<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996 Commission file number:1-8859
IP TIMBERLANDS, Ltd.
(Exact name of registrant as specified in its charter)
Texas 13 3259241
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Two Manhattanville Road, Purchase, NY 10577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-397-1500
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 ___
Class A Depositary Units outstanding on July 31, 1996: 46,445,729
<PAGE>
IP TIMBERLANDS, Ltd.
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements 3
Consolidated Statement of Earnings - 4
Three Months and Six Months Ended
June 30, 1996 and 1995
Consolidated Balance Sheet - 5
June 30, 1996 and December 31, 1995
Consolidated Statement of Cash Flows - 6
Six Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of 10 - 12
Financial Condition and Results of Operations
PART II. Other Information
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults upon Senior Securities *
Item 4. Submission of Matters to a Vote of *
Security Holders
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
* Omitted since no answer is called for, answer is in the negative or
inapplicable.
2
<PAGE>
PART I. Financial Information
ITEM 1. Financial Statements
The accompanying unaudited financial statements have been prepared in conformity
with current Securities and Exchange Commission regulations governing interim
financial reporting. In the opinion of the managing general partner of IP
Timberlands, Ltd. (the "Registrant"), a Texas limited partnership, the
accompanying unaudited financial statements contain all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the financial
position of the Registrant as of June 30, 1996, and the results of operations
for the quarter and six months ended June 30, 1996. It is suggested that these
interim financial statements be read in conjunction with the audited financial
statements and notes thereto incorporated by reference in the Registrant's Form
10-K for the year ended December 31, 1995, which has been previously filed with
the Commission.
The results for the interim period covered by this report are not necessarily
indicative of what the results will be for the remainder of the year.
3
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands - except per unit data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Stumpage sales
International Paper $19,470 $46,363 $ 63,257 $ 98,932
Unaffiliated parties 29,171 21,756 62,881 50,032
Forestland sales 4,102 869 5,972 928
Other income, net 4,056 3,944 5,797 5,307
------- ------- -------- --------
Total revenues 56,799 72,932 137,907 155,199
------- ------- -------- --------
Operating Costs and Expenses
Depletion
International Paper 1,730 2,835 4,194 6,065
Unaffiliated parties 3,454 2,757 7,136 5,522
Cost of forestlands sold 254 37 368 84
Amortization of roads 428 539 983 1,074
Forest operations 10,876 10,769 21,936 20,523
General and administrative 4,255 5,323 9,624 10,714
Property and severance taxes 3,037 3,839 6,823 7,632
------- ------- -------- --------
Total operating costs and expenses 24,034 26,099 51,064 51,614
------- ------- -------- --------
32,765 46,833 86,843 103,585
Gains on Sales of Partnership Interests 18,449 656,654
------- ------- -------- --------
Operating Earnings 51,214 46,833 743,497 103,585
Interest Income 5,721 4,241 11,571 11,246
Interest Expense (20) (11,369)
General Partners' Interest in IPTO (522) (511) (1,006) (1,148)
-------- -------- -------- --------
Net Partnership Earnings $ 56,393 $ 50,563 $742,693 $113,683
======== ======== ======== ========
Earnings per Class A Unit (Note 6) $ 0.98 $ 1.27 $ 6.64 $ 2.63
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
June 30, December 31,
1996 1995
-------- ------------
Assets
Current Assets
Cash and temporary investments $ 11,021 $ 11,899
Notes receivable - International Paper 79,797 371,378
Due from International Paper 7,293
Accounts and notes receivable 33,952 23,558
-------- ----------
Total current assets 124,770 414,128
Notes Receivable 472 1,027
Forestlands 662,730 734,200
Roads, net of accumulated amortization of
$31,292 (1996) and $49,618 (1995) 22,974 38,026
-------- ----------
Total Assets $810,946 $1,187,381
======== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued liabilities $ 15,964 $ 372
Accrued interest 5,983
Accrued property and severance taxes 7,312 6,286
Due to International Paper 8,807
Notes payable - International Paper 146,304
Customer advance payments 3,126 3,797
-------- ----------
Total current liabilities 181,513 16,438
Long-Term Debt 750,000
Lease Obligations 1,293 1,231
General Partners' Interest in IPTO 28,723 26,662
Partners' Capital
General partners 27,850 25,786
Limited partners 571,567 367,264
-------- ----------
Total Liabilities and Partners' Capital $810,946 $1,187,381
======== ==========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
----------------------
1996 1995
--------- ---------
Operating Activities
Net Partnership earnings $ 742,693 $ 113,683
Noncash items
Depletion 11,330 11,587
Cost of forestlands sold 368 84
Amortization of roads 983 1,074
Gain on sale of partnership interest (638,205)
Other, net 5,560 1,011
Changes in current assets and liabilities
Accounts and notes receivable (9,839) 4,369
Due to/from International Paper 16,100 (2,737)
Customer advance payments (671) 644
Accrued interest payable (5,983)
Other, net (3,611) 2,697
--------- ---------
Cash provided by operations 118,725 132,412
--------- ---------
Investment Activities
Investment in forestlands and roads (17,358) (14,826)
Loans to International Paper (342,482) (99,970)
Loan repayments by, and borrowings from,
International Paper 780,367 255,285
--------- ---------
Cash provided by (used for) investment activities 420,527 140,489
--------- ---------
Financing Activities
Distributions to partners of IPT and IPTO (540,130) (268,649)
--------- ---------
Change in Cash and Temporary Investments (878) 4,252
Cash and Temporary Investments
Beginning of the period 11,899 7,922
--------- ---------
End of the period $ 11,021 $ 12,174
========= =========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
IP TIMBERLANDS, Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
IP Timberlands, Ltd. (the "Registrant" or "IPT"), is a Texas limited
partnership. IP Forest Resources Company ("IPFR"), a wholly owned subsidiary
of International Paper, is the managing general partner of the Registrant and
International Paper is the special general partner.
The Registrant operates through IP Timberlands Operating Company, Ltd.
("IPTO"), a Texas limited partnership, in which the Registrant holds a 99%
limited partner's interest, and IPFR and International Paper together hold a
1% general partners' interest. IPFR is also the managing general partner of
IPTO, and International Paper is the special general partner.
2. Transactions with International Paper
The Registrant reimburses IPFR and International Paper for both direct and
indirect costs and expenses associated with the management and operations of
the Partnerships. Charges from International Paper for indirect expenses for
the quarters ended June 30, 1996 and 1995 were $ 2.2 million and $ 2.3
million, respectively, and for the six-month periods ended June 30, 1996 and
1995 were $ 5.1 million and $ 4.6 million, respectively. The interim period
charges are based upon estimates of the total charges for the year.
Interest income from notes receivable from International Paper for the
quarters ended June 30, 1996 and 1995 was $ 3.4 and $ 4.1 million,
respectively, and for the six-month periods ended June 30, 1996 and 1995 was
$ 9.0 and $ 10.9 million, respectively. The decrease in interest income was
due to lower interest rates and lower loan balances.
3. Temporary Investments
Temporary investments with a maturity of three months or less are treated as
cash equivalents and are stated at cost. Temporary investments at June 30,
1996 and December 31, 1995 were $ 6.4 and $ 6.5 million, respectively.
4. Receivables
The major classifications of current receivables are shown below. No
allowance for doubtful accounts was considered necessary.
June 30, December 31,
1996 1995
-------- ------------
(In thousands)
Notes receivable - trade $31,145 $22,730
Accounts receivable - trade 270 275
Accrued interest and other receivables 2,537 553
------- -------
$33,952 $23,558
======= =======
7
<PAGE>
Notes receivable-trade at June 30, 1996 included $19.9 million from the sale
of an interest relating to 20,000 acres of pine plantations in the second
quarter of 1996, and at December 31, 1995, included $18.5 million from a
fourth-quarter bulk sale. Both amounts were subsequently received.
5. Gain on Sale of Partnership Interest
In June 1996, the Partnership completed a sale of a special partnership
interest relating to 20,000 acres of pine plantations in the South. As a
result of this sale, IPT recognized a gain of approximately $18 million.
Essentially all of the earnings from this transaction were attributable to
the Secondary Account.
On March 29, 1996, a subsidiary partnership of IPT completed the sale of a
98% general partnership interest to R-H Timber Co. As a result of this
transaction, IPT recognized a book gain of approximately $638 million,
approximately $203 million, or $4.37 per unit of which was allocated to the
Class A Units. IPT retained a 1% interest in the partnership as well as a
preferred interest. Class A unitholders have approximately a 30 % share of
the retained preferred interest, equal to about $.90 per Class A Unit.
6. Computation of Earnings Per Class A Unit
The Partnership Agreement provides for the allocation of Partnership earnings
among the general and limited partners. The following table presents the
computation of earnings per Class A Unit (in thousands, except per unit
data):
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- --------------------
1996 1995 1996 1995
------- -------- -------- --------
Allocation to Primary Account $47,611 $ 62,539 $306,320 $129,310
Allocation to Secondary Account 8,782 (11,976) 436,373 (15,627)
------- -------- -------- --------
Net Partnership Earnings 56,393 50,563 742,693 113,683
------- -------- -------- --------
95% of the Primary Account(1) 45,230 59,412 291,004 122,844
4% of the Secondary Account(1) 351 (479) 17,455 (625)
------- -------- -------- --------
Earnings Allocated to
Class A Limited Partners $45,581 $ 58,933 $308,459(2) $122,219
======= ======== ======== ========
Weighted Average Class A
Units Outstanding 46,446 46,446 46,446 46,446
======= ======== ======== ========
Earnings Per Class A Unit $ 0.98 $ 1.27 $ 6.64(2) $ 2.63
======= ======== ======== ========
(1) Class B units are allocated 4% of Primary Account and 95% of Secondary
Account earnings. The general partners are allocated 1% of each account.
(2) Includes $203 million, or $4.37 per Class A Unit, from the sale of a
subsidiary partnership interest.
8
<PAGE>
7. Partners' Capital
The following tables present an analysis of the activity in Partners' Capital
(in thousands):
Partners' Capital
------------------------------------
General Limited
Partners Partners Total
-------- ---------- ----------
Six Months Ended June 30, 1996
Balance - January 1, 1996 $25,786 $ 367,264 $ 393,050
Net earnings for the period 7,427 735,266 742,693
Partner distributions (5,363) (530,963) (536,326)
------- ---------- ----------
Balance - June 30, 1996 $27,850 $ 571,567 $ 599,417
======= ========== ==========
Six Months Ended June 30, 1995
Balance - January 1, 1995 $33,651 $1,145,938 $1,179,589
Net earnings for the period 1,137 112,546 113,683
Partner distributions (2,660) (263,302) (265,962)
------- ---------- ----------
Balance - June 30, 1995 $32,128 $ 995,182 $1,027,310
======= ========== ==========
Distributions in 1996 include a special distribution paid on May 31, of $9.75
per Class A Unit.
The authorized and outstanding Class A and B Depositary Units at June 30,
1996 and 1995, which represent the limited partnership interests of IPT, are
presented below. The Class B Units are 100% owned by International Paper and
affiliates.
Class A Depositary Units Outstanding
--------------------------------------- Class B
International Unaffiliated Depositary
Paper and Third Units
Affiliates Parties Total Outstanding
------------- ------------ ---------- -----------
Number of Units 39,146,229 7,299,500 46,445,729 50,976,480
Percentage of total 84% 16% 100% 100%
Under the terms of the Partnership Agreement, International Paper has the
right to purchase, at any time, all outstanding Class A Units at a price
equal to 133% of the market price at that time.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Partnership revenues for the second quarter of 1996 were $56.8 million, down 22%
from 1995 second quarter revenues of $72.9 million. Revenues from stumpage sales
were $48.6 million in the 1996 second quarter, compared with $68.1 million in
the same period of 1995. Net partnership earnings for the second quarter were
$56.4 million, or 11% higher than 1995 second quarter net earnings of $50.6
million.
Stumpage sales revenues in the South were 9% above 1995 totals for the second
quarter due to higher harvest volumes. Average prices in this region were
slightly below prior year levels. Good summer logging conditions led to a higher
harvest and increased inventories, putting pressure on pulpwood and sawlog
prices toward the end of the quarter. In the Northeast, lower harvest volumes
led to a 19% decline in stumpage sales revenues compared with the second quarter
of 1995 despite slightly higher average prices.
The decline in 1996 second quarter stumpage sales was due to a decrease in sales
to International Paper reflecting the loss of western region sales. Since the
subsidiary partnership interest sold in March 1996 included all of the
Partnership's western forestlands, no significant future earnings contributions
will come from this region.
In June, the Partnership completed a sale of a special partnership interest
relating to 20,000 acres of pine plantations in the South. As a result of this
sale, IPT recognized a gain of approximately $18 million. Essentially all of the
earnings from this transaction were attributable to the Secondary Account.
Forestland sales were minimal in both the 1996 and 1995 second quarters.
Amounts attributable to the Primary and Secondary Accounts for major categories
in the statement of earnings were (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1996 1995 1996 1995
------- ------- -------- --------
Stumpage Sales
Primary Account $48,641 $68,118 $126,138 $148,937
Secondary Account 1 27
------- ------- -------- --------
$48,641 $68,119 $126,138 $148,964
======= ======= ======== ========
Forestland Sales
Primary Account $ 650 $ 628 $ 650 $ 633
Secondary Account 3,452 241 5,322 295
------- ------- -------- --------
$ 4,102 $ 869 $ 5,972 $ 928
======= ======= ======== ========
Operating Costs and Expenses
Primary Account $12,873 $16,967 $ 30,772 $ 36,237
Secondary Account 11,161 9,132 20,292 15,377
------- ------- -------- --------
$24,034 $26,099 $ 51,064 $ 51,614
======= ======= ======== ========
10
<PAGE>
Operating costs and expenses by category are shown in the consolidated statement
of earnings on page 4.
