Secured Obligations under the Line of Credit
Agreement, the Timber Notes, any Additional Timber Notes and the Indenture
to be paid by the Trustor including, without limitation, the principal of,
and the interest due under the Timber Notes, any Additional Timber Notes
and the Line of Credit Agreement; all charges, fees and other sums to be
paid by the Trustor as provided in the Operative Documents, the principal
of and interest on any future advances secured by this Deed of Trust, and
the principal of and interest on any other indebtedness secured by this
Deed of Trust.
(b) The Trustor, except for any matters as would not have a
Material Adverse Effect, (i) shall keep the Collateral Mortgaged Property
in good condition and repair (ordinary wear and tear excepted); (ii) shall
comply with all laws, statutes, ordinances, regulations, covenants,
conditions and restrictions now or hereafter affecting the Collateral
Mortgaged Property or any part thereof or requiring any alterations or
improvements; (iii) shall not commit, or permit, any waste or deterioration
of the Collateral Mortgaged Property; and (iv) shall not commit, suffer or
permit any act to be done in or upon the Collateral Mortgaged Property in
violation of any law, ordinance or regulation except where such violation
would not have a Material Adverse Effect.
(c) The Trustor will, at the Trustor's own expense, record
and re-record, file and re-file and register and re-register this Deed of
Trust and every other instrument in addition and supplemental hereto that
may be required by applicable law in order to perfect and maintain the
priority of the lien, assignment and security interest created hereby, in
such manner and places and within such times as shall be necessary or
desirable to perfect and maintain the priority of such lien, assignment and
security interest and to preserve and protect the rights and remedies of
the Deed of Trust Trustee and the Collateral Agent hereunder, and will
furnish evidence of each such recording, filing and registration to the
Collateral Agent.
(d) Without affecting the Trustor's obligations under
Section 7.1(c) hereof, promptly following the request of the Collateral
Agent, the Trustor will, at its expense, correct any defect or error that
may be discovered in the contents of this Deed of Trust or in the execution
or acknowledgment hereof, and will execute and deliver such further
instruments and do such further acts and things as may be reasonably
requested by the Collateral Agent (i) to carry out more effectively the
purposes of this Deed of Trust, (ii) to subject to the lien, assignment and
security interests created hereby any of the Mortgaged Property, and (iii)
to perfect and maintain the priority of such lien, assignment and security
interests, subject only to Permitted Encumbrances, until such Mortgaged
Property is released by the Collateral Agent from the lien of this Deed of
Trust.
(e) The Trustor binds itself and its successors, assigns
and legal representatives to warrant and forever defend unto the Collateral
Agent and its successors and assigns, all the Mortgaged Property and any
portion thereof and to maintain the lien of this Deed of Trust on and in
the Mortgaged Property, free and clear of all defects, irregularities of
title, liens, security interests, charges or other encumbrances other than
(i) those created by this Deed of Trust and (ii) Permitted Encumbrances;
and if a Responsible Officer of the Trustor has knowledge that the title to
the Mortgaged Property or the lien of this Deed of Trust has been or is
being challenged, directly or indirectly, or if any legal proceedings are
instituted against the Trustor, the Collateral Agent or any past or present
Collateral Agent in connection with any such challenge, the Trustor will
promptly give notice thereof to the Collateral Agent and, at the Trustor's
cost and expense, will (i) diligently act to cure, or cause to be cured,
any defect with respect to Mortgaged Property that may have developed or be
claimed and that could reasonably be expected to have a Material Adverse
Effect and take all necessary and proper steps for the defense of the title
of the Collateral Agent to the Mortgaged Property and the lien of this Deed
of Trust thereon, (ii) subject to Section 8.14 hereof, indemnify and hold
the Collateral Agent and the past or present Collateral Agents harmless
from and against any and all losses suffered by any such indemnified Person
resulting from any failure of or defect in title (other than Permitted
Encumbrances) to the Mortgaged Property or the lien of this Deed of Trust,
(iii) take such legal action as is reasonably appropriate to the defense
thereof, including but not limited to, the employment of counsel, the
prosecution and defense of litigation and the compromise or release and
discharge of any adverse claims made and (iv) promptly give notice to the
Collateral Agent upon the Trustor's obtaining knowledge of any defect or
irregularity of title (other than Permitted Encumbrances) or any claim that
could give rise to a defect or irregularity of title (other than Permitted
Encumbrances).
(f) With such exceptions as do not, and are not likely to,
have a Material Adverse Effect, the Trustor will, at the Trustor's expense,
promptly take or cause to be taken all such action as is within its control
and may be reasonably required from time to time to enforce or secure the
observance or performance in all material respects of all terms, covenants,
agreements or conditions to be observed or performed by any third parties
under any material Subject Contract or other material instrument or
agreement, or any Environmental Law, General Law or Timber Law, applicable
to any of the Mortgaged Property, and, upon the occurrence and during the
continuance of a Trapping Event, upon the request of the Collateral Agent,
to exercise any of its rights, remedies, powers and privileges under any
such Subject Contract or other instrument or agreement or any Environmental
Law, General Law or Timber Law, all in accordance with the respective terms
thereof.
(g) The Trustor will, at the Trustor's expense, comply with
all Environmental Laws, General Laws and Timber Laws applicable to the
Trustor or the Mortgaged Property, the non-compliance with which would have
a Material Adverse Effect.
(h) At the Trustor's cost and expense, the Trustor will
perform, or the Trustor will arrange for the performance of, the services
(pursuant to the New Services Agreement or otherwise) consistent with the
standards set forth in Section 2.3 of the New Services Agreement as in
effect on the date hereof.
(1) the Trustor shall ensure that each contract for the
sale of Company Timber (other than (i) the New Master Purchase
Agreement and related log purchase agreements or (ii) any
agreements for Lump Sum Sales or Pay-As-You-Harvest Sales
pursuant to Sections 6.1 and 6.2 of the Indenture) shall (a)
permit verification by an independent third party or by the
Trustor of the scaling and measuring of the amount of Company
Timber or Harvested Timber sold in a manner substantially similar
to Section 6.3 of the Master Purchase Agreement; (b) expressly
state that such contract and all rights of the counterparty
thereunder are fully subordinate to this Deed of Trust; (c)
contain a non-petition agreement substantially similar to that
included in the Master Purchase Agreement; (d) contain provisions
substantially similar to Section 4.2 of the Master Purchase
Agreement; and (e) not contain provisions in violation of the
Indenture or this Deed of Trust. The Trustor shall, consistent
with good business practice, maintain orderly files relating to
each contract for the sale of Company Timber, correspondence and
other records, documents and papers pertaining to the Company
Timber and the operations and maintenance thereof. Upon request
of the Collateral Agent, the Trustor shall deliver to the
Collateral Agent copies, certified as true and correct by a
Responsible Officer of the Trustor, of all Purchase Agreements
with third parties then in effect that pertain to the sale of the
Company Timber.
(2) Unless and while the same constitutes a Permitted
Encumbrance, or unless non-payment is otherwise permitted by the
Indenture, the Deed of Trust, the Line of Credit Agreement or
other Operative Documents, or is not material, the Trustor shall
cause all liabilities of the Trustor incurred with respect to or
affecting the Mortgaged Property to be paid when due.
(3) Unless and while the same constitutes a Permitted
Encumbrance, the Trustor shall cause all Trustor Taxes to be paid
punctually before the same become delinquent, together with any
interest and penalty payable in connection therewith.
(4) The Trustor shall comply (in accordance with the terms
thereof) with any final order, judgment or other non-appealable
direction of any Tribunal requiring the removal, treatment or
disposal by the Trustor of any Hazardous Materials or Hazardous
Materials Contamination with respect or attributable to any of
the Mortgaged Property or any Disposal Site, and the Trustor
shall provide the Collateral Agent with satisfactory evidence of
such compliance.
The Trustor shall comply, or shall cause compliance with,
the covenants and agreements in paragraph (1) of this paragraph (h) in a
manner consistent in all material respects with prudent business practices,
determined in the reasonable judgment of Trustor, (i) which are consistent
with then current applicable industry standards, (ii) do not, individually
or in the aggregate, have a Material Adverse Effect and (iii) which are in
compliance, in all material respects, with applicable Timber Laws.
(i) The Trustor will insure and keep insured (or cause to
be insured or be kept insured) all of the material Mortgaged Property
(other than Company Timber and Harvested Timber) of an insurable nature in
accordance with prudent standards then being followed by other companies
engaged in the same or similar lines of business and in the same general
area; provided, without limiting the generality of the foregoing, the
Trustor will maintain or cause to be maintained: (i) comprehensive general
and automobile liability insurance against claims for personal injury,
death or property damage with limits of liability of not less than
$10,000,000 per occurrence and deductibles of up to $3,000,000 per
occurrence; and (ii) all such workers' compensation or similar insurance as
may be required by applicable laws, provided that the Trustor may self-
insure any or all workers' compensation liabilities.
To the extent that any of the insurance required by this
clause (i) ceases to be available at commercially reasonable rates, the
Trustor may maintain insurance coverage in accordance with the prudent
standards then being followed by other companies engaged in the same or
similar lines of business and in the same general area. In the event that
the Trustor wishes to effect replacement coverage pursuant to the preceding
sentence, it will (i) notify the Collateral Agent of such intent as soon as
reasonably practicable, and (ii) not less than five (5) Business Days prior
to the termination of the coverage for which replacement is to be made,
furnish the Collateral Agent with a report of the Trustor describing in
reasonable detail the nature of such replacement coverage and the reasons
why the Trustor believes that such replacement coverage is appropriate.
The Trustor shall deliver to the Collateral Agent evidence
of such policies of insurance together with all renewals thereof. Each
such casualty insurance policy shall provide by way of endorsements, riders
or otherwise that proceeds will be payable to the Collateral Agent, as its
interest may appear. The Trustor will cause the Collateral Agent to be
named as an additional insured under the public liability policies of the
Trustor, and each such policy will be endorsed to provide that the policy
shall not be canceled or materially changed by the insurer before the
expiration of 30 days, or 10 days in the event of nonpayment of premium,
after receipt by the Collateral Agent of written notice; and that the
Collateral Agent may, but shall not be obligated to, make premium payments
to prevent any such cancellation, or alteration, which payments will be
accepted by the insurer. In the event that the Collateral Agent makes any
such premium payments in order to avoid a lapse in insurance coverage
required hereunder, the Trustor shall promptly reimburse the Collateral
Agent therefor. Any such payment not reimbursed shall become part of the
Secured Obligations. Evidence of a renewal policy shall be furnished to
the Collateral Agent not less than 15 days prior to the expiration of the
initial or preceding renewal policy.
(j) At any and all reasonable times, upon request of the
Collateral Agent, the Trustor will permit the Collateral Agent or its
designated representatives to enter upon the Mortgaged Property or any part
thereof for the purpose of inspecting the condition and operation thereof.
(k) The Trustor shall, following any exercise of any power
of sale or any foreclosure sale of the Mortgaged Property pursuant to this
Deed of Trust, be a mere tenant at sufferance of the purchaser of the
property at said sale, and such purchaser shall be entitled to immediate
possession thereof, and, if the Trustor fails to vacate such property
immediately, such purchaser may and shall have the right to go into any
court of competent jurisdiction, and file an action to obtain possession of
such properties, which action shall lie against the Trustor as a tenant at
sufferance.
(l) The Trustor will, upon a Responsible Officer of the
Trustor having knowledge thereof, give the Collateral Agent prompt notice
of (i) any material casualty loss, notice of intended condemnation or
taking, condemnation or taking with respect to any of the Mortgaged
Property, (ii) the termination of any Purchase Agreement by any purchaser
of a material portion of the Company Timber, or any reduction or
renegotiation by any such purchaser of the sales price or the amount of the
Company Timber required to be purchased under any Purchase Agreement
relating to a material portion of the Company Timber, (iii) any inquiry or
proceeding of any Tribunal with respect to any Hazardous Material in, on,
from or attributable to any of the Mortgaged Property, (iv) the presence of
any Hazardous Materials Contamination with respect to or attributable to
any of the Mortgaged Property, in each case, in quantities which could have
a Material Adverse Effect, with a full description thereof, (v) every claim
or demand made or proceeding instituted by any Person that, individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect and (vi) the occurrence of any other event or circumstance that has
had or could reasonably be expected to have a Material Adverse Effect.
(m) The Trustor will pay all appraisal or consulting fees,
filing or recording fees, mortgage registration fees, Trustor Taxes,
abstract fees, landman and/or title examiner fees, attorneys' fees, charges
and disbursements and all other costs and expenses of every character
incurred by the Trustor in connection with the making, closing and
servicing of the Secured Obligations and will reimburse the Collateral
Agent for all expenses, including, without limitation, reasonable
attorneys' fees and court costs, incurred by it in enforcing or collecting
the Secured Obligations or otherwise in enforcing its rights under this
Deed of Trust. In the event that the Collateral Agent should pay directly
any such costs and expenses, the Trustor shall promptly reimburse the
Collateral Agent for all such sums reasonably incurred. Any such sums not
reimbursed shall become part of the Secured Obligations.
(n) Subject to Section 8.14 hereof, the Trustor shall
indemnify, protect, defend and hold the Collateral Agent, the Trustee, the
Deed of Trust Trustee and each present or past Collateral Agent, Trustee
and Deed of Trust Trustee, and their respective directors, officers,
employees, attorneys and agents (collectively referred to as the
"Indemnified Parties" in paragraphs (n) and (o) of this Section 7.1)
harmless from and against any and all liabilities (including, without
limitation, strict liability), actions, demands, orders, penalties, losses,
costs or expenses (including, without limitation, reasonable attorneys'
fees, charges and disbursements and remedial costs), suits, costs of any
settlement or judgement and claims of any and every kind whatsoever
(including, without limitation, those arising under CERCLA and similar
state statutes) that may now or in the future (whether before or after
payment in full of the Secured Obligations, whether before or after any
final and full release of this Deed of Trust, or whether before or after
any exercise of any power of sale, any foreclosure sale, judicial or non-
judicial, under this Deed of Trust or a conveyance in lieu of foreclosure)
be paid, incurred or suffered by or asserted against the Indemnified
Parties by any Person or entity or Tribunal for, with respect to, or as a
direct or indirect result of, the actual or threatened presence in, on or
under, or the actual or threatened escape, seepage, leakage, spillage,
discharge, emission or release from, any of the Mortgaged Property or any
Disposal Site, of any Hazardous Materials, or any Hazardous Materials
Contamination, or arising out of or relating to the applicability of any
Environmental Law relating to Hazardous Materials (including, without
limitation, any Federal, State or local so-called "Superfund" or
"Superlien" laws, statute, law, ordinance, code, rule, regulation, order or
decree), except to the extent that a court of competent jurisdiction shall
have made a final determination that such liability was caused by the gross
negligence or willful misconduct of such Indemnified Party and provided, in
the event of a foreclosure of this Deed of Trust or a conveyance by the
Trustor in lieu of foreclosure, such liability arises from events occurring
prior to such foreclosure or conveyance by deed in lieu.
(o) Subject to Section 8.14 hereof, without limiting any
other provision hereof, the Trustor further agrees to indemnify, protect,
defend and hold the Indemnified Parties harmless from and against any and
all liabilities (including, without limitation, strict liability), actions,
claims, judgments, demands, orders, costs, expenses, charges, suits, costs
of settlements or judgments and claims of any kind whatsoever (including,
without limitation, reasonable attorneys' fees, charges and disbursements)
incurred by or claimed, brought, rendered or charged against any
Indemnified Parties (either before or after payment in full of the Secured
Obligations, either before or after any final and full release of this Deed
of Trust, or either before or after any foreclosure sale, whether judicial
or nonjudicial, under this Deed of Trust or conveyance in lieu of
foreclosure) (1) under or by reason of this Deed of Trust or the exercise
of any rights or remedies hereunder in accordance with the terms hereof,
(2) resulting from claims by third parties to any Assigned Proceeds or
other payments received by any Indemnified Party in connection with the
Mortgaged Property, (3) by reason of any alleged obligations of Pacific
Lumber, Salmon Creek or the Trustor with respect to any of the Mortgaged
Property and/or (4) by reason of any violation or alleged violation by
Pacific Lumber, Salmon Creek or the Trustor of any General Laws or Timber
Laws; provided, however, that the foregoing indemnity shall not apply where
a court of competent jurisdiction shall have made a final determination
that such liability was caused by the gross negligence or willful
misconduct of the party or parties seeking indemnification. All amounts
paid by the Indemnified Parties in settlement, compromise, satisfaction or
discharge of any such claim, action or judgment, and all court costs,
attorneys' fees and other expenses of every character incurred by the
Indemnified Parties pursuant to and in accordance with the provisions of
paragraph (n) or this paragraph (o) shall be due and payable by the Trustor
on demand and shall become a part of the Secured Obligations secured by
this Deed of Trust.
(p) An Indemnified Party shall notify the Trustor promptly
of any claim for which it may seek indemnity pursuant to the provisions of
paragraphs (n) or (o). The Trustor shall have the right to defend the
claim, and such Indemnified Party shall cooperate in the defense. If the
Trustor does not defend such claim, such Indemnified Party may have
separate counsel and the Trustor shall pay the reasonable fees and expenses
of such counsel. The Trustor shall have no obligation to pay for any
settlement of any such claim made without its consent.
(q) The Trustor shall deliver to the Collateral Agent, and
the Collateral Agent shall deliver to the Trustor, copies of all
environmental inspection reports relating to Hazardous Materials obtained
by such party or for its benefit, or otherwise in such party's possession,
with respect to the Mortgaged Property. Each party shall maintain such
reports as confidential, unless disclosure is required by law, or unless
such information may become public other than as a consequence of such
party's actions, and except that such information may be provided to any
prospective purchaser of any of the Mortgaged Property.
(r) Commencing as soon as reasonably possible, and in no
event later than April 1, 1999, the Trustor shall maintain, on a quarterly
basis, a complete current copy of the GIS Data Processing Information at a
location with a third party approved by the Collateral Agent. Collateral
Agent hereby approves, as the party to hold such Data Processing
Information, the third party consultant retained from time to time by the
Trustor to advise the Trustor with respect to the GIS.
(s) The Trustor shall pay, or cause to be paid prior to
delinquency, all real property taxes and assessments, general and special,
and all other taxes and assessments, of any kind or nature whatsoever
relating to the Mortgaged Property, including, without limitation, non-
governmental levies or assessments such as maintenance charges, levies or
charges resulting from covenants, conditions and restrictions affecting the
Mortgaged Property, which are assessed or imposed upon the Mortgaged
Property, or become due and payable, and which create or may create a lien
upon the Mortgaged Property, or any part thereof (all of the above
hereinafter referred to, collectively, as "Impositions"); provided,
however, that if, by law, any such Imposition is payable, or may at the
option of the taxpayer be paid, in installments, Trustor may pay the same
or cause it to be paid, together with any accrued interest on the unpaid
balance of such Imposition, in installments as the same become due and
before any fine, penalty, interest or cost may be added thereto for the
nonpayment of any such installment and interest.
(t) If at any time after the date hereof there shall be
assessed or imposed (i) a tax or assessment on the Mortgaged Property in
lieu of or in addition to the Impositions otherwise payable by the Trustor
pursuant to clause (s) or (ii) a license fee, tax or assessment imposed on
Collateral Agent, a Secured Party, a Liquidity Provider or Deed of Trust
Trustee and measured by or based in whole (or in part) upon the amount of
the outstanding obligations secured hereby, or (iii) a license fee, tax or
assessment imposed on Collateral Agent, a Secured Party, a Liquidity
Provider or Deed of Trust Trustee because of Collateral Agent's or Deed of
Trust Trustee's interest in the Mortgaged Property, then all (or said part
of) such taxes, assessments or fees shall be deemed to be included within
the term "Impositions" as defined in clause (s) and the Trustor shall pay
and discharge the same as herein provided with respect to the payment of
Impositions. Anything to the contrary herein notwithstanding, the Trustor
shall have no obligation to pay any franchise, estate, inheritance, income,
excess profits or similar tax levied on Collateral Agent or Deed of Trust
Trustee.
Section 7.2 Negative Covenants. As further assurances with
regard to the Secured Obligations, the Trustor hereby covenants, warrants
and agrees in favor of the Collateral Agent, for the benefit of the Secured
Parties, as follows:
(a) The Trustor will not mortgage, pledge or hypothecate
the Mortgaged Property or any part thereof or any interest therein, except
for (i) Nonrecourse Timber Acquisition Indebtedness permitted by the
Indenture and (ii) the indebtedness referred to in Section 4.9(u) of the
Indenture.
(b) The Trustor will not, except for Permitted
Encumbrances, create, suffer or permit to exist any Lien or other
encumbrance of, on, in or affecting the Mortgaged Property, or any part
thereof or any interest therein.
(c) The Trustor will not permit removal of any Data
Processing Equipment unless (i) such removal would not have a Material
Adverse Effect or (ii) such removal is otherwise permitted by the terms of
this Deed of Trust.
Section 7.3 Covenants Survive. Without limiting any other
provision of this Deed of Trust, all representations, warranties, covenants
and indemnities contained in this Article VII (which representations,
warranties, covenants and indemnities are being made solely for the benefit
of the Trustee, the Collateral Agent, and the Secured Parties, and
expressly not for the benefit of any other successor owner of any of the
Mortgaged Property) shall survive any exercise of a power of sale or any
foreclosure sale (whether judicial or nonjudicial) under this Deed of Trust
or conveyance in lieu of foreclosure, and the indemnities contained in
Sections 7.1(n) and 7.1(o) hereof shall survive the repayment in full of
the Secured Obligations and the full and final release and discharge of
this Deed of Trust and other instruments securing the Secured Obligations.
Section 7.4 Obligations of the Services Provider under the New
Services Agreement. Notwithstanding any provision of this Deed of Trust
that provides that the Trustor shall be obligated to pay an expense or
perform an obligation, the Services Provider shall not be relieved from any
obligation that it may have under the New Services Agreement to pay such
expenses or perform such obligation (to the extent set forth in the New
Services Agreement), except to the extent provided therein.
ARTICLE VIII--REMEDIES; POWER OF SALE
Section 8.1 Events of Breach. If both (a) there is any "Event
of Default" as defined in Section 7.1 of the Indenture (after giving effect
to any applicable notice or grace periods provided in the Indenture),
including, without limitation, any such event caused by a failure to pay
when due any amount due under the Indenture or any installment of principal
of or interest on the Secured Obligations, and (b) there exists an
Acceleration Event (such combination of circumstances being referred to as
an "Event of Breach"), then, in addition to the other rights and remedies
set forth in this Article VIII, the Lien evidenced or created by this Deed
of Trust shall be subject to foreclosure in any manner provided for herein
or provided for by law.
Section 8.2 Right to Cure. Upon the occurrence and during the
continuance of an Event of Breach, the Collateral Agent, at its option and
without any obligation to do so, may take such action or tender such
performance or payment as may be required to cure the Event of Breach. All
amounts advanced by the Collateral Agent as aforesaid and all costs and
expenses incurred in taking such action or tendering such performance shall
be due and payable upon demand, shall become a part of the Secured
Obligations, and shall be fully secured by this Deed of Trust. Any amounts
so paid or costs or expenses incurred, as well as the time of payment
thereof, shall be deemed fully established by the affidavit or Certificate
of the Collateral Agent signed by a Responsible Officer of the Collateral
Agent and stating the action taken or the performance or payment made by
the Collateral Agent, the circumstances under which such action was taken
or such performance or payment made, that such action taken or performance
or payment made was in compliance with this Deed of Trust, the amount so
paid or costs or expenses incurred, as well as the time of payment thereof.
The taking of such action or the tendering of any such performance or
payment by the Collateral Agent shall not prevent the Trustee or any
Secured Party from declaring (in accordance with the terms of the
Indenture) the Secured Obligations to be due and payable under the
provisions of the Indenture, this Deed of Trust, the Timber Notes, any
Additional Timber Notes or the Line of Credit Agreement during the
continuance of an Event of Breach and pursuing any other remedies available
to the Trustee and the Secured Parties.