Sales volumes attributable to timber sales were (in thousand cunits):
Three Months Six Months
Ended Ended
June 30, June 30,
------------- --------------
1996 1995 1996 1995
---- ---- ----- -----
Used by International Paper facilities 210 255 440 569
Resold by International Paper 57 122 214 278
Sold to unaffiliated parties 472 362 975 760
--- --- ----- -----
739 739 1,629 1,607
=== === ===== =====
Liquidity and Capital Resources
IPT had cash and temporary investments of $11.0 million, a current payable to
International Paper of $8.8 million, notes receivable from International Paper
of $79.8 million and demand notes payable to International Paper of $146.3
million at June 30, 1996. The notes payable represent borrowings by the
Secondary Account. Cash is either invested in temporary investments or loaned to
International Paper at market rates. The breakdown of liquid assets between the
Primary and Secondary Accounts was (in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
----------------------------- ------------------------------
Primary Secondary Primary Secondary
Account Account Total Account Account Total
------- --------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Cash and temporary
investments $10,167 $ 854 $ 11,021 $ 6,806 $ 5,093 $ 11,899
Notes receivable -
International Paper 79,797 79,797 288,587 82,791 371,378
Due from (to)
International Paper 1,605 (10,412) (8,807) 14,691 (7,398) 7,293
Notes Payable -
International Paper (146,304) (146,304)
------- --------- --------- -------- ------- --------
$91,569 $(155,862) $ (64,293) $310,084 $80,486 $390,570
======= ========= ========= ======== ======= ========
Total per Class A Unit $ 1.74 $ 6.41
========= ========
</TABLE>
The decrease in Primary Account liquid assets reflects the payment of a $9.75
per Class A Unit special distribution on May 15, 1996.
11
<PAGE>
In addition, current assets at June 30, 1996 and December 31, 1995, included $.3
million of accounts receivable for both periods and $ 31.1 million and $22.7
million, respectively of notes receivable, respectively, from parties other than
International Paper, due within the next 12 months.
The following table reflects cash flow from operations, after capital
expenditures, attributable to the Class A Units (in thousands).
Primary Secondary IPT
Account Account Total
Six Months Ended June 30, 1996 ------- --------- --------
- - ------------------------------
Cash provided by operations $131,727 $(13,002) $118,725
Investment in forestlands and roads (1,769) (15,589) (17,358)
IPTO general partners' interest in above (1,300) 286 (1,014)
-------- -------- --------
Cash flow after capital expenditures 128,658 (28,305) $100,353
Class A Unit allocation factor 95% 4% ========
-------- --------
Class A Unit cash flow
after capital expenditures $122,226 $ (1,132) $121,094
======== ======== ========
Distributions declared for Class A Units $509,510 $509,510
======== ========
Six Months Ended June 30, 1995
- - ------------------------------
Cash provided by operations $142,631 $(10,219) $132,412
Investment in forestlands and roads (4,698) (10,128) (14,826)
IPTO general partners' interest in above (1,379) 203 (1,176)
-------- -------- --------
Cash flow after capital expenditures 136,554 (20,144) $116,410
Class A Unit allocation factor 95% 4% ========
-------- --------
Class A Unit cash flow
after capital expenditures $129,726 $ (806) $128,920
======== ======== ========
Distributions declared for Class A Units $252,665 $252,665
======== ========
In July, IPT declared a cash distribution of $.50 per Class A Unit for the
second calendar quarter of 1996. This distribution is payable on August 15, 1996
to holders of record as of July 31, 1996. The decrease in regular quarterly
distributions from $.72 per Class A Unit paid in 1995 reflects the loss of
future earnings contributions from the western forestlands included in the
subsidiary partnership interest that was sold in March 1996.
In April 1996, IPT declared a special distribution of $9.75 per Class A Unit
that was paid on May 15, 1996.
Capital expenditures, including expenditures for reforestation of harvested
forestland, acquisition of capitalized leases and road construction, are
expected to be approximately $50 million for 1996.
12
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(3) Second Amended and Restated Agreement of Limited Partnership of
IP Timberlands Operating Company, Ltd.
(10) Second Amended and Restated Agreement of Limited Partnership of
West Coast Forest Resources Limited Partnership
(27) Financial Data Schedule
(b) No Current Reports on Form 8-K have been filed during the quarter for
which this report is filed.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IP Timberlands, Ltd.
By: IP Forest Resources Company
Managing General Partner
(Registrant)
Date: August 14, 1996 By: /s/ James W. Guedry
----------------------------
James W. Guedry
Vice President and Secretary
Date: August 14, 1996 By: /s/ Frederick L. Bleier
------------------------
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
14
<PAGE>
SECOND
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
OF
IP TIMBERLANDS OPERATING COMPANY, LTD.
<PAGE>
IP TIMBERLANDS OPERATING COMPANY, LTD.
TABLE OF CONTENTS
Page
----
ARTICLE I
Organizational Matters
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . .B-2
1.2 Formation . . . . . . . . . . . . . . . . . . . . . . . .B-2
1.3 Name. . . . . . . . . . . . . . . . . . . . . . . . . . .B-3
1.4 Principal Office. . . . . . . . . . . . . . . . . . . . .B-3
1.5 Power of Attorney . . . . . . . . . . . . . . . . . . . .B-3
1.6 Term. . . . . . . . . . . . . . . . . . . . . . . . . . .B-4
ARTICLE II
Purpose
ARTICLE III
Capital Contributions
3.1 Primary Account . . . . . . . . . . . . . . . . . . . . .B-5
3.2 Secondary Account . . . . . . . . . . . . . . . . . . . .B-6
3.3 Additional Contributions of the Original Limited
Partner and Capital Contributions by the
Special Limited Partners . . . . . . . . . . . . . . . .B-7
3.4 No Preemptive Rights. . . . . . . . . . . . . . . . . . B-11
3.5 Capital Accounts. . . . . . . . . . . . . . . . . . . . B-11
3.6 Interest. . . . . . . . . . . . . . . . . . . . . . . . B-15
3.7 No Withdrawal . . . . . . . . . . . . . . . . . . . . . B-15
3.8 Loans from Partners . . . . . . . . . . . . . . . . . . B-16
ARTICLE IV
Maintenance of the Accounting Units; Distributions
4.1 Sharing of Costs and Expenses of the Primary Account. . B-16
4.2 Sharing of Costs and Expenses of the Secondary Account. B-17
B-(i)
<PAGE>
4.3 Sharing of Revenues of the Primary Account. . . . . . . B-17
4.4 Sharing of Revenues of the Secondary Account. . . . . . B-18
4.5 Allocation of Costs and Revenues. . . . . . . . . . . . B-19
4.6 Classification of Certain Costs and Revenues. . . . . . B-19
4.7 Financing of Costs and Distributions. . . . . . . . . . B-20
4.8 Affiliated Corporations and Partnerships. . . . . . . . B-21
4.9 Closing of the Primary Account. . . . . . . . . . . . . B-21
4.10 Current Distributions . . . . . . . . . . . . . . . . . B-22
4.11 Inter-Account and Related Party Loans . . . . . . . . . B-24
ARTICLE V
Federal Income Tax Allocations
5.1 Capital Account Allocations . . . . . . . . . . . . . . B-24
5.2 Tax Allocations . . . . . . . . . . . . . . . . . . . . B-26
5.3 Other Rules . . . . . . . . . . . . . . . . . . . . . . B-28
ARTICLE VI
Management and Operation of Business
6.1 Management. . . . . . . . . . . . . . . . . . . . . . . B-30
6.2 Organizational Certificate. . . . . . . . . . . . . . . B-31
6.3 Reliance by Third Parties and Effect on Limited
Partners. . . . . . . . . . . . . . . . . . . . . . . . B-32
6.4 Compensation and Reimbursement of the General Partners. B-32
6.5 Outside Activities. . . . . . . . . . . . . . . . . . . B-32
6.6 Partnership Funds . . . . . . . . . . . . . . . . . . . B-33
6.7 Contracts with Affiliates; Joint Ventures . . . . . . . B-34
6.8 Loans to or from a General Partner and Others . . . . . B-34
6.9 Indemnification of General Partners . . . . . . . . . . B-35
6.10 Liability of General Partners . . . . . . . . . . . . . B-39
6.11 Other Matters Concerning the General Partners . . . . . B-39
6.12 Tax Basis and Value Determinations. . . . . . . . . . . B-40
6.13 Resolution of Conflicts of Interest . . . . . . . . . . B-40
ARTICLE VII
Rights and Obligations of Limited Partners
7.1 Limitation of Liability . . . . . . . . . . . . . . . . B-41
7.2 Management of Business. . . . . . . . . . . . . . . . . B-41
B-(ii)
<PAGE>
Books, Records, Accounting and Reports
8.1 Records, Accounting and Reports . . . . . . . . . . . . B-41
8.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . B-41
8.3 Annual Reports. . . . . . . . . . . . . . . . . . . . . B-42
8.4 Other Information . . . . . . . . . . . . . . . . . . . B-42
ARTICLE IX
Income Tax Matters
9.1 Preparation of Tax Returns. . . . . . . . . . . . . . . B-42
9.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . B-43
9.3 Tax Controversies . . . . . . . . . . . . . . . . . . . B-43
9.4 Organizational Expenses . . . . . . . . . . . . . . . . B-43
9.5 Taxation as a Partnership . . . . . . . . . . . . . . . B-44
ARTICLE X
Transfer of Interests
10.1 Transfer. . . . . . . . . . . . . . . . . . . . . . . . B-44
10.2 Transfer of Interest of General Partners. . . . . . . . B-44
10.3 Transfer of Interest of a Limited Partner . . . . . . . B-44
ARTICLE XI
Admission of Substituted Partners
11.1 Admission of the Limited Partners . . . . . . . . . . . B-45
11.2 Admission of Successor and Substitute Limited Partners. B-45
11.3 Admission of Successor Managing General Partner . . . . B-45
11.4 Admission of Successor Special General Partner. . . . . B-45
11.5 Amendment of Agreement. . . . . . . . . . . . . . . . . B-46
ARTICLE XII
Withdrawal or Removal of the General Partners
12.1 Withdrawal or Removal of the Managing General Partner . B-46
12.2 Withdrawal or Removal of Special General Partner. . . . B-46
B-(iii)
<PAGE>
12.3 Interest of Departing Partner . . . . . . . . . . . . . B-46
ARTICLE XIII
Dissolution and Liquidation
13.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . B-47
13.2 Continuation of the Partnership . . . . . . . . . . . . B-48
13.3 Liquidation . . . . . . . . . . . . . . . . . . . . . . B-48
13.4 Distribution in Kind. . . . . . . . . . . . . . . . . . B-49
13.5 Return of Capital . . . . . . . . . . . . . . . . . . . B-50
13.6 Waiver of Partition . . . . . . . . . . . . . . . . . . B-50
ARTICLE XIV
Amendment of Partnership Agreement
14.1 Amendments. . . . . . . . . . . . . . . . . . . . . . . B-50
ARTICLE XV
Merger
15.1 Authority . . . . . . . . . . . . . . . . . . . . . . . B-51
15.2 Procedure for Merger or Conslidation. . . . . . . . . . B-51
15.3 Approval by Limited Partner of Merger or Consolidation. B-52
15.4 Certificate of Merger . . . . . . . . . . . . . . . . . B-53
15.5 Effect of Merger. . . . . . . . . . . . . . . . . . . . B-53
ARTICLE XVI
Limitations
16.1 Sale of Substantially All Assets. . . . . . . . . . . . B-53
ARTICLE XVII
Special Provisions
17.1 Withdrawal of Acreage by the Original Limited Partner;
Title to the Timberlands . . . . . . . . . . . . . . . B-54
17.2 Right of IP to Retain or Purchase Mineral Interests . . B-55
17.3 Matters Relating to the Class C Units (Series I). . . . B-56
B-(iv)
<PAGE>
ARTICLE XVIII
General Provisions
18.1 Definitions . . . . . . . . . . . . . . . . . . . . . . B-61
"Accounting Unit" . . . . . . . . . . . . . . . . . . . B-61
"Additional Capital Contribution Amount". . . . . . . . B-61
"Adjusted Property" . . . . . . . . . . . . . . . . . . B-61
"Advancing Partner. . . . . . . . . . . . . . . . . . . B-61
"Affiliate" . . . . . . . . . . . . . . . . . . . . . . B-61
"Affiliated Corporation". . . . . . . . . . . . . . . . B-61
"Affiliated Partnership". . . . . . . . . . . . . . . . B-61
"Affiliated Partnership Agreement". . . . . . . . . . . B-61
"Aggregate Distribution Shortfall Preferred Return. . . B-61
"Agreed Value". . . . . . . . . . . . . . . . . . . . . B-61
"Agreement" . . . . . . . . . . . . . . . . . . . . . . B-62
"Alexander Plantation . . . . . . . . . . . . . . . . . B-62
"Assignee". . . . . . . . . . . . . . . . . . . . . . . B-62
"Book-Tax Disparity". . . . . . . . . . . . . . . . . . B-62
"Bulk Sale" . . . . . . . . . . . . . . . . . . . . . . B-62
"Capital Account" . . . . . . . . . . . . . . . . . . . B-62
"Capital Contribution". . . . . . . . . . . . . . . . . B-62
"Carrying Value". . . . . . . . . . . . . . . . . . . . B-62
"Certificate of Limited Partnership". . . . . . . . . . B-62
"Class A Capital Account" . . . . . . . . . . . . . . . B-63
"Class A Certificate" . . . . . . . . . . . . . . . . . B-62
"Class A Limited Partner" . . . . . . . . . . . . . . . B-62
"Class A Portion" . . . . . . . . . . . . . . . . . . . B-63
"Class A Unit". . . . . . . . . . . . . . . . . . . . . B-63
"Class B Capital Account" . . . . . . . . . . . . . . . B-63
"Class B Certificate" . . . . . . . . . . . . . . . . . B-63
"Class B Limited Partner" . . . . . . . . . . . . . . . B-63
"Class B Portion" . . . . . . . . . . . . . . . . . . . B-63
"Class B Unit". . . . . . . . . . . . . . . . . . . . . B-63
"Class C Capital Account" . . . . . . . . . . . . . . . B-64
"Class C Certificate" . . . . . . . . . . . . . . . . . B-64
"Class C General Revenue Percentage Interest" . . . . . B-64
"Class C Percentage Interest" . . . . . . . . . . . . . B-64
"Class C Units" . . . . . . . . . . . . . . . . . . . . B-64
"Code". . . . . . . . . . . . . . . . . . . . . . . . . B-64
"Commencement Date" . . . . . . . . . . . . . . . . . . B-64
"Contributed Property". . . . . . . . . . . . . . . . . B-64
"Contributing Partner". . . . . . . . . . . . . . . . . B-64
B-(v)
<PAGE>
"Cut Timber". . . . . . . . . . . . . . . . . . . . . . B-64
"Default Notice". . . . . . . . . . . . . . . . . . . . B-64
"Defaulting Partner". . . . . . . . . . . . . . . . . . B-64
"Departing Partner" . . . . . . . . . . . . . . . . . . B-64
"Designated Rate" . . . . . . . . . . . . . . . . . . . B-65
"Distributable Cash from the Identified Property" . . . B-65
"Distributable Cash from Specified General Revenue" . . B-65
"Distribution Shortfall . . . . . . . . . . . . . . . . B-65
"Distribution Shortfall Preferred Return. . . . . . . . B-65
"Election Date" . . . . . . . . . . . . . . . . . . . . B-65
"First Agreement" . . . . . . . . . . . . . . . . . . . B-65
"General and Administrative Overhead" . . . . . . . . . B-65
"General Partners". . . . . . . . . . . . . . . . . . . B-65
"Identified Property" . . . . . . . . . . . . . . . . . B-65
"Identified Property Percentage Interest" . . . . . . . B-66
"Initial Limited Partner" . . . . . . . . . . . . . . . B-66
"Initial Managing General Partner". . . . . . . . . . . B-66
"Initial Period". . . . . . . . . . . . . . . . . . . . B-66
"Initial Term". . . . . . . . . . . . . . . . . . . . . B-66
"IP". . . . . . . . . . . . . . . . . . . . . . . . . . B-66
"IPFR". . . . . . . . . . . . . . . . . . . . . . . . . B-66
"IPT Partnership Agreement" . . . . . . . . . . . . . . B-66
"IPT Unit". . . . . . . . . . . . . . . . . . . . . . . B-66
"Limited Partner" . . . . . . . . . . . . . . . . . . . B-66
"Liquidator". . . . . . . . . . . . . . . . . . . . . . B-66
"Major Partnership Transaction" . . . . . . . . . . . . B-66
"Managing General Partner". . . . . . . . . . . . . . . B-67
"Net Agreed Value". . . . . . . . . . . . . . . . . . . B-67
"Operating Deficiency". . . . . . . . . . . . . . . . . B-67
"Opinion of Counsel". . . . . . . . . . . . . . . . . . B-67
"Original Certificate of Limited Partnership" . . . . . B-67
"Original Contribution Agreement" . . . . . . . . . . . B-67
"Original Limited Partner". . . . . . . . . . . . . . . B-68
"Original Partners" . . . . . . . . . . . . . . . . . . B-68
"Original Primary Account Property" . . . . . . . . . . B-68
"Original Secondary Account Property" . . . . . . . . . B-68
"Original Timber Interests" . . . . . . . . . . . . . . B-68
"Partner" . . . . . . . . . . . . . . . . . . . . . . . B-68
"Partner Loan". . . . . . . . . . . . . . . . . . . . . B-68
"Partnership" . . . . . . . . . . . . . . . . . . . . . B-68
"Partnership Interest". . . . . . . . . . . . . . . . . B-68
"Permitted Transferee". . . . . . . . . . . . . . . . . B-68
"Person". . . . . . . . . . . . . . . . . . . . . . . . B-68
B-(vi)
<PAGE>
"Primary Account" . . . . . . . . . . . . . . . . . . . B-68
"Primary Account Cash". . . . . . . . . . . . . . . . . B-69
"Primary Account Factor". . . . . . . . . . . . . . . . B-69
"Primary Account Percentage Interest" . . . . . . . . . B-69
"Primary Account Portion" . . . . . . . . . . . . . . . B-69
"Prudential". . . . . . . . . . . . . . . . . . . . . . B-69
"Recapture Income". . . . . . . . . . . . . . . . . . . B-69
"Recreational Income" . . . . . . . . . . . . . . . . . B-69
"Residual Gain" or "Residual Loss". . . . . . . . . . . B-69
"Restatement Date". . . . . . . . . . . . . . . . . . . B-70
"Secondary Account" . . . . . . . . . . . . . . . . . . B-70
"Secondary Account Cash". . . . . . . . . . . . . . . . B-70
"Secondary Account Factor". . . . . . . . . . . . . . . B-70
"Secondary Account Percentage Interest" . . . . . . . . B-70
"Secondary Account Portion" . . . . . . . . . . . . . . B-70
"Section 631(a) Cut". . . . . . . . . . . . . . . . . . B-71
"Section 631(b) Sale" . . . . . . . . . . . . . . . . . B-77
"Sell or exchange . . . . . . . . . . . . . . . . . . . B-71
"South Central Region". . . . . . . . . . . . . . . . . B-71
"Special General Partner" . . . . . . . . . . . . . . . B-71
"Specified General Revenue" . . . . . . . . . . . . . . B-71
"Specified General Revenue Percentage Interest" . . . . B-71
"Special Limited Partner" . . . . . . . . . . . . . . . B-71
"Special Limited Partner Interest". . . . . . . . . . . B-71
"Standing Timber" . . . . . . . . . . . . . . . . . . . B-72
"Substantially all of the assets of the partnership". . B-72
"Texas Act" . . . . . . . . . . . . . . . . . . . . . . B-72
"Timber Cutting Contracts" . . . . . . . . . . . . . . B-72
"Timber Deed" . . . . . . . . . . . . . . . . . . . . . B-72
"Timber Interests". . . . . . . . . . . . . . . . . . . B-72
"Timberland". . . . . . . . . . . . . . . . . . . . . . B-72
"Transferred Gain". . . . . . . . . . . . . . . . . . . B-72
"Undistributed Cash Amount" . . . . . . . . . . . . . . B-72
"Unit". . . . . . . . . . . . . . . . . . . . . . . . . B-73
"Unpaid Distribution Shortfall Preferred Return". . . . B-73
"Unrealized Gain" . . . . . . . . . . . . . . . . . . . B-73
"Unrealized Loss" . . . . . . . . . . . . . . . . . . . B-73
"WCFR". . . . . . . . . . . . . . . . . . . . . . . . . B-73
"WCFR Partnership Agreement". . . . . . . . . . . . . . B-73
"WCFR Primary Account Property" . . . . . . . . . . . . B-73
"WCFR Secondary Account Property" . . . . . . . . . . . B-73
18.2 Addresses and Notices . . . . . . . . . . . . . . . . . B-73
18.3 Titles and Captions . . . . . . . . . . . . . . . . . . B-74
B-(vii)
<PAGE>
18.4 Pronouns and Plurals . . . . . . . . . . . . . . . . . B-74
18.5 Further Action . . . . . . . . . . . . . . . . . . . . B-74
18.6 Binding Effect . . . . . . . . . . . . . . . . . . . . B-74
18.7 Integration. . . . . . . . . . . . . . . . . . . . . . B-74
18.8 Creditors. . . . . . . . . . . . . . . . . . . . . . . B-74
18.9 Waiver . . . . . . . . . . . . . . . . . . . . . . . . B-74
18.10 Counterparts . . . . . . . . . . . . . . . . . . . . . B-75
18.11 Applicable Law . . . . . . . . . . . . . . . . . . . . B-75
18.12 Invalidity of Provisions . . . . . . . . . . . . . . . B-75
18.13 Opinions Regarding Taxation as a Partnership . . . . . B-75
ANNEXES
ANNEX I - Certificate for Class A Limited Partnership Units
in IP Timberlands Operating Company, Ltd. . . . . . . B-77
ANNEX II - Certificate for Class B Limited Partnership Units
in IP Timberlands Operating Company, Ltd. . . . . . . B-78
ANNEX III - Certificate for Class C Limited Partnership
Units in IP Timberlands Operating Company, Ltd. . . . B-79
B-(viii)
<PAGE>
SECOND
AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
IP TIMBERLANDS OPERATING COMPANY, LTD.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is
entered into by and among IP TIMBERLANDS, LTD., a Texas limited partnership, IP
FOREST RESOURCES COMPANY, a Delaware corporation, INTERNATIONAL PAPER COMPANY, a
New York corporation, and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a mutual
insurance company organized under the laws of the State of New Jersey, on behalf
of its separate account, PruTimber Fund Three.
RECITALS
A. WHEREAS, the Partnership was originally formed by the Special General
Partner and WCFR as a limited partnership pursuant to the provisions of the
Texas Act under the name IP N-S Assets, L.P. by filing in the Office of the
Secretary of State of the State of Texas on March 25, 1996 the Original
Certificate of Limited Partnership;
B. WHEREAS, in connection with the formation of the Partnership, WCFR
contributed $9,999 to the Partnership in exchange for a 99% limited partner
interest and a .99% managing general partner interest, and the Special
General Partner contributed $1 to the Partnership in exchange for a .01%
special general partner interest;
C. WHEREAS, on the Commencement Date, (1) WCFR contributed certain assets to
the Partnership with respect to its combined 99.99% limited partner and
managing general partner interest and the Partnership assumed certain
liabilities of WCFR, all as more particularly described in the Original
Contribution Agreement and (2) the Special General Partner contributed cash
to the Partnership with respect to its.01% special general partner
interest;
D. WHEREAS, WCFR transferred its 99% limited partner interest in the
Partnership to the Original Limited Partner and its .99% managing general
partner interest in the Partnership to the Managing General Partner;
E. WHEREAS, the Original Limited Partner and the Managing General Partner were
admitted to the Partnership on the Commencement Date;
B-1
<PAGE>
F. WHEREAS, the transfer of the managing general partner interest and the
admission to the Partnership of the Managing General Partner caused a
dissolution of the Partnership under the Texas Act;
G. WHEREAS, the Special General Partner determined pursuant to the Texas
Act to reconstitute and continue the business of the Partnership;
H. WHEREAS, the Original Certificate of Limited Partnership was amended and
restated and the Certificate of Limited Partnership was filed with the
Secretary of State of the State of Texas, which, among other things,
effected the change of the name of the Partnership to IP Timberlands
Operating Company, Ltd.; and
I. WHEREAS, the Partners now desire to amend and restate the First Agreement
in order to, among other things, create and authorize a new class of
special limited partner interest to be issued from time to time to Special
Limited Partners, to admit Prudential as a Special Limited Partner and to
restate the interests of the Partners in the Partnership.
AGREEMENT
NOW, THEREFORE, for the reasons recited above and in consideration of the
benefits to be received by them under this Agreement, the Partners agree as
follows:
ARTICLE I
Organizational Matters
1.1 Certain Defined Terms.
Reference is made to Section 17.1 for the meaning assigned to certain
defined terms used throughout this Agreement.
1.2 Formation.
The General Partners and the Original Limited Partner have heretofore
associated themselves into a limited partnership pursuant to the provisions of
the Texas Act by filing in the Office of the Secretary of State of Texas on
April 1, 1996 the Certificate of Limited Partnership of the Partnership. In
connection with the filing in the Office of the Secretary of State of Texas of
the Certificate of Limited Partnership of the Partnership, the Partners entered
into the First Agreement in order to set forth their respective rights and
obligations and, in order to amend and restate the First Agreement, the Partners
have entered into this Agreement. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration,
dissolution and termination of the
B-2
<PAGE>
Partnership shall be governed by the Texas Act. The Partnership Interest of any
Partner shall be personal property for all purposes.
1.3 Name.
The name of the Partnership shall be, and the business of the Partnership
shall be conducted under the name of, "IP Timberlands Operating Company, Ltd."
The Partnership's business may be conducted under any other name or names deemed
advisable by the Managing General Partner. The Managing General Partner in its
sole discretion may change the name of the Partnership at any time and from time
to time. The words "Ltd." or "Limited Partnership" shall be included in the name
where necessary for purposes of complying with the laws of any jurisdiction that
so requires.
1.4 Principal Office.
(a) The principal office of the Partnership shall be Two
Manhattanville Road, Purchase, New York 10577, or such other place as the
Managing General Partner may from time to time designate to the Partners. The
Partnership may maintain such offices at such other locations as the Managing
General Partner deems advisable.
(b) The address of the registered office of the Partnership in the
State of Texas is 811 Dallas Avenue, Houston, Texas 77002, and the name and
address of the registered agent for service of process on the Partnership in the
State of Texas is CT Corporation Systems, 811 Dallas Avenue, Houston, Texas
77002. The Managing General Partner may from time to time change the registered
office and the registered agent.
1.5 Power of Attorney.
Each Partner hereby constitutes and appoints the Managing General Partner
(and any successor by merger, assignment, election or otherwise) with full power
of substitution as his true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all certificates and other instruments
(including, at the option of the Managing General Partner, this Agreement)
and all amendments thereof which the Managing General Partner deems
appropriate or necessary to qualify, or to continue the qualification of,
the Partnership as a limited partnership (or a partnership in which the
Limited Partners have limited liability) in all jurisdictions in which the
Partnership may conduct business or own property; (B) all instruments which
the Managing General Partner deems appropriate or necessary to reflect any
amendments, changes or modifications of this Agreement in accordance with
its terms; (C) all conveyances and other instruments or documents which the
Managing General Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of
this Agreement;
B-3
<PAGE>
(D) instruments relating to the admission or substitution of any Partner
pursuant to Article XI; and (E) all agreements or other instruments
(including, without limitation, a certificate of merger) relating to merger
or consolidation of the Partnership pursuant to Article XV.
Nothing herein contained shall be construed as authorizing the Managing General
Partner to amend this Agreement except in accordance with Article XIV.