Section 8.3 Power of Sale; Foreclosure. If an Event of Breach
exists and any of the Timber Notes, Additional Timber Notes or any
borrowings under the Line of Credit Agreement remains unpaid at the
maturity thereof, whether upon acceleration of maturity or otherwise:
(1) The Collateral Agent may elect to cause the Mortgaged
Property or any part thereof to be sold under the power of sale
herein granted in any manner permitted by applicable law. In
connection with any sale or sales hereunder, the Collateral Agent
may elect to treat any portion of the Mortgaged Property which
consists of a right in action or which is property that can be
severed from the real property covered hereby or any improvements
thereon without causing structural damage thereto as if the same
were personal property, and dispose of the same in accordance
with applicable law, separate and apart from the sale of the real
property. Any sale of any personal property hereunder shall be
conducted in any manner permitted by Section 9-501 or any other
applicable section of the Uniform Commercial Code. Where any
portion of the Mortgaged Property consists of real and personal
property or fixtures, whether or not such personal property is
located on or within the real property, the Collateral Agent may
elect in its discretion to exercise its rights and remedies
against any or all of the real property, personal property, and
fixtures in such order and manner as is now or hereafter
permitted by applicable law. Without limiting the generality of
the foregoing, the Collateral Agent may, in its sole and absolute
discretion and without regard to the adequacy of its security,
elect to proceed against any or all of the real property,
personal property and fixtures in any manner permitted under
Section 9-501(4) (a) of the Uniform Commercial Code; and if
Collateral Agent elects to proceed in the manner permitted under
Section 9-501(4) (a) (ii) of the Uniform Commercial Code, the
power of sale herein granted shall be exercisable with respect to
all or any of the real property, personal property and fixtures
covered hereby, as designated by the Collateral Agent, and the
Deed of Trust Trustee is hereby authorized and empowered to
conduct any such sale of any real property, personal property and
fixtures in accordance with the procedures applicable to real
property. Where any portion of the Mortgaged Property consists
of real property and personal property, any reinstatement of the
obligation secured hereby, following default and an election by
the Collateral Agent or the Secured Parties to accelerate the
maturity of said obligation, which is made by the Trustor or any
other person or entity permitted to exercise the right of
reinstatement under Section 2924c of the California Civil Code or
any successor statute, shall, in accordance with the terms of
Uniform Commercial Code Section 9-501(4) (c) (iii), not prohibit
the Collateral Agent or the Deed of Trust Trustee from conducting
a sale or other disposition of any personal property or fixtures
or from otherwise proceeding against or continuing to proceed
against any personal property or fixtures in any manner permitted
by the Uniform Commercial Code; nor shall any such reinstatement
invalidate, rescind or otherwise affect any sale, disposition or
other proceeding held, conducted or instituted with respect to
any personal property or fixtures prior to such reinstatement or
pending at the time of such reinstatement. Any sums paid to the
Collateral Agent in effecting any reinstatement pursuant to
Section 2924c of the California Civil Code shall be applied to
the Trustor's obligations and to the Collateral Agent's
reasonable costs and expenses in the manner required by Section
2924c. Should the Collateral Agent elect to sell any portion of
the Mortgaged Property which is real property, or which is
personal property or fixtures that the Collateral Agent has
elected under Section 9-501(4) (a) (ii) of the Uniform Commercial
Code to sell together with the real property in accordance with
the laws governing a sale of real property, the Collateral Agent
or the Deed of Trust Trustee shall give such notice of default
and election to sell as may then be required by law. Thereafter,
upon the expiration of such time and the giving of such notice of
sale as may then be required by law, and without the necessity of
any demand on the Trustor, the Deed of Trust Trustee, at the
time(s) and place(s) specified in the notice of sale, shall sell
said real property, and all estate, right, title, interest, claim
and demand therein, and equity and right of redemption thereof,
at such times and places as required or permitted by law, upon
such terms as the Collateral Agent or the Deed of Trust Trustee
may fix and specify in the notice of sale or as may be required
by law. If the Mortgaged Property consists of several lots,
parcels or items of property, the Collateral Agent may: (i)
designate the order in which such lots, parcels or items shall be
offered for sale or sold, or (ii) elect to sell such lots,
parcels or items through a single sale, or through two or more
successive sales, or in any other manner the Collateral Agent
deems in its best interest. Should the Collateral Agent desire
that more than one sale or other disposition of the Mortgaged
Property be conducted, Collateral Agent may, at its option, cause
the same to be conducted simultaneously, or successively, on the
same day, or on such different days or times and in such order as
the Collateral Agent may deem to be in its best interests, and no
such sale shall exhaust the power of sale herein granted or
terminate or otherwise affect the lien of this Deed of Trust on,
or the security interest of the Collateral Agent in, any part of
the Mortgaged Property not sold, until all of the Secured
Obligations have been fully paid. In the event the Collateral
Agent elects to dispose of the Mortgaged Property through more
than one sale, the Trustor agrees to pay the costs and expenses
of each such sale and of any judicial proceedings wherein the
same may be made, including reasonable compensation to the
Collateral Agent and the Deed of Trust Trustee, their agents and
counsel, and to pay all expenses, liabilities and advances made
or incurred by the Collateral Agent and the Deed of Trust Trustee
(or either of them) in connection with such sale or sales,
together with interest on all such advances made by the
Collateral Agent and the Deed of Trust Trustee (or either of
them) at the Default Rate.
(2) The Collateral Agent, with or without entry, personally
or by its agents or attorneys, insofar as applicable, may (A)
institute judicial proceedings for the complete or partial
foreclosure of this Deed of Trust under the provisions of the
laws of the jurisdiction in which the Mortgaged Property or any
part thereof is located, or under any other applicable provision
of law; or (B) take all steps to protect and enforce the rights
of the Collateral Agent and the Secured Parties, whether by
action, suit or proceeding in equity or at law (for the specific
performance of any covenant, condition or agreement contained in
this Deed of Trust, or in aid of the execution of any power
herein granted, or for any foreclosure hereunder, or for the
enforcement or any other appropriate legal or equitable remedy),
or otherwise, as the Collateral Agent, being advised by counsel,
shall deem most advisable to protect and enforce any of its
rights or duties hereunder.
In exercising its rights under this Section 8.3, the Collateral Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected
by it in good faith.
Section 8.4 Bid at Sale.
(a) Upon any sale made under or by virtue of this Article
VIII, the Collateral Agent may, on behalf of the Secured Parties, bid for
and acquire the Mortgaged Property or any part thereof and, in lieu of
paying cash therefor, may make settlement for the purchase price by
crediting upon the Secured Obligations secured by this Deed of Trust the
net proceeds of sale, after deducting therefrom the expenses of the sale
and the costs of the action and any other sums which the Deed of Trust
Trustee and the Collateral Agent are authorized to deduct under this Deed
of Trust. The person making such sale shall accept such settlement without
requiring the production of any Timber Note, any Additional Timber Note,
the Line of Credit Agreement, this Deed of Trust or the Indenture, and
without such production there shall be deemed credited to the Secured
Obligations under this Deed of Trust the net proceeds of such sale. The
Collateral Agent, upon so acquiring the Mortgaged Property or any part
thereof, shall be entitled to own, hold, lease, rent, operate, manage or
sell the same in any manner permitted by applicable laws.
(b) In connection with any trustee sale or judicial sale by
the Deed of Trust Trustee under this Deed of Trust, the Collateral Agent
shall not accept any cash bid in an amount less than the aggregate amount
payable under the Timber Notes and any Additional Timber Notes and the Line
of Credit Agreement, unless otherwise permitted by the Indenture and the
Line of Credit Agreement and all approvals required by the Indenture and
Line of Credit Agreement have been obtained by Collateral Agent. In the
event that relevant law provides that a trustee sale or judicial sale may
be made in respect of less than all of the Company Owned Timberlands and
Company Timber Rights, and the Collateral Agent shall determine to permit a
trustee sale or judicial sale for less than all of the Company Owned
Timberlands and Company Timber Rights, in connection with any such trustee
sale or judicial sale by the Deed of Trust Trustee, the Collateral Agent
shall not accept any cash bid in an amount less than the pro rata portion
of the aggregate amount payable under the Timber Notes, any Additional
Timber Notes and the Line of Credit Agreement, unless otherwise permitted
by the Indenture and the Line of Credit Agreement and all approvals
required by the Indenture and Line of Credit Agreement have been obtained
by Collateral Agent.
Section 8.5 Sale of Mortgaged Property; Application of
Proceeds.
(a) The Deed of Trust Trustee, upon the Collateral Agent's
request, may postpone any sale of all or any part of the Mortgaged Property
to be made under or by virtue of this Article VIII by public announcement
at the time and place of such sale, or by publication, if required by law,
and, from time to time thereafter, may further postpone such sale by public
announcement made at the time of sale fixed by the preceding postponement.
(b) Upon the completion of any sale made by the Deed of
Trust Trustee under or by virtue of this Article VIII, the Deed of Trust
Trustee shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient deed or deeds or other appropriate instruments,
conveying, assigning and transferring all its estate, right, title and
interest in and to the property and rights so sold. The Deed of Trust
Trustee is hereby irrevocably appointed the true and lawful attorney-in-
fact of the Trustor, in its name and stead or in the name of the Deed of
Trust Trustee, to make all necessary conveyances, assignments, transfers
and deliveries of the property and rights so sold, and, for that purpose,
the Deed of Trust Trustee may execute all necessary deeds and other
instruments of assignment and transfer, and may substitute one or more
persons with like power, the Trustor hereby ratifying and confirming all
that such attorney or attorneys or such substitute or substitutes shall
lawfully do by virtue hereof. The Trustor shall, nevertheless, if so
requested in writing by the Deed of Trust Trustee or the Collateral Agent,
ratify and confirm any such sale or sales by executing and delivering to
the Deed of Trust Trustee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the Collateral Agent or
the Deed of Trust Trustee, for such purposes and as may be designated in
such request. Any such sale or sales made under or by virtue of this
Article VIII shall operate to divest all the estate, right, title,
interest, claim and demand, whether at law or in equity, of the Trustor in
and to the property and rights so sold, and shall be a perpetual bar, at
law and in equity, against the Trustor and any Person claiming through or
under the Trustor and their successors and assigns.
(c) The receipt by the Deed of Trust Trustee for the
purchase money paid as a result of any such sale shall be a sufficient
discharge therefor to any purchaser of the property or rights, or any part
thereof, so sold. No such purchaser, after paying such purchase money and
receiving such receipt, shall be bound to see to the application of such
purchase money upon or for any trust or purpose of this Deed of Trust, any
Timber Note, any Additional Timber Note, the Line of Credit Agreement or
the Indenture, or shall be answerable, in any manner, for any loss,
misapplication or non-application of any such purchase money or any part
thereof, nor shall any such purchaser be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
(d) The purchase money, proceeds or avails of any sale made
under or by virtue of this Article VIII, together with any other sums which
then may be held by the Deed of Trust Trustee or the Collateral Agent under
this Deed of Trust as part of the Mortgaged Property or the proceeds
thereof (whether under the provisions of this Article VIII or otherwise),
shall be applied, to the extent permitted by law, as follows:
First, to pay all unpaid costs and expenses and other
amounts owing to the Collateral Agent or the Deed of Trust
Trustee under and pursuant to the terms of this Deed of Trust,
including, without limitation, costs and expenses of any exercise
of the power of sale or any foreclosure sale (excluding amounts
payable in respect of indemnification obligations); and
Second, to pay to the Collateral Agent for deposit in and
disbursement from the Payment Account, in accordance with the
provisions of Section 7.7 of the Indenture.
If the proceeds of any realization of or upon the Mortgaged
Property pursuant to this Article VIII are insufficient to cover the costs
and expenses of such realization and the payment in full of the Secured
Obligations, the Trustor shall remain liable for any deficiency.
Section 8.6 Right to Possession.
(a) If a Trapping Event occurs and is continuing and there
exists an Acceleration Event, the Collateral Agent personally, or by its
agents, attorneys or a receiver, may do any or all of the following:
(i) Enter into and upon all or any part of the
Mortgaged Property, and may exclude the Trustor, its agents and
servants therefrom; and the Collateral Agent, having and holding
the same, may use, operate, manage and control the Mortgaged
Property or any part thereof and conduct the business thereof,
either personally or by its superintendents, managers, agents,
servants, attorneys or receivers. Upon every such entry,
Collateral Agent may, at the expense of the Mortgaged Property or
the Trustor, from time to time, either by purchase, repair or
construction, maintain and restore the Mortgaged Property or any
part thereof, or remediate any environmental problems, and may
insure and reinsure the same in such amounts and in such manner
as may seem to the Collateral Agent to be advisable. Similarly,
from time to time, Collateral Agent may, at the expense of the
Mortgaged Property or the Trustor, make all necessary or proper
repairs, renewals, replacements, alterations, additions,
betterments and improvements to and on the Mortgaged Property or
any part thereof as may seem advisable to Collateral Agent;
(ii) Manage and operate the Mortgaged Property or any
part thereof and carry on the business thereof and exercise all
rights and powers of the Trustor with respect thereto, either in
the name of the Trustor or otherwise, as may seem to the
Collateral Agent to be advisable;
(iii) Collect and receive all earnings, revenues,
rents, issues, profits and income of the Mortgaged Property or
any part thereof, including, without limitation, the Assigned
Proceeds.
After deducting the expenses of (i) operating the business of the Mortgaged
Property, (ii) all such maintenance, repairs, remediation, renewals,
replacements, alterations, additions, betterments and improvements referred
to above in this clause (a), (iii) all taxes, assessments, insurance and
prior or other proper charges upon the Mortgaged Property or any part
thereof and (iv) reasonable compensation for the services of Collateral
Agent and all attorneys, counsel, agents, clerks, servants and other
employees engaged or employed by it, Collateral Agent shall apply the
monies arising by reason of any of its actions or activities referred to
above in this clause (a) in the order of priorities and amounts set forth
in clause "Second" of Section 8.5(d) hereof. All such costs, expenses and
liabilities incurred by the Collateral Agent in collecting such rents,
income and other Assigned Proceeds, in taking such possession and control
of the Mortgaged Property, and in exploring, developing, improving,
managing, operating, maintaining, enforcing, protecting or preserving the
Mortgaged Property, if not paid out of rents, income and other Assigned
Proceeds as herein above provided, shall be payable upon demand, and shall
be a part of the Secured Obligations owing by the Trustor.
(b) In exercise of the rights and powers granted under this
Section 8.6, the Collateral Agent or its agents may: (i) use against the
Trustor or any other persons, such lawful means as they may see fit to
enforce the collection of any such rents, income and other Assigned
Proceeds, and to secure possession and control of the Mortgaged Property,
or any part thereof; (ii) settle or compromise the liability of any Person
for such rents, income or other Assigned Proceeds; (iii) institute and
prosecute to final conclusion any appropriate actions, in the name of such
Person or in the name of the Trustor; and (iv) settle, compromise, abandon
or reinstitute any such actions deemed reasonably appropriate by them. In
furtherance of the foregoing, and not by way of limitation, the Trustor
binds itself to take whatever lawful steps the Collateral Agent may
reasonably request for such purposes, including, without limitation, the
institution and prosecution of appropriate actions. In connection with any
action taken by the Collateral Agent pursuant to this Section 8.6 in good
faith and in the absence of gross negligence and willful misconduct,
neither the Collateral Agent nor any agent of the Collateral Agent shall be
liable for any loss sustained by the Trustor resulting from any failure to
collect or enforce collection of any rent, income or other Assigned
Proceeds, or from any other act or omission of the Collateral Agent or any
such agent. The Collateral Agent or any agent of the Collateral Agent
shall not have and nothing in this Section 8.6 shall impose, any duty,
obligation or responsibility upon the Collateral Agent or any agent of the
Collateral Agent for the improvement, enforcement, operation, protection,
preservation, control, care, management, repair or replacement of the
Mortgaged Property, or for the discharge or performance of any of the
obligations, duties, liabilities, terms and conditions of any lease,
permit, license, contract, agreement, instrument, document, Subject
Contract, right or interest constituting part of or related to the
Mortgaged Property, unless the Collateral Agent or any agent of the
Collateral Agent shall have affirmatively undertaken any such obligation,
duty or responsibility pursuant to and in exercise of the rights granted to
them pursuant to this Section 8.6; or any responsibility or liability for
any damage or waste committed on or to the Mortgaged Property by the
Collateral Agent or any agent of the Collateral Agent (other than for the
gross negligence or for a willful act conducted in bad faith by the
Collateral Agent or any agent of the Collateral Agent), or on behalf of the
Collateral Agent or any agent of the Collateral Agent by any operators,
contractors, bailees, tenants, licensees or invitees or by any other
Person, or for any dangerous or defective condition of the Mortgaged
Property, or for the improvement, operation, enforcement, protection,
preservation, management, upkeep, repair, replacement or control of the
Mortgaged Property resulting in any damage to or loss of the Mortgaged
Property or in any injury to, death of or any damage or loss suffered by
the Trustor.
Section 8.7 Remedies Cumulative. Each of the rights and
remedies set forth in this Deed of Trust, the Timber Notes, any Additional
Timber Notes, the Line of Credit Agreement, the Indenture or any other
instrument now or hereafter evidencing or securing the Secured Obligations
or available at law or in equity shall be cumulative, and concurrent, and,
except as prohibited by applicable law, may be pursued jointly or severally
against the Trustor or any of the Mortgaged Property, and shall be
nonexclusive. Except as prohibited by applicable law, the election to
pursue any such right or remedy shall not be deemed a waiver, then or
thereafter, to pursue any other such right or remedy that may, at the time
of exercise, be available to the party exercising same. Each and every
right, power and remedy, whether specifically granted in this Deed of Trust
or otherwise existing, may be exercised from time to time and as often and
in such order as may be deemed expedient by Collateral Agent or the Deed of
Trust Trustee, as the case may be, and the exercise of any such right,
power, or remedy will not be deemed a waiver of the right to exercise, at
the same time or thereafter, any other right, power or remedy.
Section 8.8 Non-Waiver. The acceptance of payment of any
portion of the Secured Obligations after its due date or after the
occurrence of an Event of Breach shall not waive (a) any right to require
prompt payment when due of all other sums constituting Secured Obligations
or to declare an Event of Breach for failure to pay the entire unpaid
balance of the Secured Obligations or (b) any right of the Deed of Trust
Trustee and the Collateral Agent to proceed with the exercise of the power
of sale or the foreclosure sale pursuant to any such notice and
acceleration for any unpaid balance of the Secured Obligations. Delay of
the Trustee, the Collateral Agent, the Deed of Trust Trustee or any Secured
Party in asserting or exercising any right with respect to an Event of
Breach or in giving notice with respect to any event or condition that will
constitute an Event of Breach after notice and lapse of any grace or cure
period without cure shall not waive the right thereafter to assert or
exercise any right with respect to such an Event of Breach at any time
while it continues or to give notice of any such event or condition while
such event or condition continues and to cause an Event of Breach to occur
if such event or condition is not cured within any applicable grace or cure
period after giving of such notice. Waiver of a right granted to the
Trustee, the Collateral Agent, the Deed of Trust Trustee or any of the
Secured Parties as to one transaction or occurrence shall not be deemed a
waiver of such right as to any other or subsequent transaction or
occurrence.
Section 8.9 Power of Attorney. Without limiting any rights or
powers granted by this Deed of Trust to the Collateral Agent or the Deed of
Trust Trustee while no Trapping Event has occurred and is continuing, upon
the occurrence and during the continuance of any Trapping Event or any
Event of Breach, the Collateral Agent and the Deed of Trust Trustee are
each hereby appointed the attorney-in-fact of the Trustor for the purpose
of carrying out the provisions of this Article VIII and taking any action
and executing any instruments that the Collateral Agent or the Deed of
Trust Trustee may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled
with an interest.
Section 8.10 Voluntary Appearance; Receivers. After the
happening, and during the continuance, of (x) any Trapping Event upon
notice from the Collateral Agent to the Trustor, (y) any Event of Breach,
and (z) immediately upon commencement of (i) any action, suit or other
legal proceeding by the Collateral Agent to obtain judgment for any sums
required to be paid pursuant to any of the Timber Notes, any Additional
Timber Notes, the Line of Credit Agreement, this Deed of Trust or the
Indenture, or for judicial foreclosure of this Deed of Trust, or (ii) any
action, suit or other legal proceeding by the Deed of Trust Trustee or the
Collateral Agent of any other nature in aid of the enforcement of this Deed
of Trust, the Timber Notes, any Additional Timber Notes, the Line of Credit
Agreement or the Indenture, the Trustor will (1) enter its voluntary
appearance in such action, suit or proceeding, and (2) if required by Deed
of Trust Trustee or Collateral Agent during the continuance of a Trapping
Event or Event of Breach, consent to the appointment of one or more
receivers of the Mortgaged Property and of the earnings, revenues, rents,
issues, profits and Assigned Proceeds thereof. After the happening of (x)
any Trapping Event upon notice from the Collateral Agent to the Trustor,
(y) any Event of Breach, and (z) during its continuance, or upon the
commencement or filing of an action or bill in equity to foreclose this
Deed of Trust or to enforce the specific performance hereof or in aid
thereof, or upon the commencement of any other non-judicial or judicial
proceeding to enforce any right of the Deed of Trust Trustee or the
Collateral Agent, the Deed of Trust Trustee or the Collateral Agent shall
be entitled, as a matter of right, if either of them shall so elect during
the continuance of a Trapping Event or an Event of Breach, without notice
to any other party and without regard to the adequacy of the security of
the Mortgaged Property, forthwith, either before or after declaring any or
all of the Secured Obligations to be due and payable, to the appointment of
such a receiver or receivers. Any receiver or receivers so appointed shall
have such powers as the court making the appointment shall confer, and
shall have the right to incur such obligations and to issue such
certificates therefor as the court shall authorize.
Section 8.11 Retention of Possession. Notwithstanding the
appointment of any receiver, liquidator or trustee of the Trustor, or any
of its property, or of the Mortgaged Property or any part thereof, the
Collateral Agent shall be entitled to retain possession and control of all
or any part of the Mortgaged Property.
Section 8.12 Suits by Collateral Agent. All rights of action
under this Deed of Trust, the Timber Notes, any Additional Timber Notes the
Line of Credit Agreement or the Indenture may be enforced by the Collateral
Agent, the Trustee or the Deed of Trust Trustee, as the case may be,
without the possession of any instruments secured hereby and without the
production thereof or this Deed of Trust, the Indenture, the Line of Credit
Agreement, the Timber Notes, or any Additional Timber Notes at any trial or
other proceeding relative thereto. Any such suit or proceeding instituted
by Collateral Agent or the Deed of Trust Trustee shall be brought in the
name of Collateral Agent or the Deed of Trust Trustee, as trustees (subject
to the provisions of Article IX hereof), and any recovery of judgment shall
be, subject to the rights of Collateral Agent and the Deed of Trust
Trustee, for the equal and ratable benefit of the Secured Parties.
Section 8.13 Waiver of Certain Rights. To the fullest extent
not prohibited by applicable law, the Trustor hereby waives its right, at
any time, to: (a) insist upon, plead, claim or take any benefit or
advantage of any stay, extension or moratorium law, whenever enacted, now
or at any time hereafter in force, which may affect the covenants and terms
of performance of this Deed of Trust, (b) claim, take or insist upon any
benefit or advantage of any law, now or hereafter in force, providing for
valuation or appraisal of the Mortgaged Property, or any part thereof,
prior to any sale or sales thereof which may be made pursuant to any
provision herein contained, or pursuant to the decree, judgment or order of
any court of competent jurisdiction, or (c) after any such sale or sales,
claim or exercise any right, under any statute heretofore or hereafter
enacted by the United States of America, the State of California or
otherwise, to redeem the property and rights sold pursuant to such sale or
sales or any part thereof. The Trustor hereby expressly waives all
benefits and advantages of such laws, and covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to the
Collateral Agent or the Deed of Trust Trustee, but will suffer and permit
the execution of every power granted hereunder as though no such laws had
been made or enacted. The Trustor for itself, and all who may claim
through or under it, waives, to the extent that it lawfully may do so, any
and all right to have the property comprising the Mortgaged Property
marshalled upon any foreclosure of the lien hereof or to have the property
covered by this Deed of Trust and any other deed of trust, deed to secure
debt or mortgage, security agreement or other financing instrument securing
the Secured Obligations marshalled upon any foreclosure of any said deeds
of trust, deeds to secure debt, mortgages, security agreements or other
financing instruments and agrees that any court having jurisdiction to
foreclose such lien may order the Mortgaged Property sold as an entirety.
Upon any Event of Breach, the Collateral Agent may proceed directly and at
once, without notice, against the Trustor to collect or recover the full
amount of the Secured Obligations without first proceeding against any
other Person. The Trustor, for itself and all who may claim through or
under it, waives, to the extent it lawfully may do so, the giving of any
bond or surety by any receiver appointed pursuant to law or this Deed of
Trust.
THE TRUSTOR WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS DEED
OF TRUST, THE TIMBER NOTES, ANY ADDITIONAL TIMBER NOTES, THE LINE OF CREDIT
AGREEMENT AND THE INDENTURE.
Section 8.14 Limitation on Indemnities. So long as any amounts
are payable in respect of the Timber Notes, any Additional Timber Notes, or
the Line of Credit Agreement, any indemnities payable to any Person other
than a Noteholder, a Liquidity Provider, the Collateral Agent or the Deed
of Trust Trustee under any provision of this Deed of Trust shall be payable
solely from Excess Funds or from other assets or funds that are free of the
lien of this Deed of Trust; provided that any such indemnification
obligation shall survive until such obligation shall be discharged in full
and shall accrue interest for the period from and including the date such
obligation arises to but excluding the date such obligation is discharged
in full at a rate per annum equal to the Collection Account Rate.
ARTICLE IX--THE DEED OF TRUST TRUSTEE
Section 9.1 Certain Rights of the Deed of Trust Trustee. In
addition to any rights which the Deed of Trust Trustee may have at law, the
Deed of Trust Trustee shall have the following rights:
(a) the Deed of Trust Trustee may consult with counsel and
the written advice of such counsel or any opinion of counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted hereunder in good faith and in accordance with such
advice or opinion of counsel; and
(b) any action taken by the Deed of Trust Trustee or its
agents hereunder, including, without limitation, the sale of all or any
part of the Mortgaged Property and the opening of any bank accounts as may
be required to fulfill any duty hereunder, shall bind the Secured Parties
and the signature of the Deed of Trust Trustee or its agent shall be
sufficient and effective to perform any such action; and no third party
shall be required to inquire as to the authority of the Deed of Trust
Trustee to so act, or as to compliance with any of the terms and provisions
of this Deed of Trust, both of which shall be conclusively evidenced by the
action taken by the Deed of Trust Trustee or its agent.
Notwithstanding any provision in this Section 9.1 or elsewhere in
this Deed of Trust, neither the Deed of Trust Trustee, nor any of its
employees, attorneys or agents, shall take any action under this Deed of
Trust, except upon the direction or with the consent of the Collateral
Agent.
Section 9.2 Compensation and Indemnity. The Trustor covenants
and agrees:
(a) to pay to the Deed of Trust Trustee from time to time
reasonable compensation for all services rendered by the Deed of Trust
Trustee hereunder (which compensation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust); and
(b) subject to Section 8.14 hereof, to indemnify, defend,
protect and hold the Deed of Trust Trustee harmless from and against, any
loss, claim, damage, action, demand, order, cost, liability or expense,
including, without limitation, reasonable attorneys' fees, disbursements
and expenses, incurred without gross negligence or willful misconduct on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending against any claim or liability in connection with the
exercise or performance of any of the powers or duties hereunder (except
any liability incurred by the Deed of Trust Trustee with gross negligence
or willful misconduct on its part). The Deed of Trust Trustee shall notify
the Trustor promptly of any claim for which it may seek indemnity. The
Trustor shall defend the claim and the Deed of Trust Trustee shall
cooperate in the defense. The failure of the Deed of Trust Trustee to so
notify the Trustor shall not relieve the Trustor of its obligations
hereunder. The Trustor need not pay for any settlement made without its
written consent.