(a) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive the
death, incompetency, dissolution, bankruptcy or termination of any Partner and
the transfer of his or its Partnership Interest and shall extend to such
Partner's heirs, successors and assigns. Each such Partner hereby agrees to be
bound by any representations made by the Managing General Partner, acting in
good faith hereby pursuant to such power of attorney; and each such Partner
hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the Managing General Partner, taken in good faith under
such power of attorney. Each Partner shall execute and deliver to the Managing
General Partner, within 15 days after receipt of the Managing General Partner's
request therefor, such further designations, powers of attorney and other
instruments as the Managing General Partner deems necessary to effectuate this
Agreement and the purposes of the Partnership.
1.6 Term.
The Partnership shall continue in existence until the close of Partnership
business on December 31, 2035, or until the earlier termination of the
Partnership in accordance with the provisions of Article XIII.
ARTICLE II
Purpose
The purpose and business of the Partnership shall be, and shall be limited
to, the acquisition, development, ownership, management, operation, leasing and
disposition of Timber Interests; the carrying on of any business and the doing
of any act relating to or arising from the acquisition, development, ownership,
management, operation, leasing and disposition of Timber Interests that a
limited partnership organized under the Texas Act may carry on; the entering
into any partnership, joint venture or other similar arrangement to engage in
any of the foregoing; and anything incidental to the foregoing.
B-4
<PAGE>
ARTICLE III
Capital Contributions
3.1 Primary Account.
The Original Partners and their predecessors in interest have made and
shall make the following Capital Contributions to the Partnership for
attribution to the Primary Account:
(a) Managing General Partner. (i) On the Commencement Date, the
Initial Managing General Partner contributed to the Partnership, for
attribution to the Primary Account, cash in an amount, or property having a
Net Agreed Value, which cash or property was WCFR Primary Account Property,
such that its total Capital Contribution then being made as Initial
Managing General Partner was equal to .99% of the total Capital
Contributions (based on the amounts credited to the Capital Accounts on
account thereof) to the Partnership then being attributed to the Primary
Account pursuant to this paragraph (a)(i) and paragraphs (b)(i) and (c)
hereof.
(i) Following the Commencement Date, whenever the Original
Limited Partner makes a Capital Contribution to the Partnership pursuant to
Section 3.3(a), the Managing General Partner shall contribute to the
Partnership, for attribution to the Primary Account, cash in an amount, or
property having a Net Agreed Value, such that its Capital Contribution then
being made as Managing General Partner shall be equal to .99% of the total
Capital Contributions (based on the amounts credited to the Capital
Accounts on account thereof) to the Partnership then being attributed to
the Primary Account pursuant to this paragraph (a)(ii), paragraph (b)(ii)
hereof and Section 3.3(a).
(b) Special General Partner. (i) On the Commencement Date, the Special
General Partner contributed to the Partnership, for attribution to the
Primary Account, cash in an amount, or property having a Net Agreed Value,
such that its Capital Contribution then being made as Special General
Partner was equal to .01% of the total Capital Contributions (based on the
amounts credited to the Capital Accounts on account thereof) to the
Partnership then being attributed to the Primary Account pursuant to this
paragraph (b)(i) and paragraphs (a)(i) and (c) hereof.
(i) Following the Commencement Date, whenever the Original
Limited Partner makes a Capital Contribution to the Partnership pursuant to
Section 3.3(a), the Special General Partner shall contribute to the
Partnership, for attribution to the Primary Account, cash in an amount, or
property having a Net Agreed Value, such that its Capital Contribution then
being made shall be equal to .01% of the total Capital Contributions (based
on the amounts credited to the Capital Accounts on account thereof) to the
Partnership then
B-5
<PAGE>
being attributed to the Primary Account pursuant to this paragraph (b)(ii),
paragraph (a)(ii) hereof and Section 3.3(a).
(c) Initial Limited Partner. On the Commencement Date, the Initial
Limited Partner contributed WCFR Primary Account Property to the Partnership
pursuant to the Original Contribution Agreement in exchange for the Class A Unit
and the Class B Unit. The WCFR Primary Account Property was attributed to the
Primary Account. In exchange for the Class A Portion of the WCFR Primary Account
Property, the Initial Limited Partner received the Class A Unit, and, in
exchange for the Class B Portion of the WCFR Primary Account Property, the
Initial Limited Partner received the Class B Unit. At the time of such Capital
Contribution, the Partnership assumed (and took the WCFR Primary Account
Property, subject to) all liabilities and other indebtedness to be assumed by
the Partnership in accordance with the Original Contribution Agreement. For
purposes of crediting Capital Accounts pursuant to Section 3.5(a), the Class A
Capital Account of the Initial Limited Partner was credited with the Class A
Portion of the WCFR Primary Account Property for which the Class A Unit was
issued pursuant hereto; and the Class B Capital Account of the Initial Limited
Partner was credited with the Class B Portion of the WCFR Primary Account
Property for which the Class B Unit was issued pursuant hereto.
3.2 Secondary Account.
The Original Partners and their predecessors in interest have made and
shall make the following Capital Contributions to the Partnership for
attribution to the Secondary Account:
(a) Managing General Partner. (i) On the Commencement Date, the
Initial Managing General Partner contributed to the Partnership, for
attribution to the Secondary Account, cash in an amount, or property having
a Net Agreed Value, which cash or property was WCFR Secondary Account
Property, such that its Capital Contribution then being made as Initial
Managing General Partner was equal to .99% of the total Capital
Contributions (based on the amounts credited to the Capital Accounts on
account thereof) to the Partnership then being attributed to the Secondary
Account pursuant to this paragraph (a)(i) and paragraphs (b)(i) and (c)
hereof.
(i) Following the Commencement Date, whenever the Limited Partner
makes a Capital Contribution to the Partnership pursuant to Section 3.3,
the Managing General Partner shall contribute to the Partnership, for
attribution to the Secondary Account, cash in an amount, or property having
a Net Agreed Value, such that its Capital Contribution then being made as
Managing General Partner shall be equal to .99% of the total Capital
Contributions (based on the amounts credited to the Capital Accounts on
account thereof) to the Partnership then being attributed to the Secondary
Account pursuant to this paragraph (a)(ii), paragraph (b)(ii) hereof and
Section 3.3(a).
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<PAGE>
(b) Special General Partner. (i) On the Commencement Date, the Special
General Partner contributed to the Partnership, for attribution to the
Secondary Account, cash in an amount, or property having a Net Agreed
Value, such that its Capital Contribution then being made as Special
General Partner was equal to .01% of the total Capital Contributions (based
on the amounts credited to the Capital Accounts on account thereof) to the
Partnership then being attributed to the Secondary Account pursuant to this
paragraph (b)(i) and paragraphs (a)(i) and (c) hereof.
(ii) Following the Commencement Date, whenever the Limited
Partner makes a Capital Contribution to the Partnership pursuant to Section
3.3(a), the Special General Partner shall contribute to the Partnership,
for attribution to the Secondary Account, cash in an amount, or property
having a Net Agreed Value, such that its Capital Contribution then being
made shall be equal to .01% of the total Capital Contributions (based on
the amounts credited to the Capital Accounts on account thereof) to the
Partnership then being attributed to the Secondary Account pursuant to this
paragraph (b)(ii), paragraph (a)(ii) hereof and Section 3.3(a).
(c) Initial Limited Partner. On the Commencement Date, the Initial
Limited Partner contributed WCFR Secondary Account Property to the Partnership
pursuant to the Original Contribution Agreement in exchange for the Class A Unit
and the Class B Unit. The WCFR Secondary Account Property was attributed to the
Secondary Account. In exchange for the Class A Portion of the WCFR Secondary
Account Property, the Initial Limited Partner received the Class A Unit, and in
exchange for the Class B Portion of the WCFR Secondary Account Property, the
Initial Limited Partner received the Class B Unit. At the time of such Capital
Contribution, the Partnership assumed (and took the WCFR Secondary Account
Property, subject to) all liabilities and other indebtedness to be assumed by
the Partnership in accordance with the Original Contribution Agreement. For
purposes of crediting Capital Accounts pursuant to Section 3.5(a), the Class A
Capital Account of the Initial Limited Partner was credited with the Class A
Portion of the WCFR Secondary Account Property for which the Class A Unit was
issued pursuant hereto and the Class B Capital Account of the Initial Limited
Partner was credited with the Class B Portion of the WCFR Secondary Account
Property for which the Class B Unit was issued pursuant hereto.
3.3 Additional Contributions of the Original Limited Partner and Capital
Contributions by the Special Limited Partners.
(a) Additional Contributions of the Original Limited Partner.
Following the Commencement Date, the Original Limited Partner may contribute
additional capital, whether in the form of cash or property, to the Partnership
and the Partnership shall assume (or take any such Contributed Property subject
to) all liabilities attributed to any such Contributed Property in accordance
with the following general principles:
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(i) (A) During the Initial Term, any Timber Interests contributed
to the Partnership by the Original Limited Partner will be deemed to have
been contributed (I) with respect to the Class A Unit, to the extent of
95.96% of the Primary Account Portion of the Net Agreed Value of such
Timber Interests, and (II) with respect to the Class B Unit, to the extent
of 4.04% of the Primary Account Portion of the Net Agreed Value of such
Timber Interests. Such Timber Interests will be deemed to have been
contributed (I) with respect to the Class A Unit, to the extent of 4.04% of
the Secondary Account Portion of the Net Agreed Value of such Timber
Interests and (II) with respect to the Class B Unit, to the extent of
95.96% of the Secondary Account Portion of the Net Agreed Value of such
Timber Interests. For purposes of crediting Capital Accounts pursuant to
Section 3.5(a), the Class A Capital Account of the Original Limited Partner
shall be credited with that portion of the Net Agreed Value of the Timber
Interests deemed contributed with respect to the Class A Unit and the Class
B Capital Account of the Original Limited Partner shall be credited with
that portion of the Net Agreed Value of the Timber Interests deemed
contributed with respect to the Class B Unit.
(B) Following the Initial Term, any Timber Interests contributed
to the Partnership by the Original Limited Partner will be deemed to
have been contributed (I) with respect to the Class A Unit to the
extent of 4.04% of the Net Agreed Value of such Timber Interests and
(II) with respect to the Class B Unit to the extent of 95.96% of the
Net Agreed Value of such Timber Interests; unless the Class A Unit and
the Class B Unit shall have been combined or reclassified pursuant to
paragraph (d) hereof, in which case such Timber Interests will be
deemed contributed with respect to such combined or reclassified Unit.
For purposes of crediting Capital Accounts pursuant to Section 3.5(a),
the Class A Capital Account of the Original Limited Partner shall be
credited with that portion of the Net Agreed Value of the Timber
Interests deemed contributed with respect to the Class A Unit and the
Class B Capital Account of the Original Limited Partner shall be
credited with that portion of the Net Agreed Value of the Timber
Interests deemed contributed with respect to the Class B Unit; unless
the Class A Capital Account and the Class B Capital Account have been
combined into a single Capital Account pursuant to Section 3.5(e), in
which case, such single Capital Account of the Original Limited
Partner shall be credited with the Net Agreed Value of such Timber
Interests.
(ii) (A) During the Initial Term, the Primary Account Portion of
the Agreed Value of any Timber Interests contributed by the Original
Limited Partner pursuant hereto will be attributed to the Primary Account
and the Secondary Account Portion of the Agreed Value of any such Timber
Interests will be attributed to the Secondary Account.
(B) Following the Initial Term, the Agreed Value of any Timber
Interests contributed by the Original Limited Partner pursuant hereto
will be attributed in full to the Secondary Account.
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(iii) (A) During the Initial Term, any cash contributed by the
Original Limited Partner pursuant hereto, which cash was received by the
Original Limited Partner as a contribution to capital, shall be deemed to
have been contributed (I) with respect to the Class A Unit, to the extent
of the Class A Portion of both the Primary Account Cash and Secondary
Account Cash so contributed to the Partnership, and (II) with respect to
the Class B Unit, to the extent of the Class B Portion of both the Primary
Account Cash and the Secondary Account Cash so contributed to the
Partnership. The Primary Account Cash so contributed will be attributed to
the Primary Account and the Secondary Account Cash so contributed will be
attributed to the Secondary Account.
(B) Following the Initial Term, any cash contributed by the
Original Limited Partner pursuant hereto, which cash was received by
the Original Limited Partner as a contribution to capital, shall be
deemed to have been contributed (I) with respect to the Class A Unit
to the extent of 4.04% of such cash and (II) with respect to the Class
B Unit to the extent of 95.96% of such cash; unless the Class A Unit
and the Class B Unit shall have been combined or reclassified pursuant
to paragraph (d) hereof, in which case such cash will be deemed
contributed with respect to such combined or reclassified Unit. Any
such Capital Contribution of cash by the Original Limited Partner will
be attributed in full to the Secondary Account.
(iv) Upon the amendment of the IPT Partnership Agreement pursuant
to Section 3.3(g) thereof to provide for the combination or
reclassification of the Units issued by the Original Limited Partner, the
Managing General Partner shall also amend the Certificate of Limited
Partnership to provide for the same combination or reclassification of the
Class A Unit and the Class B Unit.
(b) Issuance of Class C Units and Capital Contributions by Special
Limited Partners. The Managing General Partner is hereby authorized to issue,
from time to time, Class C Units to Special Limited Partners in exchange for
Capital Contributions by such Special Limited Partners to the Partnership. Each
series of Class C Units so issued will carry the rights and obligations set
forth in this Agreement and any amendment to this Agreement made in connection
with the issuance of such series of Class C Units. Except as otherwise provided
in this Agreement, as long as a series of Class C Units remains outstanding, the
Partnership shall not transfer the Identified Property with respect to such
series of Class C Units. The terms of each series of Class C Units issued
pursuant hereto shall be as specified in Article XVII.
(c) Additional Capital Contributions of Special Limited Partners. (i)
Except as otherwise provided in this Section 3.3(c) or agreed to by the
Partners, if the Managing General Partner reasonably determines that the
Partnership's projected cash requirements with respect to any Identified
Property for any calendar quarter exceed the amount of cash attributable to such
Identified Property that is projected to be available during such calendar
quarter to fund those requirements (an "Operating Deficiency"), then the
Managing General Partner shall (A) notify each Special Limited
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Partner holding any Class C Units to which such Identified Property relates of
the Operating Deficiency and within two days of receiving such notice each such
Special Limited Partner shall contribute additional cash to the Partnership
equal to the amount (such amount referred to as the "Additional Capital
Contribution Amount") determined by multiplying the amount of the Operating
Deficiency by such Special Limited Partner's Identified Property Percentage
Interest with respect to such series of Class C Units, and (B) cause the
Partnership to fund the remaining portion of such Operating Deficiency from
other funds available to the Partnership.
(ii) If any Special Limited Partner (the "Defaulting Partner")
fails to contribute to the Partnership any portion of such Special Limited
Partner's Additional Capital Contribution Amount, the Managing General
Partner shall promptly deliver notice thereof to the Original Partners,
which notice (a "Default Notice") shall specify the name of the Defaulting
Partner and the unpaid portion of such Defaulting Partner's Additional
Capital Contribution Amount. Any Partner that receives a Default Notice
(the "Advancing Partner") may, by notice delivered to the Defaulting
Partner on or before the date that is 5 days following the delivery of such
Default Notice (the "Election Date"), elect to make a loan to the
Partnership (a "Partner Loan") with respect to the Additional Capital
Contribution Amount. Any such Election Notice shall specify the amount of
the Partner Loan and the maturity of, and the liens and security interests
required with respect to, such Partner Loan.
(iii) Notwithstanding anything to the contrary herein, a Partner
making a Partner Loan pursuant to Section 3.3(c)(ii) hereof may, in its
sole discretion, (i) make such loan without any approval or consent of the
other Partners, (ii) designate the maturity of such loan (not to be less
than 30 days nor more than 5 years), and (iii) require that such loan be
secured by the grant of a lien upon and security interest in, Partnership
Assets (fully subordinated to all existing secured Partnership debt to
Persons other than the Partners, including future advances under and
renewals, extensions and refundings of, such debt). Each Partner Loan
shall, unless otherwise agreed by the Partnership and the Advancing
Partner, bear interest, payable quarterly, at the rate per annum equal to
the lesser of (i) the Prime Rate plus 5% and (ii) the maximum nonusurious
rate of interest permitted by applicable law, and shall be deemed an
obligation of indebtedness from the Partnership to such Advancing Partner
payable in accordance with its terms. All payments on Partner Loans shall
be applied first to accrued interest and second to the outstanding
principal balance. All Partner Loans shall be evidenced by promissory notes
of the Partnership in such form as the Managing General Partner determines
to be appropriate. The Partners shall, or shall authorize the Managing
General Partner to, execute and deliver all necessary promissory notes,
deeds of trust, security agreements and financing statements and other
documents as the Advancing Partner may reasonably request in order to
evidence and secure the Partner Loan made under Section 3.1(c). All Partner
Loans shall be pre-payable by the Partnership at any time in whole or in
part without premium or penalty and, if Partner Loans exist as of any time
to more than one Partner then all liens and security interests provided by
the Partnership with respect to such Partner Loans shall be treated as
being secured and
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perfected as of the same time, with equal dignity, and otherwise in pari
passu. Except to the extent specifically provided in this Agreement, a
Partner Loan shall not be deemed an increase in or contribution to the
Capital Account of the lending Partner or entitle such lending Partner to
any greater proportion of the gains or losses which the Partnership may
sustain.
3.4 No Preemptive Rights.
No Partner shall have any preemptive, preferential or other right with
respect to, as may be applicable, (a) additional Capital Contributions; (b)
issuance or sale of Class A Units, Class B Units, Class C Units or any other
Units or Interests; (c) issuance of any obligations, evidences of indebtedness
or other securities of the Partnership convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
Class A Units, Class B Units, Class C Units or any other Units or Interests; (d)
issuance of any right of subscription to or right to receive, or any warrant or
option for the purchase of, any of the foregoing securities; or (e) issuance or
sale of any other securities that may be issued or sold by the Partnership.
3.5 Capital Accounts.
The Partnership shall maintain Capital Accounts in accordance with the
following provisions of this Section 3.5:
(a) The Partnership shall maintain for each General Partner a separate
Capital Account. Such Capital Account shall be increased by (i) the cash amount
or Net Agreed Value of all Capital Contributions made by such General Partner
pursuant to this Agreement and (ii) all items of Partnership income and gain
computed in accordance with Section 3.5(b) and allocated to such Partner
pursuant to Section 5.1 and decreased by (iii) the cash amount or Net Agreed
Value of all distributions of cash or property made to such Partner pursuant to
this Agreement and (iv) all items of Partnership deduction and loss computed in
accordance with Section 3.5(b) and allocated to such Partner pursuant to Section
5.1.
Subject to paragraph (e) hereof, the Partnership shall maintain for
the Original Limited Partner a separate Class A Capital Account with respect to
the Class A Unit. Such Class A Capital Account shall be increased by (i) the
cash amount or that portion of the Net Agreed Value of all Capital Contributions
made in exchange for the issuance of, or subsequently made with respect to, the
Class A Unit pursuant to this Agreement and (ii) all items of income and gain
computed in accordance with Section 3.5(b) and allocated with respect to the
Class A Unit pursuant to Section 5.1 and decreased by (iii) the cash amount or
Net Agreed Value of all distributions of cash or property made with respect to
the Class A Unit pursuant to this Agreement and (iv) all items of deduction and
loss computed in accordance with Section 3.5(b) and allocated with respect to
the Class A Unit pursuant to Section 5.1.
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Subject to paragraph (e) hereof, the Partnership shall also maintain
for the Original Limited Partner a separate Class B Capital Account with respect
to the Class B Unit. Such Class B Capital Account shall be increased by (i) the
cash amount or that portion of the Net Agreed Value of all Capital Contributions
made in exchange for the issuance of, or subsequently made with respect to, the
Class B Unit pursuant to this Agreement and (ii) all items of income and gain
computed in accordance with Section 3.5(b) and allocated with respect to the
Class B Unit pursuant to Section 5.1 and decreased by (iii) the cash amount or
Net Agreed Value of all distributions of cash or property made with respect to
the Class B Unit pursuant to this Agreement and (iv) all items of deduction and
loss computed in accordance with Section 3.5(b) and allocated with respect to
the Class B Unit pursuant to Section 5.1.
The Partnership shall maintain for each Special Limited Partner a
separate Capital Account with respect to each series of Class C Units held by
such Partner. Such Capital Account shall be increased by (i) the cash amount or
Net Agreed Value of all Capital Contributions made by such Special Limited
Partner pursuant to this Agreement with respect to such series of Class C Units
and (ii) all items of Partnership income and gain computed in accordance with
Section 3.5(b) and allocated to such Partner pursuant to Section 5.1 with
respect to such series of Class C Units and decreased by (iii) the cash amount
or Net Agreed Value of all distributions of cash or property made to such
Partner pursuant to this Agreement with respect to such series of Class C Units
and (iv) all items of Partnership deduction and loss computed in accordance with
Section 3.5(b) and allocated to such Partner pursuant to Section 5.1 with
respect to such series of Class C Units.
(b) For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for Federal income tax
purposes, provided that:
(i) Solely for purposes of the application of the provisions of
this Section 3.5, the Partnership shall be treated as owning directly its
proportionate share of all property owned by all Affiliated Partnerships
(as determined by the Managing General Partner based upon the provisions of
the Affiliated Partnership Agreements).
(ii) Any deductions for depreciation, cost recovery or
amortization (other than depletion under Section 611 of the Code)
attributable to a Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership was equal to the Agreed Value of such property. Upon an
adjustment to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization pursuant to Sections 3.5(d),
6.12 or 16.1, any further deductions for such depreciation, cost recovery
or amortization (other than depletion under Section 611 of the Code)
attributable to such property shall be determined as if the adjusted basis
of such property was equal to the Carrying Value of such property
immediately following such adjustment.
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(iii) If the Partnership's adjusted basis in a depreciable or
cost recovery property is reduced for Federal income tax purposes pursuant
to Section 48(q)(1) of the Code, the amount of such reduction shall, solely
for purposes hereof, be deemed to be an additional depreciation or cost
recovery deduction in the year such property is placed in service and shall
be allocated among the Partners pursuant to Section 5.1. Any restoration of
such basis pursuant to Section 48(q)(2) of the Code shall be allocated in
the same manner to the Partners to whom such deemed deduction was
allocated.
(iv) Any depletion deductions separately determined, in
accordance with the principles of Section 611 of the Code, with respect to
a separate timber account shall be computed as if the aggregate adjusted
basis of the timber units included in such timber account on the date of
such determination was equal in amount to the Partnership's Carrying Value
with respect to such timber account as of such date. The depletion
allowance separately determined with respect to a timber account shall not,
in the aggregate, exceed the Partnership's total Carrying Value with
respect to all of the timber units included in such timber account. This
provision shall only apply to depletion separately stated as an item of
deduction, as opposed to depletion amounts treated as a reduction of
amounts realized or included as a cost of goods sold (which depletion
amounts are the subject of Section 3.5(b)(v)).
(v) Any income, gain or loss attributable to the taxable
disposition of any property (including any disposition of a Timber
Interest, regardless of qualification under Section 631 of the Code) shall
be determined by the Partnership as if the adjusted basis of such property
(or, in the case of certain timber dispositions, the "adjusted depletion
basis" of such timber) as of such date of disposition was equal in amount
to the Partnership's Carrying Value with respect to such property as of
such date. The adjusted basis or adjusted depletion basis, whichever the
case may be, determined upon sales or other dispositions of timber units
included in a timber account shall not, in the aggregate, exceed the
Partnership's total Carrying Value with respect to all of the timber units
included in such timber account.
(vi) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code shall, for purposes of
capital account maintenance, be treated as an item of deduction and shall
be allocated among the Partners pursuant to Section 5.1.
(vii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code,
without regard to the fact that such items are not includable in gross
income or are neither currently deductible nor capitalizable for Federal
income tax purposes.
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(c) Generally, a transferee of a Partnership Interest will succeed to
the Capital Account relating to the Partnership Interest transferred. However,
if the transfer causes a termination of the Partnership under Section
708(b)(1)(B) of the Code, the Partnership properties shall be deemed to have
been distributed in liquidation of the Partnership to the Partners (including
the transferee of the Partnership Interest) pursuant to Sections 13.3 and 13.4
and recontributed by such Partners in reconstitution of the Partnership. In such
event, the Carrying Values of the Partnership properties shall be adjusted
immediately prior to such deemed distribution, pursuant to Section 3.5(d)(ii),
and such adjusted Carrying Values shall constitute the Agreed Values of such
properties upon the deemed contribution to the reconstituted Partnership. The
Capital Accounts of such reconstituted Partnership shall be maintained in
accordance with the principles of this Section 3.5.
(d) (i) Upon an issuance by the Original Limited Partner of additional
IPT Units for cash or Contributed Property pursuant to Section 3.3 of the
IPT Partnership Agreement, any adjustments made, pursuant to Section
3.5(d)(i) of the IPT Partnership Agreement, to the Class A Capital Accounts
(as defined in the IPT Partnership Agreement), in the aggregate, will be
reflected in the Class A Capital Account and any adjustments made, pursuant
to Section 3.5(d)(i) of the IPT Partnership Agreement to the Class B
Capital Accounts (as defined in the IPT Partnership Agreement), in the
aggregate, will be reflected in the Class B Capital Account. Any
adjustments made to the capital accounts of the general partners of the
Original Limited Partner pursuant to Section 3.5(d)(i) of the IPT
Partnership Agreement shall be reflected in, and divided between, the Class
A Capital Account and the Class B Capital Account in an appropriate and
reasonable manner determined solely by the Managing General Partner. Any
corresponding adjustments to the Carrying Values of the Original Limited
Partner's properties shall be made to the Carrying Values of the same
properties of the Partnership.
(ii) In addition, immediately prior to the distribution of any
Partnership cash or property either (A) to provide funds to the Original
Limited Partner for redemption of IPT Units pursuant to Section 17.2 of the
IPT Partnership Agreement or (B) in liquidation of the Partnership pursuant
to Sections 13.3 and 13.4, any adjustments made, pursuant to either Section
3.5(d)(ii) or 3.5(d)(iii) of the IPT Partnership Agreement, to the Class A
Capital Accounts and Class B Capital Accounts (as defined in the IPT
Partnership Agreement) maintained by the Original Limited Partner, as well
as any adjustments made to the capital accounts of the general partners of
the Original Limited Partner, pursuant to either Section 3.5(d)(ii) or
3.5(d)(iii) of the IPT Partnership Agreement, shall be reflected in, and
divided between, the Class A Capital Account and the Class B Capital
Account in the same manner provided in paragraph (i) hereinabove. Any
corresponding adjustments to the Carrying Values of the Original Limited
Partner's properties shall be made to the Carrying Values of the same
properties of the Partnership.
(iii) Immediately prior to the issuance or redemption of any
Special Limited Partner Interest, the Capital Accounts of the Partners and
the Carrying Values of all
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Partnership properties shall be appropriately adjusted (consistent with the
provisions hereof, the provisions of the IPT Partnership Agreement, and the
provisions of Section 704(b) of the Code and the regulations thereunder)
upwards or downwards to reflect any Unrealized Gain or Unrealized Loss
attributable to all Partnership properties (as if such Unrealized Gain or
Unrealized Loss had been recognized on a sale of such properties
immediately prior thereto). In connection with any adjustment to the Class
A Capital Account or the Class B Capital Account pursuant to Section
3.5(d)(i) or (ii), the Class C Capital Accounts of the Special Limited
Partners and the Carrying Values of all Partnership properties shall be
appropriately adjusted (consistent with the provisions hereof, the
provisions of the IPT Partnership Agreement, and the provisions of Section
704(b) of the Code and the regulations thereunder) upwards or downwards to
reflect any Unrealized Gain or Unrealized Loss attributable to all
Partnership properties (as if such Unrealized Gain or Unrealized Loss had
been recognized on a sale of such properties immediately prior thereto).