Section 9.3 Removal or Substitution of the Deed of Trust
Trustee. To the extent permitted by law, but to such extent only, the Deed
of Trust Trustee is appointed herein subject to the following terms,
namely:
(a) The Deed of Trust Trustee shall have the right to
resign upon the later of (i) 30 days written notice to the Trustor and
Collateral Agent, or (ii) the date of appointment of a substitute Deed of
Trust Trustee. Collateral Agent, at the later of such 30 days period (if
applicable), or the date of appointment of a substitute Deed of Trust
Trustee, by an instrument in writing executed by it, may accept the
resignation of or remove any Deed of Trust Trustee. Upon the written
request of Collateral Agent, the Trustor shall join with Collateral Agent
in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or removal.
A successor to the Deed of Trust Trustee so resigned or removed may be
appointed in the manner provided in this Section 9.3.
(b) Upon the resignation or removal of any Deed of Trust
Trustee, Collateral Agent shall have power to appoint and, upon the written
request of Collateral Agent, the Trustor shall, for such purpose, join with
Collateral Agent in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more
Persons approved by Collateral Agent to act as successor Deed of Trust
Trustee of all or any part of the Mortgaged Property with such powers as
provided for in this Article IX and to vest in such Person or Persons in
the capacity aforesaid, any property, title, right or power deemed
necessary or desirable, subject to the other provisions of this Section.
If the Trustor does not join in such appointment within 15 days after the
receipt by it of a request so to do, or in case an Event of Breach has
occurred and is continuing, without any request upon the Trustor,
Collateral Agent acting alone shall make such appointment. Should any
written instrument from the Trustor be required by any successor Deed of
Trust Trustee so appointed for more fully confirming to such successor Deed
of Trust Trustee such property, title, right or power, any and all such
instruments shall, on request, be executed, acknowledged and delivered by
the Trustor.
(c) Any successor to the Deed of Trust Trustee
(hereinafter, in this subsection (c) called the "Successor Deed of Trust
Trustee") shall execute, acknowledge and deliver to its predecessor
(hereinafter in this subsection (c), called the "Predecessor Deed of Trust
Trustee"), Collateral Agent and the Trustor, an instrument accepting such
appointment. Thereupon, the Successor Deed of Trust Trustee shall, without
any further act, deed or conveyance, become vested with the estates,
properties, rights, powers, duties and trusts of the Predecessor Deed of
Trust Trustee in the trusts created by this Deed of Trust, with the same
effect as if originally named as Deed of Trust Trustee. At the written
request of the Trustor, the Collateral Agent or the Successor Deed of Trust
Trustee, the Predecessor Deed of Trust Trustee shall execute and deliver an
instrument transferring to the Successor Deed of Trust Trustee, upon the
trusts herein expressed, the Mortgaged Property and shall duly assign,
transfer, deliver and pay over to the Successor Deed of Trust Trustee, any
property and money subject to the lien hereof held by it. If any written
instrument from the Trustor or Collateral Agent is required by the
Successor Deed of Trust Trustee for more fully and certainly vesting in and
confirming to the Successor Deed of Trust Trustee such estates, properties,
rights, powers and trusts, then, at the request of the Successor Deed of
Trust Trustee, all such instruments shall be made, executed, acknowledged
and delivered by the Trustor or the Collateral Agent to the Successor Deed
of Trust Trustee.
ARTICLE X--MISCELLANEOUS
Section 10.1 Severability. In the event any item, term, or
provision contained in this Deed of Trust is in conflict or may be held
hereafter to be in conflict with any applicable law, this Deed of Trust
shall be affected only as to its application to such item, term or
provision and shall, to the fullest extent permitted by applicable law, in
all respects remain in full force and effect.
Section 10.2 Captions. All Article and Section titles or
captions contained in this Deed of Trust or in any appendix, schedule or
exhibit attached hereto are for convenience only and shall not be deemed a
part of this Deed of Trust and shall not modify, restrict or otherwise
affect the meaning or interpretation of this Deed of Trust.
Section 10.3 Service of Notices and Demands. Except as
otherwise specifically required by applicable law, any notice, demand,
request, authorization, direction, specification, consent, waiver or other
document authorized or permitted by this Deed of Trust to be served on or
given to the Trustor shall be sufficiently served or given for all purposes
if it shall be sent by first class mail to the Trustor addressed to it at
the address for the Trustor set forth in the preamble of this Deed of
Trust, by telecopy or other means of electronic communication (confirmed in
writing by mail simultaneously dispatched) (if by telecopy, to Fax No.
(707) 764-5001, Attention: Scotia Pacific Company LLC), or at such other
address (or telecopy or other means of electronic communication) as may
have been furnished in writing to the other parties by the Trustor. Any
notice, demand, request, authorization, direction, consent, waiver or other
document authorized by this Deed of Trust to be served on or given to the
Collateral Agent shall be sufficiently served or given for all purposes, if
it shall be sent by first class mail to the Collateral Agent addressed to
it at the address for the Collateral Agent set forth in the preamble of
this Deed of Trust, by telecopy (confirmed in writing by mail
simultaneously dispatched) to Fax No. (617) 664-5371 or at such other
address (or telex, telecopy, or other electronic communication number, as
the case may be) as may have been furnished in writing to the other parties
by the Collateral Agent. Any notice, demand, request, authorization,
direction, consent, waiver or other document authorized by this Deed of
Trust to be served on or given to the Deed of Trust Trustee shall be
sufficiently served or given for all purposes, if it shall be sent by first
class mail to the Deed of Trust Trustee addressed to it at the address for
the Deed of Trust Trustee set forth in the preamble of this Deed of Trust,
by telecopy (confirmed in writing by mail simultaneously dispatched) to Fax
No. (714) 261-9327, or at such other address (or telex, telecopy, or other
electronic communication number, as the case may be) as may have been
furnished in writing to the other parties by the Deed of Trust Trustee.
Any notice or other communication mailed to a Noteholder shall be
mailed to the Noteholder at the Noteholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed. Failure to mail a notice or
communication to a Noteholder or any defect in it shall not affect its
sufficiency with respect to other Noteholders.
Any notice or other communication mailed to a Liquidity Provider
shall be mailed to the Liquidity Provider at the Liquidity Provider's
address as it appears in the Line of Credit Agreement and shall be
sufficiently given if so mailed within the time prescribed.
If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 10.4 Governing Law; Submission to Jurisdiction; Waiver
of Objection to Venue.
(a) This Deed of Trust, including, without limitation, the
enforcement hereof and the validity and priority of the lien created
hereby, shall be governed by the internal laws of the State of California,
without regard to its conflict of laws principles.
(b) The Trustor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District
of New York and of any New York state court sitting in New York City for
the purposes of all legal proceedings arising out of or relating to this
Deed of Trust or the transactions contemplated hereby. The Trustor hereby
irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venue of any such
proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
Section 10.5 Effect of Other Security, Releases. The Trustor
agrees that no other security, now existing or hereafter taken, for the
Secured Obligations shall be impaired or affected in any manner by the
execution hereof; no security subsequently taken by any holder of the
Secured Obligations shall impair or affect in any manner the security given
by this Deed of Trust; all security for the payment of the Secured
Obligations shall be taken, considered and held as cumulative; and the
taking of additional security shall at no time release or impair any
security by endorsement or otherwise previously given. The Trustor further
agrees that any part of the security herein described may be released
without in any way altering, varying, or diminishing the force, effect, or
lien of this Deed of Trust, or of any renewal or extension of said lien,
and that this Deed of Trust shall continue as a first lien, assignment and
security interest on all the Mortgaged Property not expressly released
pursuant to the terms hereof until all Secured Obligations are fully
discharged and paid.
Section 10.6 No Election of Remedies. The filing of a suit to
foreclose any lien, assignment, or security interest under this Deed of
Trust either on any matured portions of the Secured Obligations or for all
Secured Obligations shall never be considered an election so as to preclude
foreclosure under any power of sale herein contained after dismissal of the
suit.
Section 10.7 Binding Effect; Collateral Agent. The terms,
provisions, covenants and conditions hereof shall be binding upon the
Trustor and the Trustor's successors and assigns and shall inure to the
benefit of the Collateral Agent and its permitted successors and assigns
pursuant to the Indenture. Neither the Trustor nor the Collateral Agent
shall assign any of its respective rights or obligations hereunder except
as expressly permitted hereby or by the Indenture. The Collateral Agent
and the Trustee shall at all times be one and the same Person and shall
comply with and be bound by all terms of and provisions of the Indenture
applicable thereto, including, without limitation, Article 9 of the
Indenture.
Section 10.8 Amendments.
(a) The Collateral Agent and the Trustor may amend,
supplement or otherwise modify this Deed of Trust without notice to or
consent of any Noteholder or Liquidity Provider:
(1) to cure any ambiguity, omission, defect or internal
inconsistency;
(2) to add to the covenants of the Trustor for the benefit
of the Collateral Agent or the Secured Parties or to surrender
any right or power herein conferred upon the Trustor; or
(3) to make any change that does not adversely affect the
rights of any Noteholders or any Liquidity Provider.
After an amendment, supplement or other modification under
this Section becomes effective, the Trustor shall mail to Noteholders and
the Liquidity Providers a notice briefly describing such amendment,
supplement, or other modification. The failure to give such notice to all
Noteholders and the Liquidity Providers, or any defect therein, shall not
impair or affect the validity of an amendment, supplement or other
modification under this Section 10.8.
(b) The Collateral Agent and the Trustor may amend,
supplement or otherwise modify any provision of this Deed of Trust without
notice to any Noteholder or any Liquidity Provider, but with (A) written
consent of the Majority Secured Parties and Rating Agency Confirmation, or
(B) written consent of the Supermajority Holders (after prior notice of the
Rating Agency Evaluation) and Rating Agency Evaluation. Subject to
Sections 7.13 and 7.17 of the Indenture, the Majority Secured Parties may
waive compliance with any provisions of this Deed of Trust without notice
to any Noteholder. However, without the consent of each Noteholder
affected, an amendment, supplement, waiver or other modification may not:
(1) reduce the amount of Timber Notes whose Noteholders
must consent to an amendment, supplement, waiver or other
modification; or
(2) make any change in this Section 10.8.
It shall not be necessary for the consent of the Noteholders
or Liquidity Providers under this Section 10.8 to approve the particular
form of any proposed amendment, supplement, waiver or other modification,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement, waiver or other modification
under this Section 10.8 becomes effective, the Trustor shall mail to
Noteholders and the Liquidity Providers a notice briefly describing such
amendment, supplement, waiver or other modification. The failure to give
such notice to all Noteholders and the Liquidity Providers, or any defect
therein, shall not impair or affect the validity of an amendment,
supplement, waiver or other modification under this Section 10.8. Any
amendment, supplement, waiver or other modification shall be binding upon
all subsequent transferees of the Timber Notes and any replacement
Liquidity Provider.
(c) A consent to an amendment, supplement or other
modification or a waiver by a Noteholder shall bind the Noteholder and
every subsequent holder of that Timber Note or portion of the Timber Note
that evidences the same debt as the consenting Noteholder's Timber Note,
even if notation of the consent or waiver is not made on the Timber Note.
Consent to any amendment, supplement or other modification or a waiver by a
Noteholder shall be irrevocable once given. After an amendment,
supplement, waiver or other modification becomes effective, it shall bind
every Noteholder, unless it makes a change described in any of clauses (l)
or (2) of Section 10.8. In that case, the amendment, supplement, waiver or
other modification shall bind each Noteholder who has consented to it and
every subsequent Noteholder of a Timber Note or a portion of a Timber Note
that evidences the same debt as the consenting Noteholder's Timber Note.
(d) A consent to an amendment, supplement or other
modification or a waiver by a Liquidity Provider shall bind the Liquidity
Provider and every subsequent provider of a Commitment in respect of the
Line of Credit Agreement or successor to that portion of the Line of Credit
Agreement that evidences the same debt as held by the consenting Liquidity
Provider, even if notation of the consent or waiver is not made on the
relevant instrument. Consent to any amendment, supplement or other
modification or a waiver by a Liquidity Provider shall be irrevocable once
given. After an amendment, supplement, waiver or other modification
becomes effective, it shall bind every Liquidity Provider.
The Trustor shall (or, if Definitive Notes have not been
issued, may, but shall not be obligated to) fix a record date for the
purpose of determining the Noteholders entitled to give their consent or
take any action described above. If a record date is fixed, then
notwithstanding the immediately preceding paragraph, those persons who were
Noteholders at such record date (or their duly designated proxies), and
only those persons, shall be entitled to give such consent or to take any
such action, whether or not such persons continue to be Noteholders after
such record date.
(e) The Collateral Agent shall sign any amendment,
supplement or other modification authorized pursuant to this Section 10.8
if the amendment does not adversely affect the rights, duties, liabilities
or immunities of the Collateral Agent. If it does, the Collateral Agent
may, but need not sign it. In signing such amendment the Collateral Agent
shall be entitled to receive, and, subject to Section 9.1 of the Indenture,
shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that such amendment is authorized or permitted
by this Deed of Trust.
Section 10.9 General Provisions as to Certificates and
Opinions.
(a) As evidence of compliance with any condition precedent
or covenant provided for in this Deed of Trust that relates to the release
of property subject to the lien of this Deed of Trust, to the addition of
property to be subject to the lien of this Deed of Trust, to the
satisfaction of the Secured Obligations and reconveyance of this Deed of
Trust or to any other action to be taken by the Collateral Agent upon
application, request or order of the Trustor, the Trustor will furnish to
the Collateral Agent:
(i) an Officer's Certificate of the Trustor stating
that, in the opinion of the signers, all such conditions
precedent and covenants (as the case may be) relating to the
proposed action have been complied with (or will have been
complied with upon the execution and delivery of designated
instruments); and
(ii) an Opinion of Counsel stating that in such
counsel's opinion, as to legal matters, all such conditions
precedent and covenants (as the case may be) have been complied
with (or will have been complied with upon the execution and
delivery of designated instruments);
except that in the case of any application or request as to which the
furnishing of such documents is specifically required by any provisions of
this Deed of Trust or the Indenture relating to such particular application
or request, no additional certificate or opinion need be furnished.
(b) Each Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Deed of Trust
shall include:
(i) a statement that the Person making such
Certificate or rendering such Opinion of Counsel has read such
condition or covenant;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such Certificate or Opinion of Counsel are
based;
(iii) a statement that in the opinion of such Person,
such Person has made such examination or investigation as is
necessary to enable such Person to express an informed opinion
whether such condition or covenant has been complied with; and
(iv) a statement whether, in the opinion of such Person
such condition or covenant has been complied with.
(c) Unless otherwise expressly provided herein, any
application, request, order, certified resolution, Certificate, notice,
statement or other instrument of the Trustor or of any other Person
required or permitted to be filed with the Collateral Agent or to be made
or given under this Deed of Trust shall be dated and shall state the
provision or provisions of this Deed of Trust pursuant to which it is
filed, made or given and shall be signed by a Responsible Officer of the
Person taking such action.
(d) Any counsel giving an Opinion of Counsel that an
instrument conforms to the requirements of this Deed of Trust, or with
respect to any similar matter, may state that such counsel is not passing
upon the truth, accuracy or good faith of the facts or opinions stated in
any application request, order, certified resolution, Officer's
Certificate, appraiser's Certificate, notice, statement or other instrument
required to be delivered to the Collateral Agent signed by any person other
than such counsel.
(e) Any Officer's Certificate of the Trustor or Certificate
of an appraiser, forester or other expert may be based, insofar as the
matters therein are of a legal nature, upon an Opinion of Counsel, unless
such officer, appraiser, forester or other expert knows that such Opinion
of Counsel is, or any of the facts upon which such Opinion of Counsel is
based is, erroneous.
(f) Any Opinion of Counsel may be based, insofar as it
relates to factual matters or information in possession of the Trustor or
the Services Provider, upon an Officer's Certificate or representations of
a Responsible Officer of the Trustor or the Services Provider, unless such
counsel knows that such Officers' Certificate or representations are
erroneous.
(g) Any Opinion of Counsel may be based, insofar as it
relates to appraisal matters, upon an appraiser's Certificate, unless such
counsel knows that the appraiser's Certificate is erroneous.
(h) Any Opinion of Counsel may be based on the written
opinion of other counsel reasonably satisfactory to the Collateral Agent,
in which event such Opinion of Counsel shall be accompanied by a copy of
such other counsel's opinion addressed to the Collateral Agent.
Section 10.10 Certificates and Opinions as Conditions Precedent.
Whenever it is provided in this Deed of Trust that the Trustor shall
deliver any application, certified resolution, Certificate, Opinion of
Counsel or other instrument, the truth and accuracy at the time of the
granting of such application or at the effective date of such certified
resolution, Certificate, Opinion of Counsel or other instrument, as the
case may be, of the material facts and opinions stated therein shall,
except as otherwise provided herein, be conditions precedent to the
effectiveness thereof, and whenever the delivery of any such document is a
condition precedent to the taking of any action by the Collateral Agent
hereunder, the truth and accuracy of the material facts and opinions stated
in any such document shall, except as otherwise provided herein, be
conditions precedent to the right of the Trustor to have such action taken;
provided that subject to Sections 9.1 and 9.2 of the Indenture (a) the
Collateral Agent shall be fully protected in relying thereon and (b) if any
opinion expressed in any appraiser's Certificate or Opinion of Counsel
shall prove to have been untrue or inaccurate, the effectiveness of any
action taken or omitted to be taken in reliance thereon shall not be
affected so long as such opinion was expressed in good faith.
Section 10.11 Recordation. Any supplemental deed of trust or
other instrument delivered to the Collateral Agent pursuant to this Deed of
Trust to effect the release from, or subjection to, the lien of this Deed
of Trust of any property shall be executed in a form sufficient for
recordation or filing in the real estate records and other appropriate
records of each jurisdiction in which the filing of such supplemental deed
of trust or instrument is to be made.
Section 10.12 Partial Releases. No release from the lien or
encumbrance of this Deed of Trust of any part of the Mortgaged Property by
Collateral Agent or Deed of Trust Trustee shall in any way alter, vary or
diminish the force or effect of this Deed of Trust on the balance of the
Mortgaged Property or the priority of the lien of this Deed of Trust on the
balance of the Mortgaged Property.
Section 10.13 Counterpart Execution. This Deed of Trust may be
executed in multiple original counterparts. Each such counterpart shall be
deemed an original for all purposes, and all such counterparts together
shall evidence and constitute one and the same instrument.
Section 10.14 Limitations on Bankruptcy Petition Against the
Trustor. The Collateral Agent and the Deed of Trust Trustee hereby
covenant and agree that, prior to the date which is one year and one day
after the last to occur of (a) payment in full of all outstanding Timber
Notes and (b) payment in full of all amounts due under the Line of Credit
Agreement, it will not institute against, or join any other Persons in
instituting against, the Trustor any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding or other similar
proceeding under any Bankruptcy Law, unless the consent of the Majority
Secured Parties to the taking of such action is obtained.
Section 10.15 Attorneys' Fees. If the Secured Obligations are
not paid when due or if any Event of Breach occurs, the Trustor shall pay
all costs of enforcement and collection, including but not limited to,
reasonable attorneys' fees, costs and disbursements, whether or not such
enforcement and collection includes the filing of a lawsuit.
Section 10.16 Entire Agreement. This Deed of Trust, together
with the other Operative Documents, constitutes the entire agreement of the
parties with respect to the subject matter hereof.
Section 10.17 When Timber Notes Disregarded. The provisions of
Section 12.6 of the Indenture and the definition of the term "outstanding"
shall govern for purposes of determining whether Holders of the required
principal amount of Timber Notes have concurred in any request, demand,
authorization, direction, notice, consent or waiver under or in connection
with this Deed of Trust.
Section 10.18 No Recourse Against Others. No director, officer,
employee, stockholder, or member, in their capacity as such of the Trustor
or the Collateral Agent shall have any personal liability for any
obligations of the Trustor or the Collateral Agent under this Deed of Trust
or for any claim based on, in respect of or by reason of such obligations
or their creation; provided, however, that this Section 10.18 is not
intended to limit in any way Pacific Lumber's obligations under any
Operative Document. By accepting a Timber Note, each Noteholder shall
waive and release all such liability. By executing the Line of Credit
Agreement, the Liquidity Providers shall waive and release all such
liability. The waiver and release shall be part of the consideration for
the issue of the Timber Notes, any Additional Timber Notes and the Line of
Credit.
Section 10.19 Benefits of Deed of Trust. Nothing in this Deed
of Trust, the Timber Notes, any Additional Timber Notes or the Line of
Credit Agreement express or implied, shall give to any person, other than
the parties hereto and their successors hereunder, the Noteholders, the
Liquidity Providers and any Person entitled to indemnification hereunder,
any benefit or any legal or equitable right, remedy or claim under this
Deed of Trust.
Section 10.20 Indenture. Notwithstanding anything to the
contrary contained herein, with respect to any terms or provisions of the
Indenture which are or may be applicable to the Mortgaged Property, to the
extent such terms or provisions are inconsistent with or conflict with the
terms and provisions of this Deed of Trust, the terms and conditions of the
Indenture shall control.
IN WITNESS WHEREOF, the Trustor has caused this Deed of Trust to be
duly executed on its behalf by its authorized officer, effective on the
date first above written, on the date set forth in the applicable
acknowledgment hereto.
SCOTIA PACIFIC COMPANY LLC,
a Delaware limited liability
company
as Trustor
By: /S/ GARY L. CLARK
Gary L. Clark
Vice President, Finance &
Administration
STATE OF CALIFORNIA )
)
COUNTY OF HUMBOLDT )
On July 17, 1998, before me Susan Pryor-Colby, a Notary Public
for the State of California, personally appeared Gary L. Clark,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity on behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature: /s/ Susan Pryor-Colby (Seal)
<PAGE>
SCHEDULE A
TO DEED OF TRUST
DEFINITIONS
An "Acceleration Event" will be deemed to exist at any time when
the Timber Notes have been accelerated and such acceleration has not been
rescinded.
"Accounts" has the meaning given to such term in Section 5.1(a)
of the Indenture.
"Additional Liquidity Provider Fees" means any commitment fee,
agent's fee or similar fee payable to the Liquidity Providers or to any
agent for the Liquidity Providers under the Line of Credit Agreement to the
extent, but only to the extent, that the amount or rate of such fee is in
excess of the amount that would be payable therefor under the terms of the
Bank of America Credit Agreement as in effect on the Closing Date.
"Additional Timber Notes" means notes issued pursuant to a
Supplemental Indenture pursuant to Section 2.14 of the Indenture.
"Additional Timber Properties" means (a) any timber rights or
timberlands located in the State of California which are purchased by the
Trustor subsequent to the Closing Date and subjected to the Lien of the
Deed of Trust in connection with the release of funds from the Prefunding
Account pursuant to Section 5.10 of the Indenture and (b) the Elk River
Timberlands, if and when the Elk River Timberlands become subject to this
Deed of Trust.
"Advance" means any Interest Advance and any Termination Advance,
which may be a borrowing, draw or other cash receipt obtained by the
Trustor or the Collateral Agent or behalf of the Trustor from the Liquidity
Providers under the Line of Credit Agreement. The term "borrow" when used
with respect to any Advance means to obtain such Advance under the Line of
Credit Agreement and the term "borrowing" has a like meaning.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition of "Affiliate," "control," when used with respect to any
specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agreement Not to Cut" means any agreement by the Trustor to
limit or refrain from cutting, harvesting, severing or selling any Company
Timber in exchange for a monetary payment to the Trustor.
"Alternate Property" means timberlands (a) containing at least
the Mbfe of timber as the Headwaters Acquisition Property, (b) having a
fair value at least equal to the Headwaters Acquisition Property, (c)
having expected operating costs not materially greater than the Headwaters
Acquisition Property, and (d) having sufficient access or access rights to
enable harvesting operations to be conducted thereon, all of which matters
shall be reflected in an Officer's Certificate.
"Assigned Proceeds Obligor" means any Person (a) owing any
Assigned Proceeds, (b) having in its possession any Assigned Proceeds, or
(c) obligated to pay, perform or deliver any Assigned Proceeds.
"Bank of America" means Bank of America, National Trust and
Savings Association.
"Bank of America Credit Agreement" means the Credit Agreement,
dated July 20, 1998, among the Trustor, Bank of America National Trust and
Savings Association, as agent, and the other financial institutions
parties thereto, as such credit agreement may from time to time be
extended, amended, modified, supplemented or amended and restated in
accordance with the provisions of Section 11.3 of the Indenture.
"Bankruptcy Law" means any Federal or State bankruptcy,
insolvency, reorganization or similar law for the relief of debtors from
time to time in effect.
"Bankrupt or Insolvent" or "Bankruptcy or Insolvency" shall have
occurred or exist with respect to any Person if:
(a) such Person shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property under any Bankruptcy Law, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under
the Federal Bankruptcy Code, (iv) file a petition seeking to take
advantage of any other Bankruptcy Law, or (v) acquiesce in writing to
any petition filed against it in an involuntary case under the Federal
Bankruptcy Code;
(b) a proceeding or case shall be commenced, without the
application or consent of such Person, in any court of competent
jurisdiction, seeking under any Bankruptcy Law (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of such Person, or of all
or any substantial part of its assets or (iii) similar relief in
respect of such Person under any Bankruptcy Law, and such proceeding
or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing (other than an order
referred to in clause (c) below) shall be entered and continue
unstayed and in effect, for a period of 60 or more consecutive days;
or
(c) an order for relief against such Person shall be
entered in an involuntary case under the Federal Bankruptcy Code.
"Business Day" means any day other than a Saturday, a Sunday or a
day on which banking institutions in the Borough of Manhattan, the City of
New York, New York, in San Francisco, California or in the Commonwealth of
Massachusetts, are authorized or required by law or executive order to
close.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as the same may be in effect from time to
time, any successor statute, and the rules and regulations thereunder.