(e) (i) Immediately prior to the distribution of any Partnership
property in liquidation of the Partnership pursuant to Sections 13.3 and
13.4, once all adjustments provided for herein have been made, the Class A
Capital Account and the Class B Capital Account of the Original Limited
Partner shall be combined into a single Capital Account (in the event such
Capital Accounts have not theretofore been combined pursuant to paragraph
(ii) hereof).
(ii) In the event the capital accounts maintained for any partner
of the Original Limited Partner have been combined pursuant to Section
3.5(e)(ii) of the IPT Partnership Agreement, the Managing General Partner
shall combine the Class A Capital Account and the Class B Capital Account
and, thereafter, maintain a single Capital Account for the Original Limited
Partner.
3.6 Interest.
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
3.7 No Withdrawal.
A Partner shall not be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Section 4.10 and Articles XII, XIII and XVII.
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3.8 Loans from Partners.
Loans by a Partner to the Partnership shall not be considered Capital
Contributions.
ARTICLE IV
Maintenance of the Accounting Units; Distributions
4.1 Sharing of Costs and Expenses of the Primary Account.
Except as otherwise specifically provided herein, for each calendar year
during the Initial Term all of the following costs and expenses of the
Partnership will be attributed to the Primary Account and shall be charged to
the Original Partners in accordance with their respective Primary Account
Percentage Interests:
(a) All Partnership costs and expenses attributable to the
Partnership's sale or other disposition of Timber Interests, or the
Partnership's acquisition of Timber Interests, to the extent attributed to the
Primary Account by the Managing General Partner pursuant to Section 4.6(a).
(b) All Partnership costs and expenses attributable to the
Partnership's supervision, operation, management and treatment of its Timber
Interests and all General and Administrative Overhead, to the extent attributed
to the Primary Account by the Managing General Partner pursuant to Section
4.6(b).
(c) All Partnership costs and expenses, if any, attributable to the
Partnership's cutting, transportation and other processing of timber (whether
performed directly by the Partnership or indirectly through an agent or
independent contractor).
(d) All other Partnership costs and expenses attributable to
Partnership activities that are reasonably determined by the Managing General
Partner to be activities the benefits of which will be realized primarily during
the Initial Term for the benefit of the Primary Account.
(e) No Partnership costs and expenses attributable to minerals and
mineral interests acquired or owned by the Partnership pursuant to Section 16.2
shall be attributed to the Primary Account.
No Partnership costs and expenses will be attributed to the Primary Account
following the expiration of the Initial Term.
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4.2 Sharing of Costs and Expenses of the Secondary Account.
Except as otherwise specifically provided herein, for each calendar year
during the Initial Term, all of the following costs and expenses of the
Partnership shall be attributed to the Secondary Account and shall be charged to
the Original Partners in accordance with their respective Secondary Account
Percentage Interests:
(a) All Partnership costs and expenses incurred in the reforestation
of the Partnership's Timberlands.
(b) All Partnership costs and expenses attributable to the
Partnership's sale or other disposition of Timber Interests, or the
Partnership's acquisition of Timber Interests, to the extent attributed to
the Secondary Account by the Managing General Partner pursuant to Section
4.6(a).
(c) All Partnership costs and expenses attributable to the
Partnership's supervision, operation, management and treatment of its
Timber Interests and all General and Administrative Overhead costs to the
extent attributed to the Secondary Account by the Managing General Partner
pursuant to Section 4.6(b).
(d) All other Partnership costs and expenses attributable to
Partnership activities that are reasonably determined by the Managing
General Partner to be activities the benefits of which will be realized
either (i) primarily during the Initial Term for the benefit of the
Secondary Account or (ii) primarily following the expiration of the Initial
Term.
(e) All Partnership costs and expenses attributable to minerals and
mineral interests owned or acquired by the Partnership pursuant to Section
16.2 shall be attributed to the Secondary Account.
All Partnership costs and expenses will be attributed to the Secondary Account
following the expiration of the Initial Term.
4.3 Sharing of Revenues of the Primary Account.
Except as otherwise specifically provided herein, for each calendar year
during the Initial Term all of the following revenues of the Partnership shall
be attributed to the Primary Account and shall be credited to the Original
Partners in accordance with their respective Primary Account Percentage
Interests:
(a) All Partnership revenues attributable to the Partnership's sale or
other disposition of Timber Interests, to the extent such revenues have
been attributed to the Primary Account by the Managing General Partner
pursuant to Section 4.6(c).
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(b) All Partnership revenues attributable to interest or other
earnings resulting from the investment of the Partnership's funds, to the
extent such revenues have been attributed to the Primary Account by the
Managing General Partner pursuant to Section 4.6(d).
(c) All other Partnership revenues attributable to the land and forest
management, ownership and operation of the Timber Interests or other assets
or properties of the Partnership during the Initial Term attributed to the
Primary Account by the Managing General Partner pursuant to Section 4.6(e).
(d) No Partnership revenues attributable to minerals or mineral
interests owned or acquired by the Partnership pursuant to Section 16.2
will be attributed to the Primary Account.
No Partnership revenues will be attributed to the Primary Account following the
expiration of the Initial Term.
4.4 Sharing of Revenues of the Secondary Account.
Except as otherwise specifically provided herein, for each calendar year
during the Initial Term all of the following revenues of the Partnership shall
be attributed to the Secondary Account and shall be credited to the Original
Partners in accordance with their respective Secondary Account Percentage
Interests:
(a) All Partnership revenues attributable to the Partnership's sale or
other disposition of Timber Interests, to the extent such revenues have been
attributed to the Secondary Account by the Managing General Partner pursuant to
Section 4.6(c).
(b) All Partnership revenues attributable to interest or other
earnings resulting from the investment of the Partnership's funds, to the extent
such revenues have been attributed to the Secondary Account by the Managing
General Partner pursuant to Section 4.6(d).
(c) All other Partnership revenues attributable to land and forest
management, ownership and operation of the Timber Interests or other assets or
properties of the Partnership during the Initial Term attributed to the
Secondary Account by the Managing General Partner pursuant to Section 4.6(e).
(d) All Partnership revenues attributable to minerals or mineral
interests owned or acquired by the Partnership pursuant to Section 16.2 shall be
attributed to the Secondary Account.
All Partnership revenues will be attributed to the Secondary Account following
the expiration of the Initial Term.
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4.5 Allocation of Costs and Revenues.
For purposes of the sharing of costs and revenues attributed to an
Accounting Unit, the accrual of such costs and revenues shall be determined on a
monthly or other reasonable basis and allocated among the Original Partners
holding Units at the close of business on the last day of each such month (or
other reasonable period) taking into account each such Partner's Percentage
Interest in the Partnership on such day, in a manner consistent with the
allocation method utilized by the Managing General Partner pursuant to Sections
5.2(h) and (i).
4.6 Classification of Certain Costs and Revenues.
Certain Partnership costs and revenues must be allocated between the
Primary Account and the Secondary Account in determining the classification of
such costs and revenues during the Initial Term. The Managing General Partner,
in its sole discretion, will be responsible for making such allocation of costs
and revenues in accordance with general timber industry practices and the
following principles:
(a) Partnership costs and expenses attributable to (i) the
Partnership's sale or other disposition of Timber Interests or to (ii) the
acquisition of Timber Interests during the Initial Term shall be allocated and
charged to the Primary Account in that amount arrived at by multiplying the
Primary Account Factor times the total amount of such costs and expenses. Such
costs and expenses shall be allocated and charged to the Secondary Account in
that amount arrived at by multiplying the Secondary Account Factor times the
total amount of such costs and expenses.
(b) Partnership costs and expenses attributable to the supervision,
operation, management and treatment of the Partnership's Timber Interests or to
General and Administrative Overhead shall be allocated between the Primary
Account and the Secondary Account as determined by the Managing General Partner
on a reasonable basis. Initially, the Managing General Partner intends to
allocate annually an amount of such costs of the Partnership to the Primary
Account equal to 15% of the annual revenues credited to the Primary Account and
to allocate the balance of such costs to the Secondary Account; provided,
however, that the Managing General Partner may in the exercise of its reasonable
judgment, change or modify the method of such allocation or adjust such
percentage if the cost allocation between the Primary Account and the Secondary
Account is determined not to be representative of the respective benefits
derived from such costs by the Primary Account and the Secondary Account.
(c) Partnership revenues realized upon the sale or other disposition
of Timber Interests during the Initial Term shall be allocated and credited to
the Primary Account in that amount arrived at by multiplying the Primary Account
Factor times the total amount of such revenues. Such revenues shall be allocated
and credited to the Secondary Account in that amount arrived at by multiplying
the Secondary Account Factor times the total amount of such revenues.
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(d) Partnership revenues attributable to interest or other earnings
resulting from the investment of the Partnership's funds during the Initial Term
shall be allocated between the Primary Account and the Secondary Account by the
Managing General Partner using whatever method of allocation it deems
reasonable, taking into account the source of such Partnership funds.
(e) Partnership revenues not otherwise classified hereinabove that are
attributable to the land and forest management, ownership and operation of the
Timber Interests or other assets or properties of the Partnership shall be
allocated between the Primary Account and the Secondary Account by the Managing
General Partner using whatever method of allocation it deems reasonable.
(f) Notwithstanding any other provision of this Agreement to the
contrary, any Partnership revenues, costs, or expenses that are attributable to
an Identified Property or a source of Specified General Revenue and are
allocable to Special Limited Partners shall not be attributed to the Primary
Account or the Secondary Account.
4.7 Financing of Costs and Distributions.
(a) During the Initial Term, the Managing General Partner, may, in its
sole discretion, utilize Capital Contributions or revenues attributed or
credited to an Accounting Unit (a) to finance costs and expenses charged to such
Accounting Unit or (b) subject to the terms of Section 4.11(c), to finance
distributions to be made to Original Partners with respect to such Accounting
Unit. In addition, the Managing General Partner may incur borrowings (in
accordance with Sections 4.11(b) and 6.1) on behalf of the Partnership to
finance such costs and expenses charged to, or distributions made with respect
to, such Accounting Unit. Subject to Section 4.11(c) if any borrowings are so
incurred to pay costs or to make distributions to Original Partners with respect
to an Accounting Unit, the Managing General Partner must thereafter utilize
revenues or Capital Contributions that have been attributed to such Accounting
Unit (pursuant to Article III or the provisions hereof) to repay such borrowings
(including interest), or any other indebtedness incurred to refinance such
borrowing, and shall not utilize revenues or Capital Contributions that have
been attributed to the other Accounting Unit (pursuant to Article III or the
provisions hereof) as a means of effecting such repayment.
Notwithstanding the foregoing paragraph, borrowings incurred by the
Partnership that are repayable from revenues or Capital Contributions attributed
to the Secondary Account neither shall mature nor shall principal or accrued
interest thereon be due and payable during the Initial Term, except that any
such loan may provide for mandatory prepayment in the event that revenues from a
Bulk Sale or other disposition of Timber Interests are attributed to the
Secondary Account, provided that no such prepayment shall be in excess of
revenues so attributed to the Secondary Account that are determined by the
Managing General Partner, in its sole discretion, not to be required to fund
costs and expenses charged to the Secondary Account or otherwise necessary for
the Partnership's operations. Nothing contained in this Section 4.7 shall
prevent the Managing General Partner from causing the Partnership to incur
borrowings or create other obligations which
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would permit creditors or other third parties to have full recourse against all
assets of the Partnership in satisfying such borrowings or other obligations.
(b) If during the course of the Initial Term, the Partnership engages
in a transaction which entails a like-kind exchange of property and the
application of the Primary Account Factor and the Secondary Account Factor with
respect to the acquired property results in the attribution to one Accounting
Unit of an interest in the acquired property which is less than the interest in
the exchanged property previously attributed to such Accounting Unit, such
Accounting Unit shall receive a transfer of cash attributed to the other
Accounting Unit as reimbursement for any resulting decrease in value.
4.8 Affiliated Corporations and Partnerships.
(a) Solely for purposes of the application of this Article IV, the
Partnership's proportionate share of the underlying revenues and costs of an
Affiliated Partnership (such "proportionate share" to be determined by the
Managing General Partner based upon the provisions of the Affiliated Partnership
Agreement) shall be attributed between the Accounting Units, and correspondingly
credited or charged to the Original Partners, as if the Partnership's
proportionate share of the assets of such Affiliated Partnership (as determined
in the manner provided hereinabove) had been owned directly by the Partnership.
(b) In the event the Partnership conducts operations through
Affiliated Corporations, the Managing General Partner shall attribute between
the Accounting Units the ownership of the stock in such Affiliated Corporations,
contributions made to such Affiliated Corporations and distributions received
from such Affiliated Corporations on a reasonable basis that reflects the manner
in which the Partnership would have attributed the underlying assets, charged
the underlying costs and credited the underlying revenues between such
Accounting Units had such assets been owned directly by the Partnership and had
such attribution been made in accordance with the provisions of Article III and
this Article IV.
4.9 Closing of the Primary Account.
(a) Immediately prior to the distribution of any Partnership property
in liquidation of the Partnership pursuant to Sections 13.3 and 13.4 during the
Initial Term, once all adjustments to the Capital Accounts and the Carrying
Values of the properties have been made pursuant to Section 3.5(d), the Primary
Account shall be combined with the Secondary Account into a single Accounting
Unit.
(b) In the event the Partnership is not liquidated during the Initial
Term, following the expiration of the Initial Term the Managing General Partner
shall repay any Partnership borrowings attributed to the Primary Account (or
reserve cash for the repayment thereof) and make any distributions required by
Section 4.10(a)(ii)(A) (to the extent possible utilizing cash attributed
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to the Primary Account to fund any such repayment or distribution). Immediately
thereafter, the Primary Account shall be closed.