"Certificate" means a certificate conforming to the requirements
of Section 12.5 of the Indenture and Section 10.9 of this Deed of Trust.
"Class" means any of (i) the Class A-1 Timber Notes, (ii) the
Class A-2 Timber Notes, (iii) the Class A-3 Timber Notes or (iv) any class
of Additional Timber Notes.
"Class A-1 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
6.55% Class A-1 Timber Collateralized Notes.
"Class A-2 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
7.11% Class A-2 Timber Collateralized Notes.
"Class A-3 Timber Notes" means the Class of Timber Notes issued
pursuant to the Indenture and designated as the Scotia Pacific Company LLC
7.71% Class A-3 Timber Collateralized Notes.
"Closing Date" means the date on which the Timber Notes are
issued pursuant to the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means State Street Bank and Trust Company, in
its capacity as collateral agent for the Holders of the Timber Notes and
the Liquidity Providers pursuant to this Deed of Trust and the Indenture,
together with its successors in such capacity.
"Collateral Agent Expenses" means any expenses or damages of or
compensation owing to the Collateral Agent (including, without limitation,
the reasonable fees and disbursements of counsel to the Collateral Agent)
incurred with respect to the enforcement or administration of this Deed of
Trust or owing to the Collateral Agent as part of the Secured Obligations.
"Collateral Mortgaged Property" means and includes all Mortgaged
Property (including both those now and hereafter existing), to which
Article 9 of the Uniform Commercial Code may now or hereafter apply,
including, but not limited to, personal property (tangible and intangible),
fixtures, goods, documents, instruments, general intangibles, chattel
paper, accounts, deposit accounts, products and proceeds, and further
including, without limitation, Harvested Timber, Company Timber to be cut
pursuant to a Purchase Agreement, the Assigned Proceeds, the Data
Processing Equipment, the Data Processing Information, the Subject
Contracts and the Accounts.
"Collection Account" means the Collection Account established
pursuant to Section 5.1(a) of the Indenture.
"Collection Account Disbursement" has the meaning given to such
term in Section 5.3(b) of the Indenture.
"Collection Account Disbursement Funds" has the meaning given to
such term in Section 5.3(b) of the Indenture.
"Collection Account Rate" means, for any date as a rate per annum
equal to the rate per annum (determined as of a date not more than three
Business Days prior to such date) for the offering to leading banks in the
London interbank market of Dollar deposits having a term of 30 days and in
an amount comparable to the amount to which such rate is applied.
"Commitment" means, at any time, the maximum principal or face
amount of the Advances, whether or not outstanding, that a Liquidity
Provider is required to make under the Line of Credit Agreement at such
time, as such amount may be varied or adjusted from time to time.
"Commitments" means, at any time, the aggregate amount of the Commitments
of all Liquidity Providers at such time.
"Company Owned Timberlands" means:
(a) the parcels of land described in (i) Exhibit A to this
Deed of Trust and (ii) any amendment to this Deed of Trust with
respect to the addition of Substitute Timber Property or Additional
Timber Properties, together with the entire right, title and interest
of the Trustor in and to such parcels of land, subject to Permitted
Encumbrances, together with (a) all right, title and interest of the
Trustor in and to all buildings, structures and other improvements now
standing, or at any time hereafter constructed or placed, upon such
land, including, without limitation, all right in and to all equipment
and fixtures of every kind and nature on such land or in any such
buildings, structures or other improvements (such buildings,
structures, other improvements, equipment and fixtures being herein
collectively called the "Improvements"), (b) all right, title and
interest of the Trustor in and to all and singular the tenements,
hereditaments, easements, rights of way, rights, privileges and
appurtenances in and to such land belonging or in any way appertaining
thereto, including without limitation, all right, title and interest
of the Trustor in, to and under any streets, ways, alleys, vaults,
gores or strips of land adjoining such land and (c) all claims or
demands of the Trustor, in law or in equity, in possession or
expectancy of, in and to such land together with all rents, income,
revenues, issues and profits from and in respect of the property
described above in this paragraph (a) and the present and continuing
right to make claim for, collect, receive and receipt for the same as
hereinafter provided. It is the intention of the Trustor that, so far
as may be permitted by law, all of the foregoing, whether now owned or
hereafter acquired by the Trustor, affixed, attached or annexed to
such land shall be and remain or become and constitute a part of the
Mortgaged Property and the security covered by and subject to the Lien
of the Deed of Trust;
(b) all right, title and interest of the Trustor in and to
(i) all extensions, improvements, betterments, renewals, substitutes
and replacements of and on the property described in the foregoing
clause (a) and (ii) all additions and appurtenances thereto not
presently leased to or owned by the Trustor and hereafter leased to,
acquired by or released to the Trustor or, constructed, assembled or
placed upon the Company Owned Timberlands immediately upon such
leasing, acquisition, release, construction, assembling or placement,
and without any further grant or other act by the Trustor (including,
without limitation, all lands added by lot line adjustment to any
existing legal parcel constituting part of the Company Owned
Timberlands); and
(c) all the estate, right, title and interest of the
Trustor, in and to all contract rights, actions and rights in action,
relating to the property described in clause (a), including, without
limitation, all rights to insurance proceeds and unearned premiums
arising from or relating to damage to such property.
Notwithstanding the foregoing, Company Owned Timberlands shall
not include any Pacific Lumber Timber.
"Company Timber" means (i) all trees and timber, including,
without limitation, standing timber and crops, now located on or hereafter
planted or growing in the soil of any Company Timber Property (other than
the Pacific Lumber Timber Rights Property), or any part or parcel thereof,
and all additions, substitutions and replacements thereof (including timber
to be cut pursuant to a Purchase Agreement) and (ii) any and all Harvested
Timber.
"Company Timber Property" means the Company Owned Timberlands and
the Company Timber Rights Property.
"Company Timber Rights" means (i) the timber rights of the
Trustor in respect of the Company Timber Rights Property referred to in
clause (i) of the definition of such term, including, without limitation,
the ownership of, and (subject to compliance with applicable law) the right
in perpetuity (or in the case of Company Timber Rights in respect of not
more than 200 acres of timberlands, the right expiring not earlier than
November 1, 2027) to harvest, all trees and timber, including, without
limitation, standing timber and crops, now located on or hereafter planted
or growing in the soil of such Company Timber Rights Property or any part
or parcel thereof and (ii) any timber rights which are (A) purchased by the
Trustor subsequent to the Closing Date with funds from the Prefunding
Account, (B) in perpetuity or expire no earlier than December 31, 2048 and
(C) described in an amendment to this Deed of Trust.
"Company Timber Rights Property" means (i) those portions of the
timberlands owned by Pacific Lumber, Salmon Creek or an unrelated third
party on the date hereof which are subject to the Company Timber Rights and
are described with particularity in the Pacific Lumber Timber Deeds and, as
to a portion of such lands, in certain maps referenced in the Pacific
Lumber Timber Deeds and held by an escrow agent pursuant to an Escrow
Agreement by and among the Trustor, Pacific Lumber, Salmon Creek and such
escrow agent, dated as of the Closing Date, and (ii) any timberlands that
are subject to timber rights referred to in clause (ii) of the definition
of Company Timber Rights.
"Conveyance Documents" means (i) the Grant Deed dated March 18,
1993 from Pacific Lumber, as grantor, to Scotia Pacific Holding Company, a
Delaware corporation ("Scotia Pacific"), as grantee, conveying certain of
the Company Owned Timberlands to Scotia Pacific and reserving in Pacific
Lumber certain timber rights (the "First Pacific Lumber Grant Deed"), (ii)
the Grant Deed dated on or prior to the Closing Date from Pacific Lumber,
as grantor, to the Trustor, as grantee, conveying certain Company Owned
Timberlands to the Trustor (the "Second Pacific Lumber Grant Deed"), (iii)
the Quitclaim Deed dated on or prior to the Closing Date from Pacific
Lumber to the Trustor conveying to the Trustor all of Pacific Lumber's
interest in certain of the timber rights previously reserved by Pacific
Lumber in the First Pacific Lumber Grant Deed (the "Pacific Lumber
Quitclaim Deed"), (iv) three Grant Deeds, each dated on or prior to the
Closing Date, from Pacific Lumber, as grantor, to the Trustor, as grantee,
conveying the Company Timber Rights to the Trustor (the "Pacific Lumber
Timber Deeds"), (v) the Bill of Sale and General Assignment dated as of
March 23, 1993 transferring from Pacific Lumber certain of the Data
Processing Information and other personal property to Scotia Pacific (the
"Bill of Sale"), (vi) the Bill of Sale and General Assignment dated as of
the Closing Date transferring certain Data Processing Information and other
personal property with respect to certain Company Owned Timberlands and the
Company Timber Rights to the Trustor (the "New Bill of Sale"), (vii) the
New Environmental Indemnification Agreement, (viii) the New Reciprocal
Rights Agreement, and (ix) the Transfer Agreement dated as of the Closing
Date (the "New Transfer Agreement") among the Trustor, Pacific Lumber and
Salmon Creek.
"Counsel" means legal counsel reasonably satisfactory to the
Trustee. Such legal counsel may be an employee, officer, manager or
director of the Trustor, Pacific Lumber or an Affiliate of either of them,
unless otherwise indicated.
"Covenant defeasance" shall have the meaning set forth in Section
8.3 of the Indenture.
"Data Processing Equipment" means all hardware, software, or
other data processing systems or equipment, whether now owned or hereafter
acquired by the Trustor, and wherever located.
"Data Processing Information" means all information, programs,
know-how, methods or methodology relating to the management of the Company
Timber Property, the harvesting, severing or cutting of Company Timber, and
the preparation of applications for Timber Harvesting Plans, including,
without limitation, all such information, programs, know-how, methods or
methodology relating to the GIS.
"Definitive Note" means a Timber Note issued in certified form.
"De Minimis Receipts" means payments received by the Trustor in
an aggregate amount not greater than $50,000 at any one time that would
otherwise be required to be deposited in the Collection Account and which
the Trustor has deposited into another bank account.
"Default" means any occurrence or condition that, with notice or
the lapse of time, or both, would become an Event of Default.
"Default Interest" means the interest accruing at the Default
Rate on any amount of Regular Interest on any Class of Timber Notes that
was not paid when such amount became due and payable.
"Default Rate" means the applicable Note Rate plus 2.00% per
annum.
"Disposal Site" means any site, facility or location to which any
Hazardous Materials from or attributable to the Company Owned Timberlands
have been transported for treatment, disposal, storage or deposit.
"Dollars" and "$" means lawful money of the United States of
America.
"Downgrade Advance" has the meaning set forth in Section 11.2(c)
of the Indenture.
"Elk River Timberlands" means, in the event the Headwaters
Acquisition Property is acquired by an Affiliate of the Trustor upon the
consummation of the Headwaters Agreement (as such term is defined in the
Offering Memorandum), (a) such Headwaters Acquisition property, or (b) the
Alternate Property, either (a) or (b) of which will be transferred to the
Trustor within 180 days after consummation of the Headwaters Agreement and
made subject to the Lien of the Deed of Trust promptly after the
acquisition thereof by the Trustor.
"Environmental Laws" means all federal, state or local statutes,
laws, ordinances, regulations, rules, rulings, orders, restrictions,
requirements, writs, injunctions, decrees or other official acts relating
to the environment or hazardous or similar substances (including, without
limitation, CERCLA and similar state laws), whether now or hereafter
enacted or imposed by any Governmental Authority.
"Escrow Holder" means U.S. Bank of California, a California State
Chartered bank.
"Excess Funds" has the meaning given to such term in Section
5.3(c)(x) of the Indenture.
"General Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts of any Governmental Authority,
now and hereafter existing at any time or times, other than Environmental
Laws and Tax Laws.
"Financial Asset" means "financial asset" as defined in Section
8-102 (a)(9) of the Uniform Commercial Code.
"GIS" means the geographical information system of the Trustor,
including any Data Processing Equipment and/or Data Processing Information
which is a part of such system, and any updates, upgrades or modifications
thereto developed by Pacific Lumber or the Trustor.
"Governmental Authority" means (a) the United States of America,
(b) any State, commonwealth, county, parish, municipality, territory,
possession or other governmental subdivision within the United States of
America or under the jurisdiction of the United States of America and (c)
any Tribunal.
"Harvested Timber" means all trees, timber and crops which have
been severed, cut or harvested from the Company Timber Property (other than
the Pacific Lumber Timber Rights Property), or any parcel thereof, and with
respect to which title has not yet passed to a third party purchaser in
compliance with the terms of the Indenture.
"Hazardous Materials" means (a) any "hazardous waste,"
"hazardous substance," "hazardous material," "hazardous constituent,"
"toxic chemical," "toxic substance," "acutely toxic substance," "pollutant"
or "contaminant," or any other formulation intended to define, list or
classify substances by reason of hazardous, dangerous, toxic or other
deleterious properties, such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," as defined in any
Environmental Law (including, without limitation, asbestos, polychlorinated
biphenyls, oil, petroleum, petroleum-related or petroleum-derived products,
natural gas, natural gas liquids, liquified natural gas or synthetic
natural gas), or any similar substances, (b) any substance the presence of
which on any property included in the Company Owned Timberlands is
prohibited by any Environmental Law, (c) any underground storage tanks, (d)
any flammable substances or explosives or any radioactive materials and (e)
any other substances subject to any rules or regulations (including,
without limitation, any notice requirements or special handling
requirements) of any Governmental Authority under any Environmental Law.
"Hazardous Materials Contamination" means the contamination
(whether now existing or hereafter occurring) of any improvements,
facilities, soil, groundwater, air or other elements on or of any property
included in the Company Owned Timberlands or the contamination of any
improvements, facilities, soil, groundwater, air or other elements on or of
any lands as a result of Hazardous Materials at any time (before or after
date of this Deed of Trust) emanating from any Company Owned Timberlands.
"Headwaters Acquisition Property" means, of the approximately
7,700 acres of timberlands expected to be acquired by an Affiliate of the
Trustor upon the consummation of the Headwaters Agreement, that portion of
such timberlands, if any, actually so acquired by an Affiliate of the
Trustor upon the consummation of the Headwaters Agreement.
"Holder" means the Person in whose name a Timber Note or an
Additional Timber Note is registered on the Register or on any similar
register for any Additional Timber Notes, as the case may be.
"Incidental Waste Disposal" means log yard debris which is and
has been disposed of in accordance with standard industry practices and
spills of minor quantities of motor oil and other petroleum products from
motor vehicles and equipment used in the ordinary course of Company Timber
harvesting and related operations, none of which, individually or in the
aggregate, would have a Material Adverse Effect.
"Indenture" means the Indenture between the Trustor and the
Trustee, pursuant to which the Timber Notes have been issued, as the same
may be amended, modified or supplemented.
"Interest Advance" has the meaning set forth in Section 11.2(a)
of the Indenture.
"Lien" means any deed of trust, security interest, assignment,
pledge, hypothecation, charge or other encumbrance.
"Lien of the Deed of Trust" means the lien, assignment and
security interest created or granted, or renewed, extended and continued in
force and effect, by this Deed of Trust (including after-acquired property
provisions of this Deed of Trust), or created by any subsequent conveyance
under this Deed of Trust or supplement to this Deed of Trust in favor of
the Collateral Agent (whether made by the Trustor or any other Person), or
otherwise created, effectively constituting any property a part of the
security and Mortgaged Property held by the Collateral Agent for the
benefit of the Secured Parties.
"Line of Credit Agreement" means a credit facility, including a
line of credit, revolving loan agreement, letter of credit facility or any
similar financing facility, of the Trustor in effect from time to time with
one or more Liquidity Providers each of whom, as of the date such credit
facility is first entered into, or, if later with respect to any Liquidity
Provider, as of the date it first becomes party thereto, has the Required
Liquidity Provider Rating, pursuant to which the Trustor or the Collateral
Agent on behalf of the Trustor may obtain Interest Advances or a
Termination Advance from the Liquidity Providers thereunder, as such credit
facility may from time to time be extended, amended, modified, supplemented
or amended and restated in accordance with the provisions of Section 11.3
of the Indenture; provided, however, that such credit facility is either
(I) the Bank of America Credit Agreement or (II) a replacement for a then
existing Line of Credit Agreement entered into in compliance with Section
11.4 of the Indenture. As of the Closing Date, the Line of Credit
Agreement is the Bank of America Credit Agreement.
"Liquidity Provider" means any financial institution that is at
the relevant time a party to the Line of Credit Agreement and has a
Commitment thereunder or has Advances outstanding thereunder.
"Liquidity Providers' Expenses" mean, as of any date, all amounts
then due from the Trustor under the Line of Credit Agreement, other than
interest (including any Supplemental Liquidity Provider Interest) and
principal and other than any Additional Liquidity Provider Fees; provided,
however, that indemnification obligations under the Line of Credit
Agreement shall not be deemed to be Liquidity Providers' Expenses (but
shall be deemed to be obligations for interest and principal on Advances)
to the extent that such indemnification obligations include, or represent
compensation for or damages constituting, the principal of and interest on
Advances.
"Lump Sum Sale" means, with respect to any sale of Company
Timber, any agreement or arrangement pursuant to which the Trustor
receives full cash payment in advance for the purchase price for a
specified quantity of Company Timber (or Company Timber covered by one or
more Timber Harvesting Plans or contained on one or more parcels of land),
and is required to provide, subsequent to the date of such payment, the
quantity of timber provided therein (or covered by such Timber Harvesting
Plans or contained on such parcels).
"Majority Holders" at any date means, subject to Section 7.13 of
the Indenture, the Holders of a majority in aggregate outstanding principal
amount of Timber Notes and any Additional Timber Notes of all Classes at
such date.
"Majority Secured Parties" means the holders of a majority in
aggregate outstanding principal amount of Advances under the Line of Credit
Agreement, the Timber Notes and any Additional Timber Notes.
"Material Adverse Effect" means any material adverse effect on
(a) the Mortgaged Property or the operation, use or value thereof, (b) the
ability of the Trustor to perform and observe in all material respects its
covenants and obligations under this Deed of Trust, the Indenture or any of
the other Operative Documents, (c) the condition (financial or otherwise),
results of operations, business or business prospects of the Trustor or (d)
the rights or remedies of the Trustee or any Noteholder under the Indenture
or of this Deed of Trust Trustee or the Collateral Agent under this Deed of
Trust.
"Mbfe" means, with respect to (i) old growth redwood, one Mbfe
for each one thousand board feet, net Scribner scale, of Company Timber,
(ii) old growth Douglas-fir, 0.723757 Mbfe for each one thousand board
feet, net Scribner scale, of Company Timber, (iii) young growth redwood,
0.751381 Mbfe for each one thousand board feet, net Scribner scale, of
Company Timber, (iv) young growth Douglas-fir, 0.488950 Mbfe for each one
thousand board feet, net Scribner scale, of Company Timber and (v) each
other species or category of Company Timber other than hardwoods (i.e.,
trees which are not conifers), 0.309392 Mbfe for each one thousand feet,
net Scribner scale, of Company Timber.
"Monthly Calculation Date" means the last day of each calendar
month.
"Monthly Deposit Date", with respect to any Monthly Calculation
Date, means (a) the 20th day of the calendar month following such Monthly
Calculation Date or (b) if such day is not a Business Day, the Business Day
immediately succeeding such day (provided, however, that all calculations
as of such Monthly Deposit Date shall be computed as of the date that would
have been a Monthly Deposit Date if such date were a Business Day).
"Mortgaged Property" means all of the rights, titles, interests
and estates now owned or hereafter acquired by the Trustor in, to and
under, each of the following:
i. the Company Owned Timberlands;
ii. the Company Timber Rights;
iii. all Company Timber;
iv. the Accounts, all funds, investments, securities and
Financial Assets from time to time held in or credited to
any Account, all Security Entitlements with Respect to any
Account and all interests, profits, Proceeds, or other
income derived from such funds, investments, securities,
Financial Assets and Security Entitlements and all the
Trustor's rights in any funds held in any Account;
v. all the Subject Contracts, and all the Proceeds now or
hereafter receivable, owing, deliverable, performable or
attributable to or under the Subject Contracts;
vi. all Data Processing Equipment and all other machinery,
equipment and other tangible personal property and all
fixtures and improvements now or hereafter situated upon any
part of the Company Owned Timberlands;
vii. all Data Processing Information and all other
information, programs, know-how, methods or methodology
relating to the management of the Company Timber Property
and the harvesting, severing or cutting of Company Timber;
viii. all existing and future permits, licenses,
rights-of-way, easements, leases, franchises,
certificates of public convenience and necessity, and
all similar rights and privileges, that relate to or
are appurtenant to any part of the Company Timber
Property;
ix. all Proceeds of and other rights relating to insurance
or condemnation (including, without limitation, any
judgments, insurance proceeds, awards of damages and
settlements) receivable or accruing by reason of the loss
of, damage to, diminution in the value of or income or
revenues from, or taking (by power of eminent domain or
otherwise) of all or any part of the properties or interests
hereinabove or hereinbelow described in this definition of
the Mortgaged Property;
x. all documents, instruments, drafts, acceptances,
general intangibles, chattel paper, deposit accounts,
accounts, and all the Proceeds therefrom or attributable
thereto, whether now or hereafter existing, arising out of
or relating to the sale, use, exchange, development,
operation, cutting, harvesting, storage, gathering,
transportation, improvement, marketing, disposal, lease,
handling or other dealings with or of all or any portion of
the properties or interests hereinabove or hereinbelow
described in this definition of Mortgaged Property;
xi. without limiting the foregoing descriptions, all
equipment and inventory (as such terms are defined in the
Uniform Commercial Code) and all documents (as defined in
the Uniform Commercial Code) now and at any time or times
hereafter obtained or acquired by the Trustor covering or
representing all or any portion of the properties or
interests hereinabove or hereinbelow described in this
definition of Mortgaged Property;
xii. all Timber Harvesting Plans and any other permits,
documents or other governmental approvals pertaining to the
harvesting, cutting, severing, transporting, storing,
processing or handling of the Company Timber; and all plans,
engineering reports, land planning, maps, surveys, and
information and any other reports, plans, maps, surveys or
information to be used in connection with the Company Owned
Timberlands or Company Timber Rights;
xiii. all property of any kind or description that (i)
may from time to time after the date of this Deed of
Trust by delivery or by writing of any kind be
conveyed, mortgaged, pledged, assigned or transferred
to the Collateral Agent by the Trustor, or by any
Person, with the consent of the Trustor, or otherwise
as expressly permitted by the terms of this Deed of
Trust and accepted by the Collateral Agent to be held
as part of the Mortgaged Property or (ii) is required
by the terms of the Indenture or this Deed of Trust to
be subjected to the Lien of the Deed of Trust;
xiv. each and every right, privilege, hereditament and/or
appurtenance in anywise incident or appertaining to any of
the properties or interests hereinabove or hereinbelow
described in this definition of the Mortgaged Property;
xv. the Proceeds from or attributable to the rights,
titles, interests and estates hereinabove referred to in
this definition of the Mortgaged Property (including,
without limitation, all Assigned Proceeds), all guarantees
and suretyship agreements relating to any such Proceeds, and
the rights, titles and interests of the Trustor therein, and
all security for payment or performance thereof, now or
hereafter existing or arising;
xvi. all other personal property used in connection with the
above-described Mortgaged Property; and
xvii. all extensions, renewals, proceeds, accessions,
improvements, substitutions and replacements of and to
any of the above-described Mortgaged Property.
Notwithstanding the foregoing, Mortgaged Property shall not include (i) any
Pacific Lumber Timber, (ii) any motor vehicles subject to a certificate of
title law, (iii) any Timber Harvesting Plans to the extent that the Trustor
is prohibited from granting a security interest therein, (iv) any permits,
documents or other governmental approvals other than Timber Harvesting
Plans which the Trustor is prohibited by applicable law from granting a
security interest in or (v) any accounts or inventory (as each such term is
defined in the Uniform Commercial Code) of Pacific Lumber or any proceeds
thereof.
"New Additional Services Agreement" means the New Additional
Services Agreement dated as of the Closing Date between the Trustor and
Pacific Lumber, as the same may be amended, modified or supplemented.
"New Environmental Indemnification Agreement" means the New
Environmental Indemnification Agreement dated as of the Closing Date
between the Trustor and Pacific Lumber, as the same may be amended,
modified or supplemented.
"New Master Purchase Agreement" means the New Master Purchase
Agreement dated as of the Closing Date between the Trustor and Pacific
Lumber, as the same may be amended, modified or supplemented.
"New Reciprocal Rights Agreement" means the New Reciprocal Rights
Agreement dated as of the Closing Date among the Trustor, Pacific Lumber
and Salmon Creek, as the same may be amended, modified or supplemented.
"New Services Agreement" means the New Services Agreement entered
into between the Trustor and Pacific Lumber dated as of the Closing Date,
as the same may be amended, modified or supplemented, and any similar
agreement hereafter entered into between the Trustor and any Person (other
than Pacific Lumber) as successor Services Provider, as the same may be
amended, modified or supplemented.
"New Transfer Agreement" has the meaning assigned to such term in
the definition of "Conveyance Documents."
"Nonrecourse Timber Acquisition Indebtedness" means purchase
money indebtedness incurred by the Trustor in the course of acquisition of
any timberlands or timber rights, provided that (i) in the event of
nonpayment of such purchase money indebtedness, the holder thereof shall
only have recourse for repayment to the property securing such indebtedness
and (ii) the agreements is respect of such purchase money indebtedness
shall contain a non-petition agreement substantially similar to that
included in the New Master Purchase Agreement.
"Non-Renewal Advance" has the meaning set forth in Section
11.2(b) of the Indenture.
"Note Rate" means, for each Class of Timber Notes, the interest
rate indicated on the face of each Timber Note of such Class.
"Noteholder" means a Holder.
"Offering Memorandum" means the Offering Memorandum, dated July
9, 1998, relating to the offering of the Timber Notes, as such Offering
Memorandum may be amended or supplemented.
"Officer" has the meaning given to such term in the definition of
"Responsible Officer."
"Officer's Certificate" means a certificate that:
(a) is signed by a Responsible Officer of the Person or Persons
required to furnish or submit such certificate; and
(b) complies with the applicable requirements of Section 12.5
of the Indenture or Section 10.9 of this Deed of Trust, as the case
may be.
"Operative Documents" means the Indenture, this Deed of Trust,
the Timber Notes from time to time outstanding, the New Services Agreement,
the New Master Purchase Agreement (and log purchase agreements entered into
pursuant thereto), and the Conveyance Documents.
"Opinion of Counsel" means a written opinion of Counsel which:
(a) complies with the applicable requirements of Section 12.5 of
the Indenture or Section 10.9 of this Deed of Trust, as applicable;
(b) is addressed to the Trustee or the Collateral Agent, as
applicable; and
(c) is in form and substance reasonably satisfactory to the
addressee.
"Pacific Lumber" means The Pacific Lumber Company and any
successor in interest thereto.
"Pacific Lumber Timber" means (i) all trees and timber,
including, without limitation, standing timber and crops, now located on or
hereafter planted or growing in the soil of any Pacific Lumber Timber
Rights Property, or any part or parcel thereof, and all additions,
substitutions and replacements thereof and (ii) any and all of the
foregoing which have been severed, cut or harvested from the Pacific Lumber
Timber Rights Property or any part of parcel thereof.
"Pacific Lumber Timber Rights" means the timber rights of Pacific
Lumber in respect of the Pacific Lumber Timber Rights Property, including,
without limitation, the ownership of, and (subject to compliance with
applicable law) the right in perpetuity to harvest, all trees and timber,
including, without limitation, standing timber and crops, now located on or
hereafter planted or growing in the soil of any Pacific Lumber Timber
Rights Property or any part or parcel thereof.
"Pacific Lumber Timber Rights Property" means those portions of
the Company Owned Timberlands specifically identified as Pacific Lumber
Timber Rights Property on those certain maps held by an escrow agent
pursuant to an Escrow Agreement by and among the Trustor, Pacific Lumber,
Salmon Creek and such escrow agent, dated as of the Closing Date.
"Pacific Lumber Timber Rights Property Release Notice" has the
meaning set forth in Section 6.3 of the Indenture.
"Pay-as-You-Harvest Sale" means, with respect to any sale of
Timber, any agreement or arrangement pursuant to which (A) the Trustor
shall receive partial payment in advance (the "Up-Front Payment") for the
purchase of a specified quantity of Company Timber (or Company Timber
covered by one or more Timber Harvesting Plans or contained on one or more
parcels of land), and the balance of which shall be paid as (or after) such
Company Timber is harvested and/or delivered or (B) the Trustor shall
receive payments for the purchase of a specified quantity of Company Timber
(or Company Timber covered by one or more Timber Harvesting Plans or con-
tained on one or more parcels of land) as (or after) such Company Timber is
harvested and/or delivered.
"Payment Account" means the Payment Account to be established and
maintained by the Trustee pursuant to Section 5.1(a) of the Indenture.
"Permitted Encumbrances" means:
(a) the specific matters, if any, to which this Deed of Trust is
expressly made subject as set forth in a Schedule to a mortgagee title
insurance policy in favor of the Trustee or Collateral Agent in
respect of the Mortgaged Property;
(b) the New Reciprocal Rights Agreement;
(c) easements, restrictions, rights-of-way, servitudes,
restrictive covenants, permits, licenses, use agreements, boundary
agreements, surface leases, subsurface leases, or other similar
encumbrances on, over or in respect of the Company Timber or the
Company Timber Property contained in or arising from or in respect of
any document, instrument or agreement entered into by or with the
consent of the Trustor in connection with any Timber Harvesting Plans,
Timber Laws, or Environmental Laws;
(d) discrepancies, conflicts in boundary lines, shortages in
area, encroachments, or any other facts which a correct survey would
disclose, none of which, singly or in the aggregate, materially
adversely affects the operation or value of the Mortgaged Property or
materially adversely impairs the Trustor's or the Collateral Agent's
right to receive and retain the proceeds of cutting, harvesting or
severing of Company Timber attributable to the Company Owned
Timberlands or the Company Timber Rights;
(e) Liens for Trustor Taxes not yet delinquent or that are being
diligently contested by the Trustor in good faith by appropriate
proceedings and against which adequate reserves are being maintained
in accordance with generally accepted accounting principles by the
Trustor, provided that the enforcement or foreclosure of any such lien
shall have been stayed pending the resolution of such proceedings;
(f) operators' liens or mechanics' or materialmen's liens
arising in the ordinary course of business and incidental to the
incurrence of reasonable expenses permitted by the Indenture or this
Deed of Trust with respect to the Mortgaged Property for amounts not
yet due and payable or that are being diligently contested by the
Trustor in good faith by appropriate proceedings and against which
adequate reserves are being maintained by the Trustor, provided that
the enforcement or foreclosure of any such lien shall have been stayed
pending the resolution of such proceedings; such lien is fully
subordinate to and subject in right of prior payment of the Secured
Obligations;
(g) easements, restrictions, rights-of-way, servitudes,
restrictive covenants, permits, licenses, use agreements, boundary
agreements, surface leases, subsurface leases or other similar
encumbrances on, over or in respect of the Company Timber or Company
Owned Timberlands, none of which, singly or in the aggregate,
materially adversely affects the operation or value of the Mortgaged
Property or materially adversely impairs the Trustor's or the
Collateral Agent's right to receive and retain the Proceeds of
cutting, harvesting or severing Company Timber attributable to the
Company Owned Timberlands or the Company Timber Rights;
(h) such sales contracts and other similar agreements as are
customarily found in connection with operating properties comparable
to the Company Owned Timberlands or the Company Timber Rights, none of
which, singly or in the aggregate, materially adversely affects the
operation or value of the Mortgaged Property or materially adversely
impairs the Trustor's or the Collateral Agent's right to receive and
retain the Proceeds of cutting, harvesting or severing Company Timber
attributable to the Company Owned Timberlands or the Company Timber
Rights;
(i) any lease, contract or other agreement or encumbrance
(including, without limitation, the interest of any purchaser under a
Lump Sum Sale Agreement entered into in accordance with Section 6.1 of
the Indenture in and to Company Timber so purchased) granted or
created by the Trustor after the date of the Deed of Trust that is
specifically permitted and authorized under the terms of the Indenture
and this Deed of Trust; and
(j) Liens securing the indebtedness referred to in clause (u) of
Section 4.9 of the Indenture.
"Person" means an individual, a corporation, a partnership, a
trust, an unincorporated organization, a limited liability company
(including, without limitation, the Trustor), or a government or political
subdivision thereof.
"Prefunding Account" means the Prefunding Account established
pursuant to Section 5.1(a) of the Indenture.
"Premium" has the meaning given to such term in Section 2.12 of
the Indenture.
"Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.
"Proceeds" means all proceeds, products, offspring, rents or
profits of or derived from the Mortgaged Property. The term "Proceeds"
includes whatever is receivable or received when any of the Mortgaged
Property or Proceeds is sold, collected, exchanged or otherwise disposed
of, whether such disposition is voluntary or involuntary, and includes,
without limitation, all rights to payment, including return premiums, with
respect to any insurance relating thereto.
"Purchase Agreement" means (i) the New Master Purchase Agreement
or (ii) any other agreement for the purchase of stumpage or logs between
the Trustor and any other Person, as the same may be extended, renewed,
modified, amended or supplemented.
"Registrar" shall have the meaning set forth in Section 2.3 of
the Indenture.
"Release and Substitution Notice" has the meaning given to such
term in Section 6.4 of the Indenture.
"Release Notice" has the meaning given to such term in Section
6.1(g) of the Indenture.
"Required Liquidity Provider Rating" means, with respect to a
Liquidity Provider, a rating on its short-term unsecured debt obligations
of not less than P-1 by Moody's and A-1 by S&P or, if S&P and Moody's have
not rated such Liquidity Provider's short-term unsecured debt obligations,
a rating on its long-term unsecured debt obligations of not less than Aa2
by Moody's and not less than AA by S&P, or, in each case, if any such
Rating Agency adopts a new rating system, any successor rating thereto.
"Responsible Officer" or "Officer"
(a) of any Person that is a corporation (other than the
Trustee), means the chairman of the board of directors, the president
or any vice president, the controller or any assistant controller, or
the treasurer or any assistant treasurer, or the secretary or any
assistant secretary of such Person;
(b) of any Person that is a partnership (other than the
Trustee), means any such officer of a corporate general partner of
such Person or any individual general partner of such Person;
(c) of any Person that is a limited liability company (other
than the Trustee), means the chairman of the board of managers and any
other person performing functions comparable to the functions of the
officers enumerated in (a) of this definition); and
(d) of the Trustee or the Collateral Agent, means (i) any
officer in the Corporate Trust Office of the Trustee or Collateral
Agent and (ii) any other officer of the Trustee or Collateral Agent to
whom a matter is referred because of such officer's knowledge of and
familiarity with such matter.
"Salmon Creek" means Salmon Creek Corporation, a Delaware
corporation and any successor in interest thereto.
"Secured Parties" means any Persons who at any time or from time
to time are holders of any of the Secured Obligations or any portion
thereof.
"Security Agreement" means the security agreement set forth in
Article III of the Deed of Trust, covering and describing the Collateral
Mortgaged Property and other rights and interests of the Trustor and
securing payment of the Secured Obligations.
"Security Entitlement" means "security entitlement" as defined in
Section 8-102 (a)(17) of the Uniform Commercial Code.
"Services" has the meaning given to such term in the New Services
Agreement.
"Services Provider" means Pacific Lumber, as the initial service
provider under the New Services Agreement, together with its successors in
such capacity under the New Services Agreement.
"State" means any one of the 50 states of the United States of
America (and any additional states that may be admitted after the Closing
Date) or the District of Columbia.
"Subject Contracts" means (a) all presently existing and future
contracts or leases relating in any manner to the purchase, sale, removal,
regeneration, cutting, harvesting, hauling or storing of any Company
Timber, including, without limitation, the New Master Purchase Agreement,
(b) the New Services Agreement, (c) the Conveyance Documents, and (d) any
other agreements entered into by the Trustor subsequent to the date of this
Deed of Trust, whether or not of the same general nature as set forth in
clauses (a) through (c).
"Substitute Timber Property" means any parcel or parcels of land
or any timber rights subjected to the Lien of the Deed of Trust in accor-
dance with Section 6.4 of the Indenture.
"Supermajority Holders", at any date, means the Holders of 66 %
in aggregate outstanding principal amount of Timber Notes and Additional
Timber Notes at such date.
"Supplemental Liquidity Provider Interest" means any interest
payable under the Line of Credit Agreement to the extent, but only to the
extent, that such interest is payable at a rate per annum that is in excess
of the rate per annum for such interest payable under the terms of the Bank
of America Credit Agreement as in effect on the Closing Date.
"Takings Litigation" means any existing or future action brought
by the Trustor alleging uncompensated taking by any governmental authority
of Company Owned Timberlands or Company Timber Rights for public use, and
seeking just compensation from or other relief against such governmental
authority.
"Tax Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts relating to the reporting,
imposition, rendition, collection, enforcement or other aspects of Trustor
Taxes, of every kind or character now imposed or hereafter enacted by any
Governmental Authority.
"Taxes" means all Yield Taxes and all ad valorem, occupation,
property and other taxes and assessments imposed with respect to the
Company Owned Timberlands or Company Timber Rights subject to the Lien of
the Deed of Trust (excluding income taxes and franchise taxes).
"Termination Advance" means a Downgrade Advance or a Non-Renewal
Advance, together with any Interest Advances outstanding on the date such
Downgrade Advance or Non-Renewal Advance is made.
"Timber Harvesting Plans" means all permits, whether now existing
or hereafter created, filed with any Governmental Authority with respect to
the harvesting, cutting or severance of Timber.
"Timber Laws" means all applicable statutes, laws, ordinances,
regulations, rules, rulings, orders, restrictions, requirements, writs,
injunctions, decrees or other official acts relating to the harvesting,
cutting, severance, handling or transporting of Company Timber, and the
maintenance, operation and management of the Company Timber Property,
whether now or hereafter enacted or imposed by any Governmental Authority,
including, without limitation, those relating to streams, waterways,
wildlife habitat and endangered species, exclusive of Environmental Laws.
"Timber Note" means any of the Class A-1Timber Notes, the Class
A-2 Timber Notes and the Class A-3 Timber Notes issued pursuant to the
Indenture.
"Trapping Event" shall have the meaning given to such term in
Section 5.3(d)(iii) of the Indenture.
"Tribunal" means any court or any governmental department,
commission, board, bureau, agency or instrumentality of the United States
of America or of any State, commonwealth, territory, possession, county,
parish, municipality or other governmental subdivision within the United
States of America or under the jurisdiction of the United States of
America, whether now or hereafter constituted or existing.
"Trustee" means the Person named as "Trustee" in the recitals to
the Indenture, in its capacity as trustee under the Indenture, together
with its successors in such capacity.
"Trustee's Expenses" means any fees, expenses, and damages of, or
compensation to, the Trustee (including, without limitation, the reasonable
fees and disbursements of counsel to the Trustee) incurred pursuant to the
Indenture or owing to the Trustee as part of the Secured Obligations.
"Trustor Taxes" means (without duplication) all taxes,
assessments, fees, levies, imposts, duties, deductions, withholdings or
other charges, together with any interest and penalties payable in
connection therewith, from time to time or at any time imposed or assessed
by any statute, law, ordinance, regulation, rule, ruling, order, writ,
injunction, decree or other official act of any Governmental Authority (a)
against the Trustor by reason of the Trustor's ownership, harvesting, sale
or other disposition or use of all or any part of the Mortgaged Property,
(b) upon or with respect to, measured by or charged against, required to be
deducted or withheld from or otherwise attributable to all or any part of
the Mortgaged Property (or the use, sale or other disposition thereof) or
(c) upon or against the Trustor, the Collateral Agent, the Services
Provider, the Trustee or any Beneficiary (as defined in the Deed of Trust)
by reason of the Deed of Trust or the Liens created thereby, including,
without limitation, yield, franchise, sales, transfer, gross receipts,
profits, income (other than income taxes imposed on amounts paid or accrued
on the Notes), property, ad valorem, production and severance taxes.
"Uniform Commercial Code" means the Uniform Commercial Code as
now or hereafter in effect in the State of California.
"Up-Front Payment" has the meaning set forth in the definition of
Pay-as-You-Harvest-Sale.
"Yield Taxes" means all yield, severance, excise, sales and other
taxes imposed on the cutting, harvesting, severing or sale of Company
Timber from the Company Owned Timberlands or the Company Timber Rights
Property subject to the Lien of the Deed of Trust (excluding income taxes
and franchise taxes).
Any capitalized term used in this Deed of Trust and not defined in this
Deed of Trust shall have the meaning set forth in the Indenture.
CREDIT AGREEMENT
DATED AS OF JULY 20, 1998
AMONG
SCOTIA PACIFIC COMPANY LLC,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS 1
1.1 Certain Defined Terms. 1
1.2 Other Interpretive Provisions. 11
1.3 Accounting Principles. 12
ARTICLE II. THE CREDITS 13
2.1 Amounts and Terms of Commitments. 13
2.2 Loan Accounts. 13
2.3 Procedure for Borrowing. 13
2.4 Conversion and Continuation Elections. 15
2.5 Commitment Reductions and Terminations. 16
2.6 Repayment of Advances. 17
2.7 Interest. 17
2.8 Fees. 18
2.9 Computation of Fees and Interest. 18
2.10 Payments by the Company. 18
2.11 Payments by the Banks to the Agent; Defaulting Banks. 20
2.12 Sharing of Payments, Etc. 21
2.13 Extension of Scheduled Termination Date. 21
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY 22
3.1 Taxes. 22
3.2 Illegality. 23
3.3 Increased Costs and Reduction of Return. 24
3.4 Funding Losses. 24
3.5 Inability to Determine Rates. 25
3.6 Certificates of Banks. 25
3.7 Substitution of Banks. 26
3.8 Survival. 26
ARTICLE IV. 27
4.1 Conditions of Closing Date. 27
4.2 Conditions to Each Advance. 29
ARTICLE V. REPRESENTATIONS AND WARRANTIES 30
5.1 Existence and Power. 30
5.2 Authorization; No Contravention. 30
5.3 Governmental Authorization. 31
5.4 Binding Effect. 31
5.5 Litigation. 31
5.6 No Default. 31
5.7 ERISA Compliance. 31
5.8 Title to Properties. 32
5.9 Financial Condition. 32
5.10 Environmental Matters. 33
5.11 Regulated Entities. 33
5.12 No Burdensome Restrictions. 33
5.13 Subsidiaries. 33
5.14 Insurance. 33
5.15 Full Disclosure. 34
ARTICLE VI. AFFIRMATIVE COVENANTS 34
6.1 Financial Statements. 34
6.2 Certificates; Other Information. 35
6.3 Performance of This and Other Agreements. 35
ARTICLE VII. NEGATIVE COVENANTS 35
7.1 Amendments. 36
7.2 Merger. 36
7.3 Additional Notes. 36
ARTICLE VIII. LINE OF CREDIT ACCELERATION 36
8.1 Triggering Event. 36
8.2 Line of Credit Acceleration. 37
ARTICLE IX. THE AGENT 37
9.1 Appointment and Authorization; "Agent". 37
9.2 Delegation of Duties. 38
9.3 Liability of Agent. 38
9.4 Reliance by Agent. 38
9.5 Notice of Triggering Event. 39
9.6 Credit Decision. 39
9.7 Indemnification of Agent. 39
9.8 Agent in Individual Capacity. 40
9.9 Successor Agent. 40
9.10 Withholding Tax. 41
ARTICLE X. MISCELLANEOUS 42
10.1 Amendments and Waivers. 42
10.2 Notices. 43
10.3 No Waiver; Cumulative Remedies. 44
10.4 Costs and Expenses. 44
10.5 Company Indemnification. 45
10.6 Payments Set Aside. 45
10.7 Successors and Assigns. 46
10.8 Assignments, Participations, etc. 46
10.9 Notification of Addresses, Lending Offices, Etc. 47
10.10 Limitations upon Bankruptcy Petition Against Issuer. 48
10.11 Limitations upon Actions by Agent or Banks. 48
10.12 Release of Lien. 48
10.13 Counterparts. 48
10.14 Severability. 48
10.15 No Third Parties Benefited. 48
10.16 Governing Law and Jurisdiction. 49
10.17 Waiver of Jury Trial. 49
10.18 Entire Agreement. 50
SCHEDULES
Schedule 2.1 Commitments
Schedule 5.7 ERISA
Schedule 2.3(g) Wire Transfer Instructions for Trustee
Schedule 10.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing (Interest Advance)
Exhibit B Form of Notice of Borrowing (Non-Renewal Advance)
Exhibit C Form of Notice of Borrowing (Downgrade Advance)
Exhibit D Form of Notice of Conversion/Continuation
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Annual Timber Harvest Report
<PAGE>
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of July 20, 1998, among
Scotia Pacific Company LLC, a Delaware limited liability company (the
"Company"), the several financial institutions from time to time party to
this Agreement (collectively, the "Banks"; individually, a "Bank"), and
Bank of America National Trust and Savings Association, as agent for the
Banks.
WHEREAS, pursuant to the Indenture (this and other defined terms
having the meaning given in Section 1.1), the Company has issued the Timber
Notes; and
WHEREAS, the Company, to support the timely payment of the
interest on the Timber Notes in accordance with their terms, has requested
the Banks to make available to the Company a revolving credit facility upon
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms have the following meanings:
"Accelerated Advance" means each Advance outstanding as of
the declaration by the Agent pursuant to Section 8.2 that all Advances be
converted into "Accelerated Advances" (which Advances shall thereafter no
longer constitute Interest Advances or Termination Advances hereunder).
"Acceleration Event" means the acceleration of the Timber
Notes, which acceleration at the relevant time has not been rescinded.
"Advance" means any of the Interest Advances, Non-Renewal
Advances, Downgrade Advances, or Accelerated Advances, which may be a Base
Rate Advance or a LIBOR Advance (each, a "Type" of Advance), and any
reference to Advances also applies to all of the Interest Advances, Non-
Renewal Advances, Downgrade Advances, or Accelerated Advances.
"Affected Bank" has the meaning specified in Section 3.7.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies
of the other Person, whether through the ownership of voting securities,
membership interests, by contract, or otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.9, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Advance" has the meaning given in Section 2.11(a).
"Agent's Payment Office" means the address for payments set
forth on Schedule 10.2 or such other address as the Agent may from time to
time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means (a) with respect to any Base Rate
Advance, 0.00% per annum at any time that Advances have not been
continually outstanding for more than six months, and 0.50% per annum at
all other times, and (b) with respect to any LIBOR Advance, 0.75% per annum
at any time that Advances have not been continually outstanding for more
than six months, and 1.50% per annum at all other times. Notwithstanding
the foregoing, (1) at any time that a Triggering Event or an Acceleration
Event exists and at all times after a Line of Credit Acceleration, the
Applicable Margin shall be increased by 2.00% per annum, and (2) if any
Termination Advances are not repaid in full on or before the date scheduled
for the twelfth installment of principal on account thereof pursuant to
Section 2.6(a), the Applicable Margin shall be increased by an additional
0.75% per annum.
"Arranger" means BA Securities, Inc., a Delaware
corporation, formerly named BancAmerica Robertson Stephens.
"Assignee" has the meaning specified in Section 10.8(a).
"Assignment and Acceptance" has the meaning given in Section
10.8(a).
"Attorney Costs" means and includes all fees and
disbursements of any law firm or other external counsel, the allocated cost
of internal legal services and all disbursements of internal counsel.
"Availability Termination Date" means the earlier to occur
of the close of business on the Scheduled Termination Date and the Line of
Credit Acceleration.
"Bank" has the meaning specified in the introductory clause
hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section101, et seq.).
"Bankruptcy or Insolvency" has the meaning given in the
Indenture.
"Base Rate" means, for any day, the higher of: (a) 0.50%
per annum above the Federal Funds Rate; and (b) the rate of interest in
effect for such day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The "reference rate" is a
rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above,
or below such announced rate.) Any change in the reference rate announced
by BofA shall take effect at the opening of business on the day specified
in the public announcement of such change.
"Base Rate Advance" means an Advance that bears interest
based on the Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Advances of the same Type made to the Company on the same day.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3 or the Line of Credit Acceleration occurs under Section
8.2.
"Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in New York City, San Francisco, or
the Commonwealth of Massachusetts are authorized or required by law to
close and, if the applicable Business Day relates to any LIBOR Advance,
means such a day on which commercial banks are open for international
business (including dealings in dollar deposits) in London.
"Capital Adequacy Regulation" means any guideline, request
or directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.
"Collateral Agent" has the meaning given in the Indenture.
"Collection Account" has the meaning given in the Indenture.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by all Banks
(or, in the case of Section 4.1(f), waived by the Person entitled to
receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment" shall have the meaning specified in Section
2.1.
"Company" means Scotia Pacific Company LLC, a Delaware
limited liability company; provided, however, that any references to the
business and operations of the Company before the Closing Date refer to the
business and operations of Scotia Pacific Holding Company, a Delaware
corporation and a predecessor in interest of the Company (exclusive of the
operations attributable to the timberlands and timber and related timber
harvesting rights transferred by the Company pursuant to the Company
Transfer (as defined in the Offering Memorandum)), and to the operations
attributable to the timberlands and timber and related timber harvesting
rights transferred to the Company pursuant to the Palco Transfers (as
defined in the Offering Memorandum).
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which,
under Section 2.4, the Company (a) converts Base Rate Advances into LIBOR
Advances, or (b) continues a LIBOR Advance as such for a new Interest
Period.
"Deed of Trust" has the meaning given in the Indenture.
"Defaulting Bank" has the meaning given in Section 2.11(c).
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Downgrade Advance" means an extension of credit by a Bank
to the Company pursuant to Section 2.3(c).
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the "OECD"), or a
political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting
through a branch or agency located in the United States; (c) a Person that
is primarily engaged in the business of commercial banking and that is (i)
a Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (iii) a Person of which a Bank is a Subsidiary; and (d) any
other Person acceptable to the Agent and the Company in their sole and
absolute discretion; provided, however, that no Person shall constitute an
Eligible Assignee at any time that the Commitments are in effect unless
such Person meets the Rating Qualification.
"Environmental Claims" means all claims, however asserted,
by any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" has the meaning given in the Indenture.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the
Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer (as defined in Section 4001(a)(2) of ERISA)
or a cessation of operations which is treated as such a withdrawal under
Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or notification
that a Multiemployer Plan is in reorganization; (d) the filing of a notice
of intent to terminate, the treatment of a Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by
the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "LIBOR".
"Exchange Act" means the Securities Exchange Act of 1934,
and regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including
any such successor, "H.15(519)") for the preceding Business Day opposite
the caption "Federal Funds (Effective)"; or, if for any relevant day such
rate is not or, as of any relevant date, has not yet been so published for
any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent (and, upon request of the
Company or the Trustee in any instance, communicated to the Company or the
Trustee) of the rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by each of
three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in Section 2.8(a).
"Final Maturity Date" means July 20, 2028.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its principal
functions.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including, without limitation, net income taxes and
franchise taxes), and all liabilities with respect thereto, imposed by any
jurisdiction on account of amounts payable or paid pursuant to Section 3.1.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature
and authority within the U.S. accounting profession), which are applicable
to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Indebtedness" has the meaning given in the Indenture.
"Indemnified Liabilities" has the meaning specified in
Section 10.5.
"Indemnified Person" has the meaning specified in Section
10.5.
"Indenture" means the Indenture dated as of July 20, 1998,
between the Company and State Street Bank and Trust Company, as Trustee.
"Indenture Default" means a "Default" as defined in the
Indenture.