4.10 Current Distributions.
(a) Distributions to Original Partners. Unless otherwise provided
herein, the Managing General Partner may make such cash distributions to the
Original Partners as it in its sole discretion may determine, without being
limited to current or accumulated income or gains, from any Partnership funds,
including, but not limited to, borrowed funds, but excluding funds distributable
in accordance with Section 4.10(b). In its sole discretion, the Managing General
Partner may also distribute to the Original Partners other Partnership property.
Such distributions shall be made in accordance with the following general
principles:
(i) During the Initial Term, the Managing General Partner shall
review the Partnership's Primary Account and Secondary Account to determine
whether distributions are appropriate, taking into account the costs and
revenues which are charged and credited during the preceding calendar
quarter to each such Accounting Unit pursuant to the provisions hereof and
any repayment obligations relating to indebtedness previously incurred with
respect to each such Accounting Unit. All such distributions shall be made
concurrently to all Original Partners in accordance with (A) as to
distributions with respect to the Primary Account, the Original Partners'
respective Primary Account Percentage Interests and (B) as to distributions
with respect to the Secondary Account, the Original Partners' respective
Secondary Account Percentage Interests.
(ii) Following the expiration of the Initial Term:
(A) With respect to the Primary Account, the Managing General
Partner shall repay all Partnership borrowings attributed to the
Primary Account (or reserve cash for the repayment thereof), to the
extent possible utilizing cash attributed to the Primary Account. All
remaining cash attributed to the Primary Account shall be distributed
concurrently to all Original Partners in accordance with their
respective Primary Account Percentage Interests.
(B) With respect to the Secondary Account, the Managing General
Partner, based upon the principles set forth hereinabove, may continue
to make distributions concurrently to all Original Partners in
accordance with their respective Secondary Account Percentage
Interests.
(b) Distributions to Special Limited Partners. (i) Except as otherwise
provided in this Agreement, within 18 days after the end of each calendar
quarter in respect of which Class C Units of any series are outstanding (other
than the calendar quarter in which such series of Class C Units is issued), the
Managing General Partner shall make cash distributions to each Special
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Limited Partner of record as of the last day of the calendar quarter in respect
of which such distribution is to be made in the following amounts for each such
calendar quarter:
(A) for each series of Class C Units held by such Special Limited
Partner, the Special Limited Partner's Identified Property Percentage
Interest of the Distributable Cash from the Identified Property with
respect to such series of Class C Units for such calendar quarter;
(B) for each source of Specified General Revenue, such Special
Limited Partner's Specified General Revenue Percentage Interest, if
any, of the Distributable Cash from such Specified General Revenue for
such calendar quarter; and
(C) the amount, if any, of such Special Limited Partner's Unpaid
Distribution Shortfall Preferred Return;
provided that the cash otherwise distributable to a Special Limited Partner
pursuant to this Section 4.10(b)(i) shall be reduced by the outstanding
principal amount of, and any interest expense that has been incurred by the
Partnership with respect to, any Partner Loan with respect to which such Special
Limited Partner is the Defaulting Partnership to the extent that such principal
and interest have not been previously charged against cash otherwise
distributable to such Special Limited Partner;
(ii) Notwithstanding Section 4.10(b)(i), the Managing General
Partner may, in its sole discretion, determine that all or any part of the
cash distributable to the Special Limited Partners pursuant to Section
4.10(b)(i) for any calendar quarter shall not be distributed to the Special
Limited Partners; provided that (A) any cash that is not so distributed to
one or more Special Limited Partners may at any time thereafter be
distributed to such Special Limited Partners, and (B) so long as any
Distribution Shortfall exists, the Partnership shall not make any
distributions to the Original Partners pursuant to Section 4.10(a). For
purposes of the preceding sentence, a "Distribution Shortfall" shall be
deemed to exist if the sum of the aggregate amount of cash distributable to
the Special Limited Partners pursuant to Section 4.10(b)(i)(A) and (B) for
all preceding calendar quarters and the aggregate Unpaid Distribution
Shortfall Preferred Returns of the Special Limited Partners exceeds the
aggregate amount of cash that has actually been distributed to the Special
Limited Partners up to that point in time.
(c) Payments Pursuant to Section 6.4. Any amounts paid pursuant to
Section 6.4 shall not be deemed to be distributions for purposes of this
Agreement.
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4.11 Inter-Account and Related Party Loans.
(a) To the extent cash attributed to the Primary Account is not
required to fund costs and expenses charged to the Primary Account, the Managing
General Partner may loan such funds to IP, provided that (i) such loans may not
have a maturity in excess of two years, (ii) such loans shall bear interest at a
rate not less than the rate that IP would be charged on a comparable loan by an
unaffiliated third party creditor, and (iii) such loans shall be made on other
terms and conditions as the Managing General Partner may determine to be
necessary or appropriate. Except as specified in this Section 4.11(a), the
Partnership shall not loan or advance funds from the Primary Account to IP, IPFR
or any of their respective Affiliates.
(b) The Partnership may borrow funds from IP or any of its Affiliates
at any time and from time to time during the term of the Partnership for the
purposes specified in Section 4.7(a), provided, that (i) the Partnership shall
not be obligated to pay interest with respect to any such loan or loans in
excess of the rate that the Partnership would be charged on a comparable loan
from unrelated third party creditors and (ii) repayment of each such loan shall
be made by the Partnership in accordance with the terms of this Section 4.11 and
Section 4.7.
(c) The Managing General Partner shall not permit funds contributed to
the Partnership and attributed to the Primary Account pursuant to Article III
hereof, or revenues of the Partnership attributed to the Primary Account
pursuant to Section 4.3 hereof, to be loaned, advanced or otherwise used for the
benefit of the Secondary Account or to pay any charges or costs attributable to
the Secondary Account, unless the Managing General Partner, in its sole
discretion, has reasonably determined that the failure to loan or advance funds
or revenues attributed to the Primary Account to or for the benefit of the
Secondary Account will result in a levy or attachment of assets attributed to
the Primary Account.
ARTICLE V
Federal Income Tax Allocations
5.1 Capital Account Allocations.
For purposes of maintaining the Capital Accounts and determining the rights
of the Partners among themselves, each item of income, gain, loss and deduction
(computed in accordance with Section 3.5(b)) shall be allocated among the
Partners in the following manner:
(a) Except as otherwise provided in this Section 5.1, all such items
of income, gain, loss and deduction attributable to or arising from
revenues and costs of the Partnership (or an Affiliated Partnership)
attributed to the Primary Account pursuant to Sections 4.1 and 4.3 shall be
allocated to the Managing General Partner, the Special General Partner, the
Original Limited Partner, in its capacity as the Class A Limited Partner,
and the Original
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Limited Partner, in its capacity as the Class B Limited Partner, in
accordance with their respective Primary Account Percentage Interests.
(b) Except as otherwise provided in this Section 5.1, all such items
of income, gain, loss and deduction attributable to or arising from
revenues and costs of the Partnership (or an Affiliated Partnership)
attributed to the Secondary Account pursuant to Sections 4.2 and 4.4 shall
be allocated to the Managing General Partner, the Special General Partner,
the Original Limited Partner, in its capacity as the Class A Limited
Partner, and the Original Limited Partner, in its capacity as the Class B
Limited Partner, in accordance with their respective Secondary Account
Percentage Interests.
(c) Except as otherwise provided in this Agreement, all such items of
income, gain, loss and deduction attributable to, arising from, or
allocable to Identified Property or Specified General Revenue shall be
allocated as follows:
(i) In the case of each Identified Property, such items shall be
allocated among the Original Partners and the Special Limited Partners
in proportion to their Identified Property Percentage Interests with
respect to the series of Class C Units issued with respect to such
Identified Property and any amount allocated to the Original Partners
shall then be allocated among the Original Partners in accordance with
Section 5.1(a) and (b); and
(ii) In the case of each source of Specified General Revenue,
each Special Limited Partner shall be allocated items attributable to
such source of Specified General Revenue equal to the amount
determined by multiplying such Special Limited Partner's Specified
General Revenue Percentage Interest with respect to such Specified
General Revenue by the amount of such Specified General Revenue and
the remainder of such items shall be allocated among the Original
Partners in accordance with Section 5.1(a) and (b).
(d) To the extent of the net income otherwise allocable to the
Original Partners by the Partnership for any taxable year, the Special
Limited Partners shall be allocated items of income and gain (other than
items allocable to the Special Limited Partners under Section 5.1(c)) until
the aggregate amount allocated to each Special Limited Partner for the
current and all prior taxable years pursuant to this Section 5.1(d) equals
such Special Limited Partner's Aggregate Distribution Shortfall Preferred
Return. Any interest expense incurred by the Partnership that is
attributable to a Partner Loan shall be allocated to the Special Limited
Partner that is the Defaulting Partner with respect to such Partner Loan.
(e) If any Partner unexpectedly receives any adjustments, allocations
or distributions described in Treasury Regulation Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6),
items of Partnership income and gain shall be
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specially allocated to such Partner in an amount and manner sufficient to
eliminate a deficit in its Capital Account created by such adjustments,
allocations or distributions as quickly as possible. This Section 5.1(e) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(f) If there is a net decrease in Partnership minimum gain during a
Partnership taxable year, all Partners with a deficit Capital Account
balance at the end of such year, computed as described in Treasury
Regulation Section 1.704-1(b)(4)(iv)(e), shall be allocated, before any
other allocation of Partnership items for such taxable year is made under
Section 704(b) of the Code, items of income and gain for such year (and, if
necessary, subsequent years) in the amount and in the proportions
sufficient to eliminate such deficits as quickly as possible. For purposes
of this Section 5.1(f), "minimum gain" shall be determined in accordance
with Treasury Regulation Section 1.704-1(b)(4)(iv). This Section 5.1(f) is
intended to constitute a "minimum gain chargeback" within the meaning of
Treasury Regulation Section 1.704-1(b)(4)(iv)(e).
5.2 Tax Allocations.
(a) For Federal income tax purposes, except as otherwise provided in
Section 5.2(b), each item of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners in the following manner:
(i) Except as otherwise provided in this Section 5.2(a), all such
items of income, gain, loss, deduction and credit attributable to or
arising from revenues and costs of the Partnership (or an Affiliated
Partnership) attributed to the Primary Account pursuant to Sections 4.1 and
4.3 shall be allocated to the Managing General Partner, the Special General
Partner, the Original Limited Partner, in its capacity as the Class A
Limited Partner, and the Original Limited Partner, in its capacity as the
Class B Limited Partner, in accordance with their respective Primary
Account Percentage Interests.
(ii) Except as otherwise provided in this Section 5.2(a), all
such items of income, gain, loss, deduction and credit attributable to or
arising from revenues and costs of the Partnership (or an Affiliated
Partnership) attributed to the Secondary Account pursuant to Sections 4.2
and 4.4 shall be allocated to the Managing General Partner, the Special
General Partner, the Original Limited Partner, in its capacity as the Class
A Limited Partner, and the Original Limited Partner, in its capacity as the
Class B Limited Partner, in accordance with their respective Secondary
Account Percentage Interests.
(iii) Except as otherwise provided in this Agreement, all such
items of income, gain, loss and deduction attributable to, arising from, or
allocable to any Identified Property or Specified General Revenue shall be
allocated as follows:
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(A) In the case of each Identified Property, such items shall be
allocated among the Original Partners and the Special Limited Partners
in proportion to their Identified Property Percentage Interests with
respect to the series of Class C Units issued with respect to which
such Identified Property relates and any amount allocated to the
Original Partners shall then be allocated among the Original Partners
in accordance with Section 5.2(a)(i) and (ii); and
(B) In the case of each source of Specified General Revenue, each
Special Limited Partner shall be allocated items attributable to such
source of Specified General Revenue equal to the amount determined by
multiplying such Special Limited Partner's Specified General Revenue
Percentage Interest with respect to such Specified General Revenue by
the amount of such Specified General Revenue and the remainder of such
items shall be allocated among the Original Partners in accordance
with Section 5.2(a)(i) and (ii).
(iv) To the extent of the net income otherwise allocable to the
Original Partners by the Partnership for any taxable year, the Special
Limited Partners shall be allocated items of income and gain (other than
items allocable to the Special Limited Partners under Section 5.2(a)(iii))
until the aggregate amount allocated to each Special Limited Partner for
the current and all prior taxable years pursuant to this Section 5.2(a)(iv)
equals such Special Limited Partner's Aggregate Distribution Shortfall
Preferred Return. Any interest expense incurred by the Partnership that is
attributable to a Partner Loan shall be allocated to the Special Limited
Partner that is the Defaulting Partner with respect to such Partner Loan.
(b) In the case of any Contributed Property or Adjusted Property,
items of income, gain, loss, depletion, depreciation and cost recovery
deductions attributable to such property shall be allocated for Federal
income tax purposes to the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Original Partners in the
manner provided under Section 704(c) of the Code that takes into account
the variation between the Agreed Value of such property and its adjusted
basis at the time of contribution. (B) Except as otherwise provided in
Sections 5.2(k) and 5.2(l), any items of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the manner such items would have otherwise been allocated
pursuant to Section 5.2(a).
(ii) (A) In the case of an Adjusted Property, such items
attributable thereto shall (1) first, be allocated among the Partners in a
manner consistent with the principles of Section 704(c) of the Code to take
into account the Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Section 3.5(d)(i), and (2)
second, in the event such property was originally a Contributed Property,
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be allocated among the Partners in a manner consistent with Section
5.2(b)(i)(A). (B) Except as otherwise provided in Sections 5.2(k) and
5.2(l), any items of Residual Gain or Residual Loss attributable to an
Adjusted Property shall be allocated among the Partners in the manner such
items would have otherwise been allocated pursuant to Section 5.2(a).
(iii) Except as otherwise provided in Section 5.2(b)(iv), or
5.2(k) and 5.2(l), all other items of income, gain, loss and deduction
shall be allocated among the Partners in the manner such items would have
otherwise been allocated pursuant to Section 5.2(a).