"Indenture Event of Default" means an "Event of Default" as
defined in the Indenture.
"Independent Auditor" has the meaning specified in Section
6.1(a).
"Interest Advance" means an extension of credit by a Bank to
the Company pursuant to Section 2.3(a).
"Interest Payment Date" means (a) as to any Interest
Advance, each Monthly Deposit Date occurring after such Advance is made,
(b) as to any Termination Advance, each Note Payment Date occurring after
such Advance is made and, in the case of an Interest Advance converted into
a Termination Advance, on the Monthly Deposit Date first occurring after
the date of such conversion, and (c) as to any Accelerated Advance, each
Monthly Deposit Date occurring after the Line of Credit Acceleration.
"Interest Period" means, as to any LIBOR Advance, (a)
in the case of an Interest Advance or Accelerated Advance, the period
commencing on the Borrowing Date of such Advance or on the
Conversion/Continuation Date on which the Advance is converted into or
continued as a LIBOR Advance, and ending on the next Monthly Deposit Date
occurring more than 4 Business Days after the commencement of such Interest
Period, and (b) in the case of a Termination Advance, the period commencing
on the Borrowing Date of such Advance or on the Conversion/Continuation
Date on which the Advance is converted into or continued as a LIBOR
Advance, and ending on the next Note Payment Date.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal functions under
the Code.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
10.02, or such other office or offices as such Bank may from time to time
notify the Company and the Agent.
"LIBOR" means, with respect to any LIBOR Advance for any
Interest Period therefor, the rate of interest per annum determined by the
Agent by reference to the London interbank offered rate for U.S. Dollar
deposits for the relevant Interest Period as set forth on the LIBOR Page
(as defined below) at 11:00 a.m., London time, on the applicable
Determination Date (as defined below). For purposes of the foregoing,
"LIBOR Page" means the display designated as Page 3750 on the Dow Jones
Markets (Telerate) Service, and if such page or a successor thereto is not
available, the Reuter's Screen LIBO Page (or such other page as may replace
such pages on such services for the purpose of displaying London interbank
offered rates of major banks); and "Determination Date" means the date two
Business Days prior to the first day of any Interest Period. In the case
of LIBOR Advances for an Interest Period commencing upon a Monthly Deposit
Date or up to three Business Days before or after a Monthly Deposit Date
and (in any such case) ending on the next Monthly Deposit Date, the
Interest Period for purposes of determining LIBOR will be presumed to be
one month; in the case of LIBOR Advances for an Interest Period commencing
upon one Note Payment Date and ending on the next Note Payment Date, the
Interest Period for purposes of determining LIBOR will be presumed to be
six months; and, in all other cases, the Interest Period employed in
determining LIBOR shall be the interest period closest to the actual
duration of such Interest Period for which rates are displayed on the LIBOR
Page.
"LIBOR Advance" means an Advance that bears interest based
on the LIBOR.
"Lien" has the meaning given in the Indenture.
"Line of Credit Acceleration" means the election by the
Banks pursuant to Section 8.2 to permanently cancel their obligations to
make Advances and, to the extent any Advances are outstanding, to convert
such Advances into Accelerated Advances.
"Liquidity Account" has the meaning given in the Indenture.
"Margin Stock" means "margin stock" as such term is defined
in Regulation T, U or X of the FRB.
"Material Adverse Effect" has the meaning given in the
Indenture.
"Minimum Principal Amortization" has the meaning given in
the Indenture.
"Monthly Deposit Date" has the meaning given in the
Indenture.
"Mortgaged Property" has the meaning given in the Indenture.
"Multiemployer Plan" means a "multiemployer plan", within
the meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions or,
during the preceding three calendar years, has made, or been obligated to
make, contributions.
"Non-Pro Rata Advance" shall mean an Advance made pursuant
to the deemed request by the Company pursuant to Section 2.11(c).
"Non Renewal Advance" means an extension of credit by a Bank
to the Company pursuant to Section 2.3(b).
"Note Payment Date" has the meaning given in the Indenture.
"Note Rate" has the meaning given in the Indenture.
"Notice of Borrowing" means a notice in substantially the
form of Exhibits A, B, or C, as applicable.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit D.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising hereunder or under the Fee
Letter, the Indenture, or the Deed of Trust owing by the Company to any
Bank, the Agent, or any Indemnified Person (in their capacities as such),
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter
arising.
"Offering Memorandum" means the Offering Memorandum dated
July 9, 1998, of the Company in respect of the Timber Notes.
"Operating Agreement" has the meaning given in the
Indenture.
"Operative Documents" means the Operative Documents as
defined in the Indenture, together with this Agreement, the Fee Letter, and
all certificates, Notices of Borrowing, and Notices of
Conversion/Continuation delivered pursuant hereto.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery, performance, enforcement or registration of, or otherwise with
respect to, this Agreement or any other Operative Documents.
"Participant" has the meaning specified in Section 10.8(d).
"Payment Account" has the meaning given in the Indenture.
"PBGC" means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plan years.
"Permitted Encumbrances" has the meaning given in the
Indenture.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Principal Amount" means with respect to any Advance on any
date, the aggregate outstanding principal amount thereof after giving
effect to any Borrowings and prepayments or repayments of Advances
occurring on such date.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) at such time of such Bank's Commitment divided by the aggregate
Commitments; provided, however, that for purposes of determining the Pro
Rata Share of Non-Pro Rata Advances by a Bank that is not a Defaulting
Bank, the Commitment of the Defaulting Bank shall be disregarded.
"Purchase Agreement" means the Note Purchase Agreement dated
July 9, 1998, between the Company, The Pacific Lumber Company, and Salomon
Brothers Inc., as Representative of the Initial Purchasers, with respect to
the purchase of the Timber Notes.
"Rating Qualification" means, with respect to any Bank or
potential Bank, the requirement that such Bank's short-term unsecured debt
be rated not less than "P-1" by Moody's (as defined in the Indenture) and
"A-1" by S&P (as defined in the Indenture) (or on its long-term unsecured
debt, if there are no applicable short-term unsecured debt ratings, that
the long-term unsecured debt rating of such Bank or potential Bank be rated
not less than "Aa2" by Moody's and "AA" by S&P).
"Replacement Bank" has the meaning specified in Section 3.7.
"Replacement Line of Credit" means a credit facility entered
into by the Company in replacement of this Agreement in compliance with
Section 11.4 of the Indenture.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been waived
in regulations issued by the PBGC.
"Required Banks" means at any time Banks then holding at
least 66-2/3% of the Principal Amount of the Advances, or, if no Principal
Amount is then outstanding, Banks then having at least 66-2/3% of the
Commitments.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of a
Governmental Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any of its property
is subject.
"Required Liquidity Amount" has the meaning given in the
Indenture.
"Responsible Officer" means (a) with respect to the Trustee,
a trust officer of the Trustee, and (b) with respect to the Company, the
chief executive officer, president or any vice-president, treasurer or any
assistant treasurer, or secretary or any assistant secretary of the
Company, or any other officer having substantially the same authority and
responsibility; or, with respect to certification of financial statements,
the chief financial officer or the treasurer of the Company, or any other
officer having substantially the same authority and responsibility.
"Scheduled Termination Date" means July 18, 1999, or such
later date to which the Scheduled Termination Date is extended in
accordance with Section 2.13.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation ,
association, partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person,
or one or more of the Subsidiaries of the Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company.
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, respectively, taxes imposed on or measured by
its net income and franchise taxes imposed on it by the jurisdiction (or
any political subdivision thereof) under the laws of which such Bank or the
Agent, as the case may be, is organized or maintains a lending office and
excluding any taxes, levies, assessments, imposts, duties, deductions, and
fees, including withholding taxes, to which a Bank or the Agent is subject
at the time such Bank or Agent becomes a party to this Agreement or to
which such Bank or Agent becomes subject for reasons other than a change of
law, treaty, or regulation or interpretation thereof by any Governmental
Authority.
"Termination Advance" means each Non-Renewal Advance, each
Downgrade Advance, and each Interest Advance outstanding at the time of the
making of any Non-Renewal Advance or Downgrade Advance (which Interest
Advances shall thereafter no longer constitute Interest Advances
hereunder).
"Timber Notes" has the meaning given in the Indenture.
"Triggering Event" has the meaning given in Section 8.1.
"Trustee" has the meaning given in the Indenture.
"Type" has the meaning specified in the definition of
"Advance."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for
the applicable plan year.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and Section, Schedule and Exhibit references
are to this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and
other writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding", and
the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, and references to sections therein shall include
references to any successor provisions contained in such amendments and
modifications, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Operative Document,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of
this Agreement.
(f) Unless otherwise expressly provided, any reference to
any action of the Agent or the Banks by way of consent, approval or waiver
shall be deemed modified by the phrase "in its/their sole discretion."
(g) This Agreement and certain of the other Operative
Documents are the result of negotiations among and have been reviewed by
counsel to the Agent, the Company and the other parties, and are the
products of all parties. Accordingly, they shall not be construed against
the Banks or the Agent merely because of the Agent's or Banks' involvement
in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II.
THE CREDITS
2.1 Amounts and Terms of Commitments.
Each Bank severally agrees, on the terms and conditions
set forth herein, to make loans to the Company (each such loan, an
"Advance") from time to time from the Closing Date through the Availability
Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth opposite such Bank's name on Schedule 2.1
(such amount as the same may be reduced under Section 2.5 or reduced or
increased as a result of one or more assignments under Section 10.8, the
Bank's "Commitment"); provided, however, that, after giving effect to any
Borrowing, the Principal Amount of all Advances shall not at any time
exceed the aggregate Commitments of all Banks. Within the limits of each
Bank's Commitment, unless a Termination Advance has been made, the Line of
Credit Acceleration has occurred, or a Triggering Event or an Acceleration
Event exists, and subject to the other terms and conditions hereof, the
Company may borrow under this Section 2.1, prepay under Section 2.6 and
reborrow under this Section 2.1.
2.2 Loan Accounts.
The Advances made by each Bank shall be evidenced by
one or more accounts or records maintained by such Bank and the Agent in
the ordinary course of business. The accounts or records maintained by the
Agent and each Bank shall be conclusive absent manifest error of the amount
of the Advances made by the Banks to the Company and the interest and
payments thereon. Any failure so to record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Company
hereunder to pay any amount owing with respect to the Advances.
2.3 Procedure for Borrowing.
(a) Interest Advances shall be made in one or more
Borrowings, on a Business Day that is either a Note Payment Date or the
first, second, or third Business Day before or after a Note Payment Date,
by delivery to the Agent of one or more written and completed Notices of
Borrowing complying with Section 2.3(d) in substantially the form of
Exhibit A, in an amount not exceeding the aggregate unused Commitments at
such time and shall be used solely for the payment when due of interest on
the Timber Notes (but not interest on premiums) at the Note Rates therefor
in accordance with Section 5.7 of the Indenture.
(b) Non-Renewal Advances shall be made in a single
Borrowing on a Business Day that is on or after the date 10 days before the
Scheduled Termination Date if such Scheduled Termination Date has not been
extended in accordance with Section 2.13 either by the Banks then parties
hereto or by substitution of Banks as provided in that Section (and no
Replacement Line of Credit to replace this Agreement has been obtained by
the Company) by delivery to the Agent of a written and completed Notice of
Borrowing complying with Section 2.3(d) in substantially the form of
Exhibit B, in an amount equal to the aggregate unused Commitments at such
time, and shall be used to fund the Liquidity Account in accordance with
Section 11.2(b) of the Indenture.
(c) Downgrade Advances shall be made in a single Borrowing
on a Business Day that is on or after the date 30 days after a downgrading
of the rating of any Bank below the Rating Qualification if no Replacement
Bank assumes the Commitment of such Bank in accordance with Section 3.7
(and no Replacement Line of Credit has been obtained by the Company), by
delivery to the Agent of a written and completed Notice of Borrowing
complying with Section 2.3(d) in substantially the form of Exhibit C, in an
amount equal to the aggregate unused Commitments at such time, and shall be
used to fund the Liquidity Account in accordance with Section 11.2(c) of
the Indenture.
(d) Each Borrowing of Advances shall be made upon the
Company's or the Trustee's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing (which notice must be received
by the Agent prior to 12:00 noon. (New York City time) (i) three Business
Days prior to the requested Borrowing Date, in the case of LIBOR Advances,
and (ii) on the requested Borrowing Date, in the case of Base Rate
Advances, specifying:
(A) the amount of the Borrowing;
(B) the requested Borrowing Date, which shall be a
Business Day; and
(C) the Type of Advances constituting the Borrowing,
subject to Sections 2.3(e) and (h).
(e) All Advances may be made as LIBOR Advances or Base Rate
Advances unless (1) in the case of Interest Advances, the aggregate amount
of Interest Advances requested in any Borrowing, together with all
outstanding LIBOR Advances continued on that Borrowing Date and all
outstanding Base Rate Advances converted to LIBOR Advances on that
Borrowing Date, is less than $1,000,000, or (2) in the case of Termination
Advances, there are fewer than 15 days in the Interest Period for such
Advances. In the cases described in (1) or (2) above, such Advances shall
be made as Base Rate Advances.
(f) The Agent will promptly notify each Bank of its receipt
of any Notice of Borrowing and of the amount of such Bank's Pro Rata Share
of that Borrowing.
(g) Each Bank will make the amount of its Pro Rata Share of
each Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office by 1:00 p.m. (New York City time) (in the case of
Base Rate Advances requested on or before 5:00 p.m. (New York City time) on
the preceding Business Day and LIBOR Advances) or 2:00 p.m. (New York City
time) (in the case of Base Rate Advances requested after 5:00 p.m. (New
York City time) on the preceding Business Day) on the Borrowing Date
requested by the Company in funds immediately available to the Agent.
Except as provided in Section 2.11(c) with respect to Non-Pro Rata
Advances, the proceeds of all such Advances will then be made available to
the Company by the Agent, in like funds as received by the Agent, by wire
transfer to the Trustee pursuant to the wire transfer instructions set
forth on Schedule 2.3(g), or such instructions as the Trustee may from time
to time provide to the Agent.
(h) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than five different Interest
Periods in effect.
(i) The Company irrevocably authorizes the Agent and the
Banks to accept Notices of Borrowing from the Trustee and agrees that they
will be entitled to rely upon any such Notices of Borrowing purporting to
be executed by a Responsible Officer of the Trustee without further
investigation or inquiry, notwithstanding any contrary direction or request
from the Company or any other Person, and without liability to, or creation
of any defense in favor of, the Company by virtue of such reliance.
(j) Upon the making of the Termination Advances as LIBOR
Advances, any Interest Advances converted into Termination Advances shall
be converted to LIBOR Advances on the same Borrowing Date. If Termination
Advances are made as Base Rate Advances, (i) any such Interest Advances
that are LIBOR Advances shall continue as LIBOR Advances until the end of
the relevant Interest Period and shall thereafter be continued or converted
to the same Type of Advance as all other Termination Advances, and (ii) any
such Interest Advances that are Base Rate Advances shall be continued as
such and shall thereafter be continued or converted to the same Type of
Advance as all other Termination Advances.
2.4 Conversion and Continuation Elections.
(a) Subject to Section 2.4(b), unless any outstanding
Advance is repaid in full on any Interest Payment Date, if such Advance is
a Base Rate Advance, it will be continued as such, and if such Advance is a
LIBOR Advance, it will be converted into a Base Rate Advance as of such
Interest Payment Date.
(b) The Company may, by delivery of a Notice of
Conversion/Continuation to the Agent in accordance with Section 2.4(c),
elect, (i) as of any Business Day, to convert any Base Rate Advance, or
portion thereof that will be outstanding after such Business Day, into a
LIBOR Advance, or (ii) as of any Interest Payment Date, to continue any
existing LIBOR Advance, or portion thereof that will be outstanding after
such Interest Payment Date, as a LIBOR Advance; provided, that (x) a Base
Rate Advance may be converted into a LIBOR Advance only if the aggregate
amount of all Advances, including such Base Rate Advance, being borrowed or
continued as or converted to LIBOR Advances on the relevant Business Day
equals or exceeds $1,000,000 and the Interest Period for such LIBOR
Advances is at least 26 days long; and (y) if at any time the aggregate
amount of LIBOR Advances having the same Interest Period is reduced, by
payment, prepayment, or conversion of part thereof to be less than
$1,000,000, such LIBOR Advances shall automatically convert into Base Rate
Advances.
(c) The Company shall deliver a Notice of
Conversion/Continuation, which notice shall be irrevocable, to be received
by the Agent not later than 12:00 noon (New York City time) at least three
Business Days in advance of the Conversion/ Continuation Date, specifying:
(A) the proposed Conversion/Continuation Date; and
(B) the aggregate amount of Advances to be converted
or continued.
(d) The Agent will promptly notify each Bank of its receipt
of a Notice of Conversion/Continuation or, if no timely notice is provided
by the Company, the Agent will promptly notify each Bank of the details of
any automatic conversion. All conversions and continuations shall be made
ratably according to the respective Principal Amounts of the Advances with
respect to which the notice was given held by each Bank.
(e) After giving effect to any conversion or continuation
of Advances, unless the Agent shall otherwise consent, there may not be
more than five different Interest Periods in effect.
2.5 Commitment Reductions and Terminations.
(a) The aggregate Commitments will be reduced upon and to
the extent of each reduction in the Required Liquidity Amount. Once
reduced in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to each Bank
according to its respective Pro Rata Share. The Company will notify the
Agent of each reduction in the Required Liquidity Amount on or before the
Business Day such reduction occurs, and the Agent will promptly notify each
Bank thereof.
(b) Upon the earliest to occur of the making of the
Termination Advances, the Availability Termination Date, or upon the
effectiveness of any Replacement Line of Credit, the Commitments shall
terminate. In addition, the Company may elect to terminate the
Commitments, with the consent of the Trustee or following discharge of the
Indenture, by providing three Business Day's prior irrevocable written
notice to the Agent accompanied upon the date of termination with repayment
in full of all Obligations, including payment of the commitment fee
described in Section 2.10(b) through the date of such termination.
2.6 Repayment of Advances.
(a) Subject to Section 2.10(d), the Company shall repay the
Principal Amount of the Termination Advances in twelve semiannual
installments commencing on the first Interest Payment Date occurring at
least 27 but not more than 33 months after the date such Termination
Advances were made. Such installments shall be equal to the principal
payments that would be required to fully amortize the Principal Amount of
Termination Advances with twelve equal installments of principal and
interest assuming, hypothetically, that the interest thereon was the
interest rate applicable to a LIBOR Advance having an Interest Period of
six months made on the date 10 days before the date the first such
principal installment is due. The Agent shall calculate such amortization
schedule and provide it to the Company, the Trustee, and each Bank promptly
after such date of determination. If the amount available pursuant to the
Indenture for payment of any such installment of principal on any Interest
Payment Date is insufficient to make such payment in full, such amount
shall, subject to Section 2.10(d), be payable upon the next Interest
Payment Date, and successive Interest Payment Dates thereafter, until
payment in full.
(b) Subject to Section 2.10(d), the Company shall repay the
Principal Amount of Interest Advances and Accelerated Advances upon each
Monthly Deposit Date as and to the extent of funds available therefor under
Section 5 of the Indenture.
(c) The Company shall repay the Principal Amount of all
Advances upon the effectiveness of any Replacement Line of Credit. In
addition, upon three Business Day's prior irrevocable written notice to the
Agent, the Company may prepay the Advances in whole or in part.
(d) The Company shall repay the Principal Amount of all
Advances on the Final Maturity Date.
2.7 Interest.
(a) Each Advance shall bear interest on the Principal
Amount thereof from the applicable Borrowing Date at a rate per annum equal
to LIBOR or the Base Rate, as the case may be (and subject to the Company's
right to convert Base Rate Advances to LIBOR Advances under Section 2.4),
plus the Applicable Margin.
(b) Subject to Section 2.10(d), interest on each Advance
shall be paid in arrears on each Interest Payment Date, on the
effectiveness of any Replacement Line of Credit, and on the Final Maturity
Date. Interest shall also be paid on the date of any repayment of Advances
under Section 2.6 for the portion of the Advances so repaid.
(c) Any amounts not constituting the principal balance of
Advances including, to the extent permitted by law, interest not paid when
due hereunder, shall bear interest, from the date such amounts become due
and payable hereunder, at the rate that would then be applicable to Base
Rate Advances.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period
for which interest is computed hereunder, to the extent (but only to the
extent) that contracting for or receiving such payment by such Bank would
be contrary to the provisions of any law applicable to such Bank limiting
the highest rate of interest that may be lawfully contracted for, charged
or received by such Bank, and in such event the Company shall pay such Bank
interest at the highest rate permitted by applicable law.
2.8 Fees.
(a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall
pay an agency fee to the Agent for the Agent's own account, as required by
the letter agreement ("Fee Letter") between the Company, The Pacific Lumber
Company, and the Arranger and Agent dated June 9, 1998.
(b) Commitment Fee. The Company shall pay to the Agent for
the account of each Bank a commitment fee on such Bank's actual daily
unused Commitment equal to 0.625% per annum. Such commitment fee shall
accrue from the Closing Date to the termination of the Commitments and
shall be due and payable quarterly in arrears on the Monthly Deposit Dates
occurring in January, April, July, and October of each year. Such
commitment fee shall be computed by giving effect to any reduction in the
Commitments pursuant to Section 2.5 on the later of the effective date of
such reduction or the third Business Day after the Company notifies the
Agent thereof.
2.9 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Advances
when the Base Rate is determined by BofA's "reference rate" shall be made
on the basis of a year of 365 or 366 days, as the case may be, and actual
days elapsed. All other computations of fees and interest shall be made on
the basis of a 360-day year and actual days elapsed (which results in more
interest and fees being paid than if computed on the basis of a 365-day
year). Interest and the commitment fee shall accrue during each period
during which interest or such fees are computed from the first day thereof
to the last day thereof.
(b) Each determination of an interest rate by the Agent
shall be conclusive and binding on the Company and the Banks in the absence
of manifest error.
2.10 Payments by the Company.
(a) All payments to be made by the Company shall be made
without set-off, recoupment or counterclaim. All payments by the Company
(other than payments under Sections 10.4 and 10.5, which shall be paid
directly to the Persons entitled thereto) shall be made to the Agent for
the account of the Banks at the Agent's Payment Office, and shall be made
in dollars and in immediately available funds, no later than 3:00 p.m. (New
York City time) on the date specified herein. The Agent will promptly
distribute such payment, in like funds as received, to each Bank as
follows: payment of interest will be distributable to the Banks pro rata in
accordance with the Principal Amount of Advances made by each Bank;
payments of principal will be distributed first in repayment of Agent's
Advances (if any), second in repayment of Non-Pro Rata Advances (if any) on
a pro rata basis among Banks having made such Advances, and third to all
other Advances pro rata in accordance with the Principal Amount thereof
held by each Bank; and all other amounts will be distributable in
accordance with the Banks' Pro Rata Share (or other applicable share as
expressly provided herein). Any payment received by the Agent later than
3:00 p.m. (New York City time) shall be deemed to have been received on the
following Business Day and any applicable interest shall continue to
accrue.
(b) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest.
(c) Unless the Agent receives notice from the Company
before the date on which any payment is due to the Banks that the Company
will not make such payment in full as and when required, the Agent may
assume that the Company has made such payment in full to the Agent on such
date in immediately available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each Bank on
such due date an amount equal to the amount then due such Bank. If and to
the extent the Company has not made such payment in full to the Agent, each
Bank shall repay to the Agent on demand such amount distributed to such
Bank, together with interest thereon at the Federal Funds Rate for each day
from the date such amount is distributed to such Bank until the date
repaid.
(d) Notwithstanding any other provision of this Agreement,
unless all outstanding Advances are being repaid in full and the
Commitments have been or are being terminated, all payments to be made by
the Company under this Agreement shall be made only from the Collection
Account or the Payment Account, as the case may be, as provided and on the
dates specified in the Indenture and only to the extent that the Company
shall have sufficient income or proceeds therefrom to enable the Company to
make payments in accordance with the terms hereof after giving effect to
the priority of payments provisions set forth in the Indenture. If the
amount of Liquidity Provider Expenses (as defined in the Indenture) or the
amount of principal or interest on account of the Advances included for
payment in any Monthly Trustee Certificate (as defined in the Indenture)
submitted by the Company to the Trustee pursuant to Section 5.3(b) of the
Indenture does not accurately reflect the amount owed to the Agent and the
Banks, the Agent may or, upon direction of the Required Banks, shall notify
the Company of such deficiency. If such deficiency is not remedied by
inclusion of such amounts in the next Monthly Trustee Certificate delivered
after such notice, then the Agent shall be entitled to certify to the
Trustee (with a copy to the Company) the appropriate amount of additional
Liquidity Provider Expenses, principal, or interest pursuant to Section
5.3(g) of the Indenture, which certification shall be conclusive absent
manifest error.
2.11 Payments by the Banks to the Agent; Defaulting Banks.
(a) Unless the Agent receives notice from a Bank, at least
one Business Day prior to the date of any Borrowing, that such Bank will
not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount
available to the Agent in immediately available funds on the Borrowing Date
and the Agent may (but shall not be so required), in reliance upon such
assumption, make available to the Company on such date a corresponding
amount. If and to the extent any Bank shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, that Bank
shall on the Business Day following such Borrowing Date make such amount
available to the Agent, together with interest at the Federal Funds Rate
for each day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this Section 2.11(a) shall be
conclusive, absent manifest error. If such amount is so made available,
such payment to the Agent shall constitute such Bank's Advance on the date
of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing
Date, such Advance (an "Agent's Advance") shall be payable solely to the
Agent for its own account.
(b) The failure of any Bank to make any Advance on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder
to make an Advance on such Borrowing Date, but no Bank shall be responsible
for the failure of any other Bank to make the Advance to be made by such
other Bank on any Borrowing Date except to the extent set forth in Section
2.11(c).
(c) If any Bank fails to make an Advance on any Borrowing
Date in violation of its obligations hereunder (a "Defaulting Bank"), the
Agent, promptly following its actual knowledge of such failure, will notify
the Company and each of the Banks of such failure and the amount of the
Advance that such Defaulting Bank failed to make, and such notice will be
deemed to constitute an irrevocable request by the Company for a Base Rate
Advance in an amount equal to the lesser of (1) the amount of the Advance
that such Defaulting Bank failed to make and (2) the unused Commitments of
the Banks not constituting a Defaulting Bank with respect to such Advance.
Such deemed request will be effective as and to the extent of a Notice of
Borrowing delivered at such time pursuant to Section 2.3, and each Bank
confirms that its commitment contained in Section 2.1 remains applicable,
subject to the limitations set forth in that Section, with respect to
Advances requested under this Section 2.11(c). Without limiting the
foregoing, in no instance shall any Bank be obligated to make Advances that
would cause the Principal Amount of its Advances to exceed such Bank's
Commitment. To the extent the Agent had made an Agent's Advance on account
of amounts such Defaulting Bank failed to advance, the Agent shall retain
the proceeds of such Non-Pro Rata Advances for its own account in repayment
of such Agent's Advances. All proceeds of Non-Pro Rata Advances not so
applied shall be disbursed as provided in Section 2.3(g).
2.12 Sharing of Payments, Etc.
If, other than as expressly provided elsewhere herein, any
Bank shall obtain on account of the Advances made by it any payment
(whether voluntary, involuntary, through the exercise of any right of set-
off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent
of such fact, and (b) purchase from the other Banks such participations in
the Advances made by them as shall be necessary to cause such purchasing
Bank to share the excess payment pro rata with each of them; provided,
however, that if all or any portion of such excess payment is thereafter
recovered from the purchasing Bank, such purchase shall to that extent be
rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from
the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Agent
will keep records (which shall be conclusive and binding in the absence of
manifest error) of participations purchased under this Section and will in
each case notify the Banks following any such purchases or repayments.
2.13 Extension of Scheduled Termination Date.
At least 75 and no earlier than 120 days before each
Scheduled Termination Date, the Company or the Trustee may request, through
the Agent, that each Bank extend the Scheduled Termination Date, effective
upon the day following the Scheduled Termination Date then in effect, to a
date that is 364 days following the Scheduled Termination Date then in
effect. Each Bank that elects to extend the Scheduled Termination Date
will so indicate by notifying the Agent, the Company and the Trustee in
writing during the period between 60 and 50 days before the Scheduled
Termination Date then in effect. If some but less than all of the Banks
elect to extend the Scheduled Termination Date during the aforesaid period,
the Company may (but shall not be obligated to) invoke the provisions of
Section 3.7 to substitute, effective following the Scheduled Termination
Date then in effect, for the Commitments and Advances of any Bank that has
not elected to extend the Scheduled Termination Date. Unless the
Termination Advance has earlier been made or a Line of Credit Acceleration
has earlier occurred, the Scheduled Termination Date will be extended as
aforesaid if, on or before the Scheduled Termination Date then in effect,
after taking into account any substitution in accordance with Section 3.7,
Banks with aggregate Commitments equal to the Required Liquidity Amount
have agreed to the extension of the Scheduled Termination Date as
aforesaid. If the Scheduled Termination Date shall be so extended, any
Bank not electing to extend shall cease to be a party to this Agreement
effective upon its replacement under Section 3.7, and, if such Bank's
Advances have been assigned to a Replacement Bank in accordance with
Section 3.7, such Bank shall have no continuing rights or obligations
hereunder except under those sections that are expressly to survive
termination of the Commitments and repayment of the Advances. No Bank that
does not at the time meet the Rating Qualification will be permitted to
elect to extend the Scheduled Termination Date.
ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes.
(a) Any and all payments by the Company to each Bank or the
Agent under this Agreement and any other Operative Document shall be made
free and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any
sum payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so
that, after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section), such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received and retained had
no such deductions or withholdings been made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) the Company shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid, Further
Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes,
Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each
Bank and the Agent for the full amount of (i) Taxes, (ii) Other Taxes, and
(iii) Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if
such Taxes, Other Taxes or Further Taxes had not been imposed, and any
liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes, Other
Taxes or Further Taxes were correctly or legally asserted by a relevant
Government Authority. Payment under this indemnification shall be made
within 30 days after the date the Bank or the Agent makes written demand
therefor, subject, however, to Section 2.10(d).
(d) Within 30 days after the date of any payment by the
Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish
to each Bank or the Agent the original or a certified copy of a receipt
evidencing payment thereof, or other evidence of payment satisfactory to
such Bank or the Agent.
(e) If the Company is required to pay any amount to any
Bank or the Agent pursuant to Sections 3.1(b) or (c), then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any
such additional payment by the Company which may thereafter accrue, if such
change in the sole judgment of such Bank is not otherwise disadvantageous
to such Bank.
3.2 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for any Bank or its applicable Lending Office
to make LIBOR Advances, then, on notice thereof by the Bank to the Company
through the Agent, any obligation of that Bank to make LIBOR Advances shall
be suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist (which
notification will be given by such Bank promptly after such circumstances
cease to exist).
(b) If a Bank determines that it is unlawful to maintain
any LIBOR Advance, the Company shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full
such LIBOR Advances of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last
day of the Interest Period thereof, if the Bank may lawfully continue to
maintain such LIBOR Advances to such day, or immediately, if the Bank may
not lawfully continue to maintain such LIBOR Advance. If the Company is
required to so prepay any LIBOR Advance, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, and the
affected Bank shall advance to the Company, a Base Rate Advance in the
amount of such repayment.
(c) If the obligation of any Bank to make or maintain LIBOR
Advances has been so terminated or suspended, the Company may elect, by
giving notice to the Bank through the Agent that all Advances which would
otherwise be made by the Bank as LIBOR Advances shall be instead Base Rate
Advances.
(d) Before giving any notice to the Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its LIBOR Advances if such designation will avoid the need for
giving such notice or making such demand and will not, in the good faith
judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition
of or increase in reserve requirements included in the calculation of the
LIBOR or in respect of the assessment rate payable by any Bank to the FDIC
for insuring U.S. deposits) in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or
request from any central bank or other Governmental Authority (whether or
not having the force of law), there shall be any increase in the cost to
such Bank of agreeing to make or making, funding or maintaining any LIBOR
Advances, then the Company shall, following demand of such Bank upon the
Company through the Agent, subject to Section 2.10(d), pay to the Agent for
the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or
other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by the Bank (or its Lending
Office) or any corporation controlling the Bank with any change in Capital
Adequacy Regulation, which introduction, change, or compliance requirement
is first implemented after the date of this Agreement or, if later, the
date a Bank becomes a Bank hereunder, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's
or such corporation's policies with respect to capital adequacy and such
Bank's desired return on capital) determines that the amount of such
capital is increased as a consequence of its Commitment, loans, credits or
obligations under this Agreement, then, upon demand of such Bank to the
Company through the Agent, the Company shall pay to the Agent for the
account of such Bank, from time to time as specified by the Bank, subject
to Section 2.10(d), additional amounts sufficient to compensate the Bank
for such increase.
(c) Before giving any notice to the Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its LIBOR Advances if such designation will avoid the need for
giving such notice or making such demand or reduce the amount of any
compensation payable to such Bank pursuant to this Section and will not, in
the good faith judgment of the Bank, be illegal or otherwise
disadvantageous to the Bank.
3.4 Funding Losses.
The Company shall reimburse each Bank and hold each Bank
harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis
any payment of principal of any LIBOR Advance;
(b) the failure of the Company or the Trustee to borrow,
continue or convert an Advance after either of them has given (or is deemed
to have given) a Notice of Borrowing or a Notice of Conversion/
Continuation;
(c) the prepayment or other payment (including in
connection with an assignment by an Affected Bank pursuant to Section 3.7
or following a Line of Credit Acceleration) of a LIBOR Advance on a day
that is not the last day of the relevant Interest Period; or
(d) the conversion under Section 2.3(j) of any LIBOR
Advance into a Termination Advance having a different Interest Period on a
day that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Advances or from
fees payable to terminate the deposits from which such funds were obtained.
For purposes of calculating amounts payable by the Company to the Banks
under this Section and under Section 3.3(a), each LIBOR Advance made by a
Bank (and each related reserve, special deposit or similar requirement)
shall be conclusively deemed to have been funded at the rate used in
determining LIBOR for such LIBOR Advance by a matching deposit or other
borrowing in the interbank eurodollar market for a comparable amount and
for a comparable period, whether or not such LIBOR Advance is in fact so
funded.
3.5 Inability to Determine Rates.
If the Agent determines that for any reason adequate and
reasonable means do not exist for determining the LIBOR for any requested
Interest Period with respect to a proposed LIBOR Advance, or that the LIBOR
applicable pursuant to Section 2.7 for any requested Interest Period with
respect to a proposed LIBOR Advance does not adequately and fairly reflect
the cost to the Banks of funding such Advance, the Agent will promptly so
notify the Company and each Bank. Thereafter, the obligation of the Banks
to make or maintain LIBOR Advances hereunder shall be suspended until the
Agent upon the instruction of the Required Banks revokes such notice in
writing (which instruction each Bank agrees to give promptly upon the
circumstances described in this Section 3.5 ceasing to exist). Upon
receipt of such notice, the Company may revoke any Notice of
Conversion/Continuation then submitted by it, and, if the Company or the
Trustee has submitted a Notice of Borrowing requesting LIBOR Advances, the
Banks shall make such Advances in the amount specified in such Notice of
Borrowing as Base Rate Advances instead of LIBOR Advances.
3.6 Certificates of Banks.
Any Bank claiming reimbursement or compensation under this
Article III shall deliver to the Company (with a copy to the Agent) a
certificate setting forth in reasonable detail the calculation or other
determination of the amount payable to the Bank hereunder and such
certificate shall be conclusive and binding on the Company in the absence
of manifest error.
3.7 Substitution of Banks.
Upon (a) the receipt by the Company from any Bank of a claim
for compensation under, or notice from any Bank of a circumstance described
in, Section 3.1, Section 3.2, Section 3.3, or (b) any Bank being downgraded
so that it no longer satisfies the Rating Qualification, or (c) any Bank
electing not to extend the Scheduled Termination Date before the date 50
days before such Scheduled Termination Date pursuant to Section 2.13 after
a request to do so by the Company or the Trustee pursuant to that Section,
or (d) a Bank becoming a Defaulting Bank (a Bank described in any of the
foregoing clauses (a) through (d) being referred to as an "Affected Bank"),
the Company may: (i) except in the case of an Affected Bank described in
clause (c) above, request the Affected Bank to use its best efforts to
obtain an Eligible Assignee (which, in the case of a substitution as a
result of a claim or circumstance referred to in clause (a) above, would
not following such substitution subject the Company or be subject to
similar claims or circumstances) to acquire and assume all or a ratable
part of all of such Affected Bank's Advances and Commitment; (ii) request
one more of the other Banks to acquire and assume all or a ratable part of
such Affected Bank's Advances and Commitment; or (iii) designate an
Eligible Assignee to acquire and assume all or a ratable part of such
Affected Bank's Advances and Commitment (any Bank or Eligible Assignee
making an acquisition and assumption pursuant to clause (i), (ii), or (iii)
above being referred to as a "Replacement Bank"). Any such designation of
a Replacement Bank under clause (i) or (iii) shall be subject to the prior
written consent of the Agent, which consent shall not be unreasonably
withheld. In the event of the replacement of an Affected Bank, such
Affected Bank agrees to assign its rights and obligations hereunder,
including its Commitment and Advances, to a Replacement Bank selected in
accordance with the foregoing upon payment by the Replacement Bank to such
Bank of the Principal Amount of the Affected Bank's Advances (with any
accrued but unpaid interest thereon and any accrued but unpaid commitment
fee under Section 2.8 to be payable to the Affected Bank as provided in the
Assignment and Acceptance), to effect each such assignment in accordance
with, and subject to the terms and conditions of, Section 10.8, and to take
all other action reasonably necessary to permit a Replacement Bank to
succeed to its rights and obligations hereunder; provided, however, that
the Company shall be liable for the payment upon demand, but subject to
Section 2.10(d), of all costs and other amounts arising under Section 3.4
that result from the acquisition of any Affected Bank's LIBOR Advances (or
any portion thereof) by a Bank or a Replacement Bank on a date other than
the last day of the applicable Interest Period therefor.
3.8 Survival.
The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV.
CONDITIONS PRECEDENT
4.1 Conditions of Closing Date.
The obligations of each Bank hereunder are subject to the
condition that the Agent shall have acknowledged in writing on the Closing
Date, on behalf of itself and each of the Banks, its receipt of all of the
following (to the extent receipt thereof has not been waived in writing),
in form and substance reasonably satisfactory to the Agent and each Bank,
and with sufficient copies for each Bank:
(a) Credit Agreement. This Agreement executed by each
party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of managers
of the Company authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant Secretary of the
Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers of the Company authorized to execute, deliver and perform this
Agreement, and all other Operative Documents;
(c) Operating Agreement; Good Standing. Each of the
following documents:
(i) the Operating Agreement of the Company, certified
by the Secretary or Assistant Secretary of the Company as of the Closing
Date; and
(ii) a good standing and tax good standing certificate
for the Company from the Secretary of State (or similar, applicable
Governmental Authority) of the States of Delaware and California as of a
recent date, together with (in the case of Delaware) a bring-down
certificate by facsimile, dated the second Business Day preceding the
Closing Date;
(d) Operative Documents.
(i) A copy of the Deed of Trust, duly executed by the
Company, as trustor, and duly notarized, together with legal descriptions
of the real property Mortgaged Property, which Deed of Trust shall have
been submitted to the issuer of the title policy referred to below for
recording in the official records of the County Recorder's office of the
Humboldt County;
(ii) written advice relating to such Lien and judgment
searches as the Agent or any Bank shall have requested, and copies of such
termination statements or other documents as may be necessary to confirm
that the Mortgaged Property is subject to no other Liens in favor of any
Persons (other than Permitted Encumbrances);
(iii) evidence that all other actions necessary or, in
the opinion of the Agent or the Banks, desirable to perfect and protect the
first priority security interest created by the Deed of Trust with respect
to the Mortgaged Property have been taken;
(iv) an A.L.T.A. Form B (or other form acceptable to
the Agent and the Banks) mortgagee policy of title insurance or a binder
issued by a title insurance company satisfactory to the Agent and the Banks
insuring (or undertaking to insure, in the case of a binder) that the Deed
of Trust creates and constitutes a valid first Lien against the real
property included in the Mortgaged Property in favor of the Trustee,
subject only to exceptions reasonably acceptable to the Agent and the
Banks, with such endorsements, affirmative insurance, and reinsurance as
the Agent or any Bank may reasonably request; and
(v) copies of each other Operative Document identified
herein or in the Indenture;
(e) Legal Opinions.
(i) an opinion of Kramer, Levin, Naftalis and Frankel,
counsel to the Company, and an opinion of Managing Counsel of the Company,
each addressed to the Agent and the Banks, in form and substance
satisfactory to the Agent and the Required Banks; and
(ii) reliance letters addressed to the Agent and the
Banks, in form and substance satisfactory to the Agent and the Required
Banks, with respect to the opinions to be delivered pursuant to the
Purchase Agreement by Kramer, Levin, Naftalis and Frankel, counsel to the
Company and The Pacific Lumber Company, Managing Counsel of the Company,
Managing Counsel of Pacific Lumber and Sheppard, Mullin, Richter & Hampton
LLP, counsel to the Company and The Pacific Lumber Company.
(f) Payment of Fees. Evidence of payment by the Company of
all accrued and unpaid fees, costs and expenses to the extent then due and
payable hereunder on the Closing Date, together with reasonable Attorney
Costs of BofA to the extent invoiced prior to or on the Closing Date, plus
such additional amounts of reasonable Attorney Costs as shall constitute
BofA's reasonable estimate of Attorney Costs incurred or to be incurred by
it in connection with the Closing Date (provided that such estimate shall
not thereafter preclude final settling of accounts between the Company and
BofA); including any such costs, fees and expenses arising under or
referenced in Sections 2.8 and 10.4;
(g) Pacific Lumber Certificate. A certificate signed on
behalf of The Pacific Lumber Company by its chief financial officer, dated
as of the Closing Date, stating that:
(i) the representations and warranties of The Pacific
Lumber Company and its subsidiaries in each of the Operative Documents
identified herein or in the Indenture to which it is a party are true and
correct in all material respects on and as of such date, as though made on
and as of such date;
(ii) the Merger, the Palco Transfers, and the Company
Transfer (as defined in the Offering Memorandum) have been completed
substantially as described in the Offering Memorandum, the Old Timber Notes
(as defined therein) shall have been repaid in full;
(h) Company Certificate. A certificate signed on behalf of
the Company by a Responsible Officer, dated as of the Closing Date, stating
that:
(i) the representations and warranties contained in
Article V and each of the representations and warranties of the Company in
each of the other Operative Documents identified herein or in the Indenture
are true and correct in all material respects on and as of such date, as
though made on and as of such date; and
(ii) the Company has duly issued and sold not less than
$800,000,000 but not more than $900,000,000 of Timber Notes as contemplated
by the Offering Memorandum, which Timber Notes have been rated BBB or
higher by S&P and Baa2 or higher by Moody's and all other conditions
precedent to the purchase of the Timber Notes by the Initial Purchasers
under the Purchase Agreement have been satisfied; and
(i) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may reasonably request.
4.2 Conditions to Each Advance.
The obligation of each Bank to make any Advance is subject
to the satisfaction of the following conditions precedent on the relevant
Borrowing Date:
(a) Closing Date. The Closing Date shall have occurred and
the Availability Termination Date shall not have occurred;
(b) Triggering, Acceleration Events. No Triggering Event
or Acceleration Event shall exist on such Borrowing Date; and
(c) Notice of Borrowing. A Notice of Borrowing complying
with Section 2.3 shall have been delivered to Agent, properly completed for
the type of Advance requested.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants, on and as of the
Closing Date after giving effect to the transactions described in Section
4.1(g)(ii), to the Agent and each Bank that:
5.1 Existence and Power.
The Company:
(a) is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to (1) own its assets,
carry on its business and to execute, deliver, and (2) perform its
obligations under the Operative Documents;
(c) is duly qualified as a foreign limited liability
company and is licensed and in good standing under the laws of California,
and there is no other jurisdiction where its ownership, lease or operation
of property or the conduct of its business requires such qualification or
license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clauses (b)(1), (c) or (d), to the
extent that the failure to do so would not reasonably be expected to have a
Material Adverse Effect.
5.2 Authorization; No Contravention.
The execution, delivery and performance by the Company of
this Agreement and each other Operative Document to which it is a party,
have been duly authorized by all necessary limited liability company
action, and do not and will not:
(a) contravene the terms of the Operating Agreement;
(b) conflict with or result in any breach or contravention
of, or the creation of any Lien under, any document evidencing any
Contractual Obligation (other than Liens created in favor of the Trustee or
the Collateral Agent under the Operative Documents) to which the Company is
a party or any order, injunction, writ or decree of any Governmental
Authority to which the Company or its property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization.
No approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority is
necessary or required in connection with the execution, delivery or
performance by, or enforcement against, the Company of this Agreement or
any other Operative Document, except for such of the foregoing as have been
made or obtained on or before the Closing Date or which are contemplated by
the Operative Documents or described in the Offering Memorandum but which
are not required to be made as of the Closing Date.
5.4 Binding Effect.
This Agreement and each other Operative Document to which
the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability. The Deed of Trust is effective to create, in favor of the
Collateral Agent for the benefit of the Secured Parties (as defined in the
Indenture), a first priority security interest in and lien upon the
Mortgaged Property, subject to Permitted Encumbrances.
5.5 Litigation.
Except as specifically disclosed in the Offering Memorandum
or as would not have a Material Adverse Effect, there are no actions,
suits, proceedings, claims or disputes pending, or to the best knowledge of
the Company, threatened or contemplated, at law, in equity, in arbitration
or before any Governmental Authority, against the Company or any of its
properties. No injunction, writ, temporary restraining order or any order
of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of
this Agreement or any other Operative Document, or directing that the
transactions provided for herein or therein not be consummated as herein or
therein provided.
5.6 No Default.
As of the Closing Date, the Company is not in default under
or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably be
expected to have a Material Adverse Effect.
5.7 ERISA Compliance.
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS and to
the best knowledge of the Company, nothing has occurred which would cause
the loss of such qualification. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect. There
has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with
respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither the Company nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and
no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or 4243 of
ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor
any ERISA Affiliate has engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
5.8 Title to Properties.
The Company has good record and marketable title in fee
simple to, or valid leasehold interests in, or Company Timber Rights (as
defined in the Indenture) in, all real property necessary or used in the
ordinary conduct of its business, except for Permitted Encumbrances and
such defects in title as could not, individually or in the aggregate, have
a Material Adverse Effect.
5.9 Financial Condition.
(a) The audited annual financial statements of the Company
dated December 31, 1997, the unaudited quarterly financial statements of
the Company dated March 31, 1998, and the related consolidated statements
of income and cash flows for the fiscal periods ended on those dates:
(i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise
expressly noted therein;
(ii) fairly present the financial condition of the
Company as of the date thereof and results of operations for the period
covered thereby; and
(iii) show all material indebtedness and other
liabilities, direct or contingent, of the Company as of the date thereof,
including liabilities for taxes, material commitments and contingent
obligations, subject, in the case of the quarterly statements, to good
faith audit adjustments.
(b) Since December 31, 1997, except as disclosed in the
Offering Memorandum or in the reports filed by the Company or The Pacific
Lumber Company with the SEC pursuant to the Securities Exchange Act of
1934, as amended, before the Closing Date, there has been no Material
Adverse Effect.
5.10 Environmental Matters.
The Company conducts in the ordinary course of business a
review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a
result thereof the Company has reasonably concluded that, except as
disclosed in the Offering Memorandum, such Environmental Laws and
Environmental Claims would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
5.11 Regulated Entities.
None of the Company, any Person controlling the Company, or
any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power
Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.12 No Burdensome Restrictions.
Except as disclosed in the Offering Memorandum, the Company
is not a party to or bound by any Contractual Obligation, or subject to any
Requirement of Law, which would reasonably be expected to have a Material
Adverse Effect.
5.13 Subsidiaries.
The Company has no Subsidiaries and has no equity
investments in any other Person.
5.14 Insurance.
The properties of the Company are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in
such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where the Company operates, it being
understood, however, that the Company does not maintain insurance in
respect of standing timber.
5.15 Full Disclosure.
None of the representations or warranties made by the
Company in the Operative Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in
any exhibit, report, statement or certificate furnished by or on behalf of
the Company in connection with the Operative Documents (including the
Offering Memorandum) contain any untrue statement of a material fact or
collectively omit any material fact necessary to make the statements made
therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VI.
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Advance or other Obligation shall remain unpaid or unsatisfied
6.1 Financial Statements.
The Company shall deliver to the Agent and each Bank, in
form and detail reasonably satisfactory to the Agent and the Required
Banks:
(a) as soon as available, but not later than 105 days after
the end of each fiscal year (commencing with the fiscal year ended December
31, 1998), a copy of the audited balance sheet of the Company as at the end
of such year and the related statements of income or operations and cash
flows for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, and accompanied by the opinion of
Arthur Andersen LLP or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state that such
financial statements present fairly, in all material respects, the
financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's records;
(b) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended September 30, 1998), a copy of
the unaudited balance sheet of the Company as of the end of such quarter
and the related statements of income or operations and cash flows for the
period commencing on the first day and ending on the last day of such
quarter, and certified on behalf of the Company by a Responsible Officer as
fairly presenting in all material respects, in accordance with GAAP
(subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Company.
6.2 Certificates; Other Information.
The Company shall furnish to the Agent and each Bank:
(a) promptly, copies of all audit reports and management
audit letters delivered by the Independent Auditor to the Company
(b) promptly, copies of all financial statements and
reports that the Company sends to the holders of the Timber Notes, and
copies of all financial statements and regular, periodical or special
reports (including Forms 10K, 10Q and 8K) that the Company may make to, or
file with, the SEC;
(c) on or before February 1 of each year, an annual timber
harvest report for the preceding calendar year substantially in the form of
Exhibit F;
(d) simultaneously with the giving of any notice or the
providing of any certificate, report or statement to the Trustee or the
Rating Agencies under the Operative Documents (including the compliance
certificate referenced in Section 4.6(b) of the Indenture), a copy of such
notice, certificate, report, or statement;
(e) promptly upon a Responsible Officer of the Company
becoming aware thereof, notice of each Indenture Event of Default and each
Triggering Event, and any event that, with the giving of notice or passage
of time, would constitute an Indenture Event of Default or Triggering
Event, together with a description thereof in reasonable detail; and
(f) promptly, such additional information regarding the
business, financial or corporate affairs of the Company as the Agent, at
the request of any Bank, may from time to time reasonably request.
6.3 Performance of This and Other Agreements.
Punctually pay or cause to be paid (subject to Section
2.10(d)) all amounts payable by it under this Agreement and the other
Operative Documents and observe and perform all the conditions, covenants,
and requirements applicable to it contained in this Agreement or any other
Operative Document.
ARTICLE VII.
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Advance or other Obligation shall remain unpaid or unsatisfied, the
Company shall not:
7.1 Amendments.
Unless the Required Banks waive compliance in writing,
modify, amend or supplement, or give any consent to any modification,
amendment, or supplement or make any waiver with respect to, any provision
of the Operative Documents, except in the case of Operative Documents other
than this Agreement, the Fee Letter, the Indenture, and the Deed of Trust,
for amendments, supplements, or modifications that (a) either (i) cure any
ambiguity, omission, defect or inconsistency or are necessary to comply
with the Trust Indenture Act of 1939, as amended, or (ii) add to the
covenants to the other party or parties thereto for the benefit of the
Company or the Noteholders or surrender any right or power conferred on
such other party or parties, and (b) do not adversely affect the rights of
the Agent or any Bank; provided, however, that the consent of Required
Banks to any such amendments, supplements, or modifications to the
Indenture or the Deed of Trust complying with the provisions of clauses (a)
and (b) above shall not be unreasonably delayed or denied; and provided
further that no consent of the Required Banks pursuant to this Section is
required for either (x) amendments, modifications, or supplements to the
Deed of Trust that solely add property to the Lien of the Deed of Trust or
solely release property from the Lien of the Deed of Trust to the extent
such release may be effected strictly in accordance with the terms of
Article 6 of the Indenture or Section 5.2(a) of the Deed of Trust, or (y)
any action to be taken by the Company pursuant to Section 10 of the New
Reciprocal Rights Agreement (as defined in the Indenture).
7.2 Merger.
Unless each Bank waives compliance in writing, convert to
another organizational form or consolidate with or merge into any other
wholly-owned subsidiary of The Pacific Lumber Company as permitted by
Section 4.13 of the Indenture.
7.3 Additional Notes.
Unless the Required Banks consent thereto, issue any
Additional Timber Notes (as defined in the Indenture).
ARTICLE VIII.
LINE OF CREDIT ACCELERATION
8.1 Triggering Event.
A "Triggering Event" will be deemed to exist if (1) the
maturity of the Timber Notes has been accelerated pursuant to Section 7.2
of the Indenture at a time when an Indenture Event of Default exists under
Section 7.1(3) thereof, or (2) the maturity of the Timber Notes has been
accelerated pursuant to Section 7.2 of the Indenture at a time when an
Indenture Event of Default does not exist under Section 7.1(3) thereof and
such acceleration remains in effect for 90 days, or (3) an Indenture Event
of Default exists under Section 7.1(3) of the Indenture and such Indenture
Event of Default continues unremedied (whether from the proceeds of an
Interest Advance, withdrawals from the Liquidity Account, or otherwise) for
at least 10 Business Days longer than six calendar months from the date of
the Indenture Default giving rise to such Indenture Event of Default
(excluding any such Indenture Event of Default that would not exist or
would have been cured if a Defaulting Bank had performed its obligations
hereunder), or (4) any interest on account of any Interest Advance is not
paid when due (without giving effect to Section 2.10(d)) and remains unpaid
for a period of one month plus 10 Business Days or longer during which
period an Indenture Event of Default exists under Section 7.1(3) of the
Indenture (excluding any such Indenture Event of Default that would not
exist or would have been cured if a Defaulting Bank had performed its
obligations hereunder), or (5) the principal of the Timber Notes is not
repaid in full upon the Final Maturity Date, or (6) a Bankruptcy or
Insolvency occurs with respect to the Company. The foregoing shall be
determined without giving effect to any waiver of any breach or default
under the Indenture, including any Indenture Event of Default, to which the
Required Banks have not consented.
8.2 Line of Credit Acceleration.
At any time that a Triggering Event exists, the Agent shall,
at the direction of the Required Banks, and may, with the consent of the
Required Banks, declare a Line of Credit Acceleration by notice to the
Company and the Trustee.
ARTICLE IX.
THE AGENT
9.1 Appointment and Authorization; "Agent".
(a) Each Bank hereby irrevocably (subject to Section 9.9)
appoints, designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other Operative
Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other
Operative Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere
in this Agreement or in any other Operative Document, the Agent shall not
have any duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
this Agreement or any other Operative Document or otherwise exist against
the Agent. Without limiting the generality of the foregoing sentence, the
use of the term "agent" in this Agreement with reference to the Agent is
not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law. Instead,
such term is used merely as a matter of market custom, and is intended to
create or reflect only an administrative relationship between independent
contracting parties.
9.2 Delegation of Duties.
The Agent may execute any of its duties under this Agreement
or any other Operative Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for
the negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
9.3 Liability of Agent.
None of the Agent-Related Persons shall (i) be liable for
any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Operative Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the
Banks for any recital, statement, representation or warranty made by the
Company or any Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Operative Document, or in any
certificate, report, statement or other document referred to or provided
for in, or received by the Agent under or in connection with, this
Agreement or any other Operative Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Operative Document, or for any failure of the Company or any other party to
any Operative Document to perform its obligations hereunder or thereunder.
No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other
Operative Document, or to inspect the properties, books or records of the
Company or any of the Company's Affiliates.
9.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel
(including counsel to the Company), independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other
Operative Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate and, if it so requests, it
shall first be indemnified to its satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking
or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Agreement or any other Operative Document in accordance with a request or
consent of the Required Banks and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.1, each Bank that has executed this
Agreement shall be deemed to have consented to, approved or accepted or to
be satisfied with, each document or other matter either sent by the Agent
to such Bank for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory
to the Bank.
9.5 Notice of Triggering Event.
The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Triggering Event or Acceleration Event, except with
respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank, the Trustee, or the Company
referring to this Agreement, describing such event and identifying it as a
"Triggering Event" or "Acceleration Event".
9.6 Credit Decision.
Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by
the Agent hereinafter taken, including any review of the affairs of the
Company, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Bank. Each Bank represents to the Agent
that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision
to enter into this Agreement and to extend credit to the Company hereunder.
Each Bank also represents that it will, independently and without reliance
upon any Agent-Related Person and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Operative Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any
of the Agent-Related Persons.
9.7 Indemnification of Agent.
Whether or not the transactions contemplated hereby are
consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and
without limiting the obligation of the Company to do so), pro rata, from
and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank shall reimburse the Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including reasonable Attorney
Costs) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agreement, any other
Operative Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on
behalf of the Company. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of
the Agent.
9.8 Agent in Individual Capacity.
BofA and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests
in and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Company and its Affiliates as
though BofA were not the Agent hereunder and without notice to or consent
of the Banks. The Banks acknowledge that, pursuant to such activities,
BofA or its Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Company or such Affiliate) and acknowledge that
the Agent shall be under no obligation to provide such information to them.
With respect to its Advances, BofA shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though
it were not the Agent.
9.9 Successor Agent.
The Agent may, and at the request of the Required Banks
shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor agent for the Banks which successor agent shall be
approved by the Company unless an Acceleration Event or Triggering Event
exists or the Line of Credit Acceleration has occurred. If no successor
agent is appointed prior to the effective date of the resignation of the
Agent, the Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the acceptance of
its appointment as successor agent hereunder, such successor agent shall
succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any
retiring Agent's resignation hereunder as Agent, the provisions of this
Article IX and Sections 10.4 and 10.5 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the
date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become
effective and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Required Banks appoint a
successor agent as provided for above.
9.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Bank claims exemption from,
or a reduction of, U.S. withholding tax under Sections 1441 or 1442 of the
Code, such Bank agrees with and in favor of the Agent and the Company, to
deliver to the Agent and the Company:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 or any successor
form before the payment of any interest in the first calendar year and
before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Bank,
two properly completed and executed copies of IRS Form 4224 or any
successor form before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of such Bank
during which interest may be paid under this Agreement or at such other
times as required under applicable law; and
(iii) such other form or forms as may be required under
the Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent and the Company of any change
in circumstances which would modify or render invalid any claimed exemption
or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
or any successor form and such Bank sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations, such Bank agrees
to notify the Agent and the Company of the percentage amount in which it is
no longer the beneficial owner of Obligations. To the extent of such
percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 or any successor form with the
Agent sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations, such Bank agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed
by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest
payment to such Bank an amount equivalent to the applicable withholding tax
after taking into account such reduction. However, if the forms or other
documentation required by Section 9.10(a) are not delivered to the Agent,
then the Agent may withhold from any interest payment to such Bank not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly
executed, or because such Bank failed to notify the Agent of a change in
circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Bank shall
indemnify the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this Section
shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
(f) For any period in which a Bank has failed to provide
the Agent and the Company with the appropriate form in accordance with
Section 9.10(e), such Bank shall not be entitled to any payment, payment
increase, or indemnification under Section 3.1 with respect to Taxes
imposed by the United States; provided, however, that should a Bank that is
otherwise exempt from or subject to a reduced rate of withholding become
subject to Taxes because of its failure to deliver a form required
hereunder, the Company and the Agent shall take such steps as such Bank
shall reasonably request to assist such Bank to recover such Taxes.
ARTICLE X.
MISCELLANEOUS
10.1 Amendments and Waivers.
No amendment or waiver of any provision of this Agreement,
and no consent with respect to any departure by the Company therefrom,
shall be effective unless the same shall be in writing and signed by the
Required Banks (or by the Agent at the written request of the Required
Banks) and the Company and acknowledged by the Agent, and then any such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such
waiver, amendment, or consent shall, unless in writing and signed by each
Bank affected thereby and the Company and acknowledged by the Agent, do any
of the following:
(a) increase or extend the Commitment of any Bank;
(b) postpone or delay any date fixed by this Agreement for
any payment of principal, interest, fees or other amounts due to the Banks
(or any of them) hereunder, or reduce the amount due to the Banks (or any
of them) on any such date, or consent to any amendment of Article 5 of the
Indenture that would have the effect of subordinating, delaying, or
deferring the Agent's or any Bank's right to receive payment thereunder on
account of the Obligations;
(c) reduce the principal of, or the rate of interest
specified herein on any Advance, or (subject to clause (ii) below) any fees
or other amounts payable hereunder;
(d) change the percentage of the Commitments or of the
aggregate Principal Amount of the Advances which is required for the Banks
or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.12, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Required Banks
or all the Banks, as the case may be, affect the rights or duties of the
Agent under this Agreement or any other Operative Document, (ii) no
amendment, waiver or consent shall, unless in writing and consented to by
the Trustee as well as signed by the Required Banks or all the Banks, as
the case may be, shall reduce the aggregate Commitments hereunder below the
Required Liquidity Amount or impair the rights of the Trustee to request
Advances hereunder, and (iii) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed by the parties thereto.
10.2 Notices.
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company or the Trustee by facsimile (i) shall be
immediately confirmed by a telephone call to the recipient at the number
specified on Schedule 10.2, and (ii) shall be followed promptly by delivery
of a hard copy original thereof) and mailed by registered or certified
mail, return receipt requested, faxed or delivered, to the address or
facsimile number specified for notices on Schedule 10.2; or, as directed to
the Company, the Trustee, or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated
by such party in a written notice to the Company, the Trustee, and the
Agent.
(b) All such notices, requests and communications shall be
effective when delivered for overnight (next-day) delivery, or transmitted
in legible form by facsimile machine, respectively, or if mailed, upon the
third Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery; except that notices pursuant to Article II or IX
to the Agent shall not be effective until actually received by the Agent
and that all notices by the Company or the Agent shall be copied to the
Trustee.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Company. The Agent and the Banks
shall be entitled to rely in good faith on the authority of any Person
purporting to be a Person authorized by the Company or the Trustee to give
such notice and the Agent and the Banks shall not have any liability to the
Company or any other Person on account of any action taken or not taken by
the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Advances shall not be
affected in any way or to any extent by any failure by the Agent and the
Banks to receive written confirmation of any telephonic or facsimile notice
or the receipt by the Agent and the Banks of a confirmation which is at
variance with the terms understood by the Agent and the Banks to be
contained in the telephonic or facsimile notice.
10.3 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the
part of the Agent or any Bank, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.4 Costs and Expenses.
The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) on
the Closing Date and thereafter on the first Monthly Deposit Date occurring
at least 20 days after demand (subject to Sections 2.10(d) and 4.1(f)) for
all out-of-pocket costs and expenses incurred by BofA (including in its
capacity as Agent) in connection with the development, preparation,
delivery, administration and execution of this Agreement, any Operative
Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including reasonable Attorney Costs incurred by BofA (including in
its capacity as Agent) with respect thereto;
(b) pay or reimburse the Agent on the first Monthly Deposit
Date occurring at least 20 days after demand (subject to Sections 2.10(d)
and 4.1(f)) for all costs and expenses incurred by Agent in connection with
any amendment, supplement, waiver or modification to (in each case, whether
or not consummated) this Agreement, any Operative Document and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated thereby, including reasonable
Attorney Costs incurred by Agent with respect thereto; and
(c) pay or reimburse the Agent and each Bank within five
Business Days after demand (subject to Sections 2.10(d) and 4.1(f)) for all
costs and expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or preservation of
any rights or remedies under this Agreement or any other Operative Document
during the existence of an Acceleration Event or a Triggering Event or
after the Line of Credit Acceleration (including in connection with any
"workout" or restructuring regarding the Advances, and including in any
Bankruptcy or Insolvency or appellate proceeding).
10.5 Company Indemnification.
Whether or not the transactions contemplated hereby are
consummated, the Company shall indemnify, defend and hold the Agent-Related
Persons, and each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified
Person") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, charges,
expenses and disbursements (including Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following repayment
of the Advances, termination of the Commitments, or the termination,
resignation or replacement of the Agent or replacement of any Bank) be
imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any Operative Document, or
the transactions contemplated hereby or thereby, or any action taken or
omitted by any such Person under or in connection with any of the
foregoing, including with respect to any investigation, litigation or
proceeding (including any Bankruptcy or Insolvency or appellate proceeding)
related to or arising out of this Agreement or the Advances or the use of
the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person.
The agreements in this Section shall survive payment of all other
Obligations. The Agent and the Banks acknowledge and agree that, to the
extent the Indemnified Liabilities include or represent compensation for
principal or interest on the Advances, the Agent and the Banks shall be
entitled to payment thereof under the Indenture as and to the same extent
that the Indenture provides for payment of such principal and interest on
the Advances in question.
10.6 Payments Set Aside.
To the extent that the Company makes a payment to the Agent
or the Banks and such payment or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by the Agent or
such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Bankruptcy or Insolvency or otherwise,
then (a) to the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made, and (b) each Bank
severally agrees to pay to the Agent upon demand its pro rata share of any
amount so recovered from or repaid by the Agent.
10.7 Successors and Assigns.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns, except that the Company may not assign or transfer
any of its rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
10.8 Assignments, Participations, etc.
(a) BofA may at any time assign and delegate to one or more
(but not more than four) Eligible Assignees all or any portion of its
Advances, its Commitment and the other rights and obligations of BofA as a
Bank hereunder; any Bank may, with the written consent of the Agent, at any
time assign and delegate to one or more other Banks all or any portion of
its Advances, its Commitment, and the other rights and obligations of such
Bank hereunder; and any Bank may, with the written consent of the Agent, at
any time assign and delegate to one but not more than one Eligible Assignee
(provided that no written consent of the Agent shall be required in
connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an Affiliate of such Bank) (each an "Assignee") all, but
not less than all, of its Advances, its Commitment and the other rights and
obligations of such Bank hereunder; provided, however, that in any of the
cases described above the Company and the Agent may continue to deal solely
and directly with such Bank in connection with the interest so assigned to
an Assignee until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Company, the Trustee, and the Agent
by such Bank and the Assignee; (ii) such Bank and its Assignee shall have
delivered to the Company, the Trustee, and the Agent an Assignment and
Acceptance Agreement in the form of Exhibit E ("Assignment and Acceptance")
and (iii) the assignor Bank or Assignee has paid to the Agent a processing
fee in the amount of $4000. Any assignment by a Bank other than BofA of
less than all of its outstanding Advances and Commitment, other than
interest and fees accruing before the effective date of such assignment,
shall be null and void. Notwithstanding the foregoing, BofA shall not
assign less than all of its outstanding Advances and Commitment if, after
giving effect thereto, there would be in excess of five Banks.
(b) From and after the date that the Agent notifies the
assignor Bank, the Company, and the Trustee that it has received (and
provided its consent with respect to) an executed Assignment and Acceptance
and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Bank under the
Operative Documents, and (ii) the assignor Bank shall, to the extent that
rights and obligations hereunder and under the other Operative Documents
have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under the
Operative Documents.
(c) Immediately upon the satisfaction of the conditions set
forth in clauses (i), (ii), and (iii) of Section 10.8(a), this Agreement
shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the assignment to the Assignee and the resulting
adjustment of the Commitments arising therefrom. The Commitment allocated
to each Assignee shall reduce such Commitments of the assigning Bank pro
tanto.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in any Advances, the Commitment of that Bank and
the other interests of that Bank (the "originating Bank") hereunder and
under the other Operative Documents; provided, however, that (i) the
originating Bank's obligations under this Agreement shall remain unchanged,
(ii) the originating Bank shall remain solely responsible for the
performance of such obligations, (iii) the Company, the Trustee, and the
Agent shall continue to deal solely and directly with the originating Bank
in connection with the originating Bank's rights and obligations under this
Agreement and the other Operative Documents, and (iv) no Bank shall
transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Operative Document, except as
between the Participant and the originating Bank only and only to the
extent such amendment, consent or waiver would require the consent of each
affected Bank as described in the first proviso to Section 10.1. In the
case of any such participation, the Participant shall not have any rights
under this Agreement, or any of the other Operative Documents, and all
amounts payable by the Company hereunder shall be determined as if such
Bank had not sold such participation.
(e) Notwithstanding any other provision in this Agreement,
any Bank may at any time create a security interest in, or pledge, all or
any portion of its rights under and interest in this Agreement in favor of
any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR Section203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Notification of Addresses, Lending Offices, Etc.
Each Bank shall notify the Company, the Trustee, and the
Agent in writing of any changes in the address to which notices to the Bank
should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of
such other administrative information as the Agent shall reasonably
request.
10.10 Limitations upon Bankruptcy Petition Against Issuer.
The Agent and each Bank hereby covenant and agree that,
before the date that is one year and one day after the payment in full of
all Timber Notes, it will not institute against, or join any other Persons
in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency, or liquidation proceeding or other similar
proceeding under any Bankruptcy Law (as defined in the Indenture), unless
consent of 51% of the Noteholders to the taking of such action is obtained.
10.11 Limitations upon Actions by Agent or Banks.
The Agent and each Bank hereby covenant and agree that it
will not institute any suit against the Company or exercise any right of
set-off, banker's lien, or the like, against any deposit account or
property of the Company held or maintained by the Agent or such Bank if and
to the extent that the institution or prosecution thereof or the entry of
judgment therein or the exercise of any such right would, under applicable
law, result in the surrender, impairment, waiver, or loss of the Lien of
the Deed of Trust.
10.12 Release of Lien.
Upon the request of the Company, following repayment in full
of the Advances, all interest thereon, and all other Obligations then due
and payable hereunder, if the Company is in material compliance with each
of its obligations hereunder and under the other Operative Documents
(excepting such non-compliance that would not reasonably be expected to
affect adversely the Agent or the Banks), the Agent shall execute and
deliver to the Collateral Agent such confirmations as the Company may
reasonably request that the obligations to the Agent and the Banks that are
secured by the Deed of Trust have been repaid in full.
10.13 Counterparts.
This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original,
and all of said counterparts taken together shall be deemed to constitute
but one and the same instrument.
10.14 Severability.
The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required
hereunder.
10.15 No Third Parties Benefited.
This Agreement is made and entered into for the sole
protection and legal benefit of the Company, the Banks, the Agent and the
Agent-Related Persons, and their successors and permitted assigns, and no
other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Operative Documents. Notwithstanding the
foregoing, the Trustee, in its capacity as such, shall be deemed a third
party beneficiary of this Agreement to the extent of its rights provided
herein and subject to Section 10.1.
10.16 Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATE OF CALIFORNIA SITTING IN THE CITY OF SAN FRANCISCO OR THE STATE
OF NEW YORK SITTING IN NEW YORK CITY, BOROUGH OF MANHATTAN, OR OF THE
UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA OR THE SOUTHERN
DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
OF THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH
OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY ACTION OR PROCEEDING IN SUCH JURISDICTIONS IN RESPECT OF THIS AGREEMENT
OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND THE BANKS EACH
WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA OR NEW YORK LAW, AS
APPLICABLE.
10.17 Waiver of Jury Trial.
THE COMPANY, THE BANKS AND THE AGENT EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER OPERATIVE
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR
IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR
THE OTHER OPERATIVE DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER OPERATIVE DOCUMENTS.
10.18 Entire Agreement.
This Agreement, together with the other Operative Documents,
embodies the entire agreement and understanding among the Company, the
Banks and the Agent, and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the
subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in San Francisco by their
proper and duly authorized officers as of the day and year first above
written.
SCOTIA PACIFIC COMPANY LLC
By: /S/ GARY L. CLARK
Gary L. Clark
Title: Vice President -- Finance
and Administration
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
and as Agent
By: /S/ MICHAEL BALOK
Michael Balok
Title: Managing Director
EXHIBIT 11
MAXXAM INC.
COMPUTATION OF NET INCOME
PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ---------------------------
1998 1997 1998 1997
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding 7,000,597 8,531,457 7,000,597 8,593,856
Common equivalent shares attributable
to stock options and convertible
securities 828,522 768,040 812,720 769,339
-------------- ------------- ------------- -------------
Total common and common
equivalent shares 7,829,119 9,299,497 7,813,317 9,363,195
============== ============= ============= =============
Earnings per share information:
Basic:
Net income $ 1.76 $ 3.72 $ 2.04 $ 3.80
============== ============= ============= =============
Diluted:
Net income per common and
common equivalent share $ 1.57 $ 3.42 $ 1.83 $ 3.49
============== ============= ============= =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 277,300
<SECURITIES> 35,400
<RECEIVABLES> 250,300
<ALLOWANCES> 6,400
<INVENTORY> 560,800
<CURRENT-ASSETS> 1,381,800
<PP&E> 2,200,800
<DEPRECIATION> 882,400
<TOTAL-ASSETS> 4,059,000
<CURRENT-LIABILITIES> 677,300
<BONDS> 1,913,700
0
300
<COMMON> 5,000
<OTHER-SE> 6,100
<TOTAL-LIABILITY-AND-EQUITY> 4,059,000
<SALES> 1,363,600
<TOTAL-REVENUES> 1,363,600
<CGS> 1,099,700
<TOTAL-COSTS> 1,099,700
<OTHER-EXPENSES> 141,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 106,400
<INCOME-PRETAX> 37,700
<INCOME-TAX> 13,400
<INCOME-CONTINUING> 14,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,300
<EPS-PRIMARY> 2.04
<EPS-DILUTED> 1.83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<EXCHANGE-RATE> 1 1 1 1
<CASH> 193,700 224,400 197,600 164,600
<SECURITIES> 52,400 51,600 59,200 84,600
<RECEIVABLES> 248,400 253,600 270,000 261,800
<ALLOWANCES> 5,200 4,800 4,800 5,900
<INVENTORY> 640,900 626,900 625,700 629,600
<CURRENT-ASSETS> 1,377,600 1,393,800 1,379,500 1,436,100
<PP&E> 2,092,500 2,108,300 2,138,400 2,166,500
<DEPRECIATION> 794,000 808,900 830,700 845,600
<TOTAL-ASSETS> 4,029,400 4,072,700 4,048,300 4,114,200
<CURRENT-LIABILITIES> 623,900 647,300 623,300 742,100
<BONDS> 1,944,000 1,940,500 1,904,500 1,957,000
0 0 0 0
300 300 300 300
<COMMON> 5,000 5,000 5,000 5,000
<OTHER-SE> (56,200) (32,600) 42,800 (8,200)
<TOTAL-LIABILITY-AND-EQUITY> 4,029,400 4,072,700 4,048,300 4,114,200
<SALES> 631,600 1,320,700 3,046,700 2,729,100
<TOTAL-REVENUES> 631,600 1,320,700 2,046,700 2,729,100
<CGS> 508,700 1,049,000 1,625,000 2,167,000
<TOTAL-COSTS> 508,700 1,049,000 1,625,000 2,167,000
<OTHER-EXPENSES> 73,900 170,000 246,100 325,700
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 53,100 106,000 158,300 201,400
<INCOME-PRETAX> 6,800 11,900 47,800 74,500
<INCOME-TAX> 2,700 (27,500) (13,600) (6,900)
<INCOME-CONTINUING> 700 32,600 50,600 65,200
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 700 32,600 50,600 65,200
<EPS-PRIMARY> .08 3.80 5.97 7.81
<EPS-DILUTED> .07 3.49 5.47 7.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<EXCHANGE-RATE> 1 1 1 1
<CASH> 113,800 118,900 120,500 336,600
<SECURITIES> 19,800 40,800 50,600 50,300
<RECEIVABLES> 238,600 233,100 226,600 205,900
<ALLOWANCES> 5,700 5,800 5,800 5,200
<INVENTORY> 646,600 631,500 623,600 634,800
<CURRENT-ASSETS> 1,259,000 1,250,500 1,239,800 1,477,400
<PP&E> 1,930,700 1,960,400 2,003,000 2,067,400
<DEPRECIATION> 703,200 725,000 750,600 769,500
<TOTAL-ASSETS> 3,871,800 3,877,300 3,883,100 4,115,700
<CURRENT-LIABILITIES> 628,600 654,400 615,300 743,500
<BONDS> 1,698,300 1,672,900 1,710,300 1,951,500
0 0 0 0
300 300 300 300
<COMMON> 5,000 5,000 5,000 5,000
<OTHER-SE> (83,100) (66,000) (60,500) (56,100)
<TOTAL-LIABILITY-AND-EQUITY> 3,871,800 3,877,300 3,883,100 4,115,700
<SALES> 612,200 1,279,900 1,921,100 2,543,300
<TOTAL-REVENUES> 612,200 1,279,900 1,921,100 2,543,300
<CGS> 483,700 1,024,600 1,566,500 2,085,000
<TOTAL-COSTS> 483,700 1,024,600 1,566,500 2,085,500
<OTHER-EXPENSES> 75,300 156,100 245,800 327,000
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 45,100 90,700 135,500 175,500
<INCOME-PRETAX> 13,400 24,000 8,400 (12,100)
<INCOME-TAX> 5,000 (4,100) (27,100) (44,900)
<INCOME-CONTINUING> 5,800 22,700 28,000 22,900
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 5,800 22,700 28,000 22,900
<EPS-PRIMARY> .66 2.61 3.22 2.63
<EPS-DILUTED> .61 2.40 2.96 2.42
</TABLE>