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall be
subject to allocation by the Managing General Partner in a manner designed
to eliminate, to the maximum extent possible, Book-Tax Disparities in a
Contributed Property or Adjusted Property otherwise resulting from the
application of the ceiling limitation (under Section 704(c) of the Code or
Section 704(c) principles) to the allocations provided under Sections
5.2(b)(i)(A) or 5.2(b)(ii)(A); provided that such allocation would not have
a material adverse effect on the Limited Partners. This provision shall be
applied separately with respect to all items of income, gain, loss or
deduction attributed to an Accounting Unit in eliminating the Book-Tax
Disparities in any Contributed Property or Adjusted Property attributed to
that Accounting Unit.
(c) It is intended that the allocations in paragraphs (b)(i)(A) and
(b)(ii)(B) hereof effect an allocation for Federal income tax purposes pursuant
to Section 704(c) of the Code and the Treasury regulations promulgated
thereunder and comply with any limitations or restrictions therein. The
allocations in paragraph (b) hereof are designed to eliminate, to the extent
possible, disparities that otherwise exist between the balances of the Partners'
Capital Accounts, as maintained pursuant to Section 3.5, and such balances had
such Capital Accounts been maintained strictly in accordance with tax accounting
principles. The Managing General Partner shall have discretion to make the
allocations and adjustments to Capital Accounts in any reasonable manner
consistent with the intentions of the Partners as reflected in the provisions of
this Agreement and permitted or required by Section 704 of the Code or by final
Treasury regulations promulgated thereunder.
5.3 Other Rules.
The following rules shall apply for purposes of this Article V:
(a) For purposes of determining the amounts of income, gain or loss to
be allocated pursuant hereto upon the harvesting, sale or other disposition of
Standing Timber (whether recognized in a Bulk Sale, a Section 631(b) Sale or a
Section 631(a) Cut) or Timberlands, it will be necessary to allocate between the
Primary Account and the Secondary Account (i) upon the acquisition of such
Standing Timber or such Timberland, the adjusted tax basis thereof and (ii) upon
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the sale of such Standing Timber or Timberland, the "amount realized" (for
purposes of Section 1001 of the Code) therefrom. The Managing General Partner,
in its sole discretion, shall make such allocations of adjusted tax basis (as of
the time such property is acquired by the Partnership) and of amount realized
(as of the time such property is harvested, sold or otherwise disposed of)
utilizing the Primary Account Factor and the Secondary Account Factor, based
upon such assumptions and made in such manner as it deems reasonable and
appropriate.
(b) In the case of an involuntary conversion of property under Section
1033 of the Code, or a like-kind exchange under Section 1031 of the Code, all or
part of the gain ultimately recognized upon the disposition of the acquired
property may include Transferred Gain. To the extent any such Transferred Gain
is recognized during the Initial Term, it shall be attributed to the Accounting
Unit to which such gain would have otherwise been attributed had such gain been
recognized upon such involuntary conversion or like-kind exchange and,
thereafter, allocated in accordance with the provisions of this Section 5.2.
(c) All items of income, gain, loss, deduction and credit (or basis
therefor) recognized by the Partnership for Federal income tax purposes and
allocated to the Partners in accordance with the provisions hereof shall be
determined without regard to any election under Section 754 of the Code which
may be made by the Partnership; provided, however, such allocations, once made,
shall be adjusted as necessary to take into account those adjustments authorized
under Sections 734 and 743 of the Code and, where appropriate, to provide only
Partners recognizing gain on Partnership distributions covered by Section 734
with the Federal income tax benefits attributable to the increased basis in
Partnership property resulting from any election under Section 754 of the Code.
(d) To the extent of any Recapture Income resulting from the sale or
other taxable disposition of a Partnership asset, the amount of any gain from
such disposition allocated to a Partner (or its successor in interest) for
Federal income tax purposes pursuant to the above provisions shall be deemed to
be Recapture Income to the extent such Partner has been allocated or has claimed
any deduction directly or indirectly giving rise to the treatment of such gain
as Recapture Income.
(e) In the event of the transfer of a Partnership Interest during a
year, each item of Partnership income, gain, loss, deduction and credit
attributable to the transferred interest shall, for Federal income tax purposes,
be determined on a monthly or other reasonable basis and allocated to the owner
of such Partnership Interest at the end of business on the last day of the month
or other reasonable period (or allocated between the transferor and transferee
on any other reasonable basis required or permitted by Section 706 of the Code
and regulations or rulings promulgated thereunder); provided, however, that
gains and losses from Section 631(b) transactions (and certain other
miscellaneous items) will be determined on an annual basis and prorated on a
monthly basis among the Partners owning Partnership Interests as of the close of
business on the last business day of the month. The Managing General Partner may
revise, alter or otherwise modify such method
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of allocation as it determines necessary, to the extent permitted by Section 706
of the Code and regulations or rulings promulgated thereunder.
(f) If the Percentage Interest of a Limited Partner is changed during
a year for any reason other than the transfer of a Partnership Interest to
another Person, each item of Partnership income, gain, loss, deduction and
credit shall, for Federal income tax purposes, be determined on a monthly or
other reasonable basis and allocated among the Partners, taking into account
each such Partner's Percentage Interest in the Partnership on the last day of
each such month (or other reasonable period) as required or permitted by Section
706 of the Code. Such allocation method may be revised, altered or otherwise
modified in a manner consistent with any revision, alteration or modification of
the allocation method set forth in paragraph (e) hereof.
(g) Solely for purposes of the interpretation and application of this
Article V, the Partnership shall be treated as owning directly its proportionate
share of all property owned by an Affiliated Partnership (as determined by the
Managing General Partner based upon the provisions of the Affiliated Partnership
Agreement).
(h) If any Partner unexpectedly receives any adjustments, allocations
or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d),
items of income and gain shall be specially allocated to such Partner in an
amount and manner consistent with the allocations of income and gain pursuant to
Section 5.1(e).
(i) If any Partner's Capital Account has a deficit balance as
described in Section 5.1(f), items of income and gain shall be allocated to such
Partner in an amount and manner consistent with the allocation of income and
gain pursuant to Section 5.1(f).
ARTICLE VI
Management and Operation of Business
6.1 Management.
The Managing General Partner shall conduct, direct and exercise full
control over all activities of the Partnership. Except as otherwise expressly
provided in this Agreement, all powers to manage the business and affairs of the
Partnership shall be exclusively vested in the Managing General Partner, and
neither the Special General Partner nor any Limited Partner shall have any power
to control or manage the business and affairs of the Partnership. The Managing
General Partner shall file or cause to be filed in the office of the Secretary
of State of Texas, and in the appropriate governmental offices of any other
states in which the Partnership may elect to do business, such certificates and
documents, including amendments or restatements of the Certificate of Limited
Partnership, as may be necessary or appropriate for the operation and
qualification, including the continuation thereof, of the Partnership.
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The Managing General Partner shall have full authority to do all things
deemed necessary or desirable by it in the conduct of the business of the
Partnership, including, without limitation, (a) the determination of activities
within the scope of the purpose of the Partnership in which the Partnership will
participate; (b) the making of any expenditures, the borrowing of money and the
incurring of any obligations it deems necessary or desirable for the conduct of
the activities of the Partnership; (c) the acquisition, disposition, mortgage,
pledge, encumbrance, hypothecation or exchange of any or all of the assets of
the Partnership (subject to the prior approval of the Limited Partners as may be
required under Section 16.1); (d) the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose and on any terms
it sees fit, including, without limitation, the financing of the conduct of the
activities of the Partnership and the repayment of obligations of the
Partnership; (e) the negotiation and execution on any terms deemed desirable in
its sole discretion of any contracts, conveyances or other instruments that it
considers useful or necessary to the conduct of the Partnership operations or
the implementation of its powers under this Agreement; (f) the distribution of
Partnership cash and property; (g) the selection and dismissal of employees and
outside attorneys, accountants, consultants and contractors and the
determination of their compensation and other terms of employment or hiring; (h)
the maintenance of such insurance for the benefit of the Partnership and the
Original Partners as it deems necessary; (i) the formation and operation of any
further limited or general partnerships, joint ventures or other relationships
that it deems desirable within the scope of the purpose of the Partnership and
the contribution to such partnerships, joint ventures or other entities of
assets of the Partnership, and the loan of Partnership funds to such
partnerships, joint ventures or other entities, provided that such loans are
made in connection with the conduct of the business of the Partnership; (j) the
control of any matters affecting the rights and obligations of the Partnership,
including the conduct of litigation and other incurring of legal expense and the
settlement of claims and litigation; and (k) the purchase, sale or other
acquisition or disposition of Units and depositary units representing Units at
such times and on such terms as it deems to be in the best interests of the
Partnership and the Original Partners.
6.2 Organizational Certificate.
The Partnership has filed the Certificate of Limited Partnership with the
Secretary of State of the State of Texas as required by the Texas Act and the
Managing General Partner shall cause to be filed such other certificates or
documents as may be required for the formation, operation and qualification of a
limited partnership in Texas and any other state in which the Partnership may
elect to do business. The Managing General Partner may file any necessary
amendments to the Certificate of Limited Partnership and do all things requisite
to the maintenance of the Partnership as a limited partnership under the laws of
Texas and any other state in which the Partnership may elect to do business.
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6.3 Reliance by Third Parties and Effect on Limited Partners.
Notwithstanding any other provision of this Agreement to the contrary, no
lender or purchaser, including any purchaser of property from the Partnership,
or any other Person dealing with the Partnership, shall be required to look to
the application of proceeds hereunder or to verify any representation by the
Managing General Partner as to the extent of the interest in the assets of the
Partnership that the Managing General Partner is entitled to encumber, sell or
otherwise use, and any such lender, purchaser or other Person shall be entitled
to rely exclusively on the representation of the Managing General Partner as to
its authority to enter into such financing or sale arrangement and shall be
entitled to deal with the Managing General Partner as if it were the sole party
in interest therein, both legally and beneficially. The Limited Partners hereby
agree to be bound by any representations made by the Managing General Partner
acting in good faith; and the Limited Partners hereby waive any and all defenses
and other remedies which may be available against such lender, purchaser or
other Person to contest, negate or disaffirm any action of the Managing General
Partner in connection with any such sale or financing.
6.4 Compensation and Reimbursement of the General Partners.
(a) The General Partners shall not be compensated for their services
as the General Partners to the Partnership.
(b) Each of the General Partners shall be reimbursed for all expenses,
disbursements and advances incurred or made in connection with the organization
of the Partnership and the qualification to do business of the Partnership and
the General Partners.
(c) Each of the General Partners shall be reimbursed on a monthly
basis for all direct and indirect costs it incurs or makes on behalf of the
Partnership (including amounts paid to any Person to perform services to the
Partnership) and for that portion of such General Partner's General and
Administrative Overhead and other incidental expenses necessary to the conduct
of the Partnership's business (including, without limitation, expenses allocated
to a General Partner by its affiliates) and which are allocated to the
Partnership, in addition to any reimbursement as a result of indemnification
pursuant to Section 6.9. The Managing General Partner shall determine such fees
and expenses which are allocated to the Partnership in any reasonable manner and
shall allocate such fees and expenses to the Primary Account and Secondary
Account in accordance with Article IV.
6.5 Outside Activities.
(a) The Managing General Partner shall not acquire any assets (other
than its general partner interests in the Original Limited Partner and in WCFR
and depositary units or units of the Original Limited Partner and WCFR) or enter
into or conduct any business or activity except (i) in connection with the
performance by it of the terms of this Agreement, the IPT Partnership Agreement
or the WCFR Partnership Agreement or incidental to its status as a Partner in
this
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Partnership, the Original Limited Partner or WCFR or incidental to the
acquisition, ownership or disposition of the Units, IPT Units and WCFR Units and
(ii) activities related to the non-domestic Timber Interests of either General
Partner.
(b) The Special General Partner, any Affiliate thereof (other than the
Managing General Partner) and any director, officer, partner or employee of
either General Partner or any Affiliate of a General Partner shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, may engage in the ownership, operation and
management of Timber Interests, and any other businesses and activities,
including business interests and activities in direct competition with the
Partnership and the Limited Partners, for their own account and for the account
of others, and may own interests in the same, contiguous and adjacent properties
as those in which the Partnership or the Limited Partners own an interest,
without having or incurring any obligation to offer any interest in such
properties, businesses or activities to the Partnership, the Limited Partners or
any Partner, and except as specified in paragraph (a) above, no other provision
of this Agreement shall be deemed to prohibit the General Partner or any such
Persons from conducting such other business and activities. Neither the
Partnership, the Limited Partners nor any of the Partners shall have any rights
by virtue of this Agreement or the Partnership relationship created hereby in
any business ventures of the Special General Partner, any affiliate of a General
Partner or any director, officer, partner or employee of either General Partner
or an affiliate of a General Partner.
(c) Each of the Partners hereby approves, ratifies and confirms the
execution, delivery and performance of the Original Contribution Agreement and
the New Contribution Agreement and agrees that the Managing General Partner is
authorized to execute, deliver and perform any other agreements, acts,
transactions and matters in connection therewith on behalf of the Partnership
without any further act, approval or vote of the Partners or the Partnership,
notwithstanding any other provision of this Agreement or the Partnership
Agreement of the Original Limited Partner. The participation by the Managing
General Partner in any agreement authorized or permitted under this Agreement
shall not constitute a breach by the Managing General Partner of any duty that
the Managing General Partner may owe the Partnership or the Limited Partners
under this Agreement or under applicable law.
6.6 Partnership Funds.
The funds of the Partnership shall be deposited in such accounts as are
designated by the Managing General Partner, including accounts maintained by or
in the name of the Original Limited Partner. The Managing General Partner may,
in its sole discretion, deposit funds of the Partnership in a central disbursing
account maintained by or in the name of the Original Limited Partner in which
funds of the Original Limited Partner and other Persons are also deposited,
provided that at all times books of account are maintained which show the amount
of funds of the Partnership on deposit in such account. All withdrawals from or
charges against such accounts shall be made by the Managing General Partner or
by its agents, which agents may be an Affiliate of the Managing
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General Partner. Funds of the Partnership may be invested as determined by the
Managing General Partner, except in connection with acts otherwise prohibited by
this Agreement.
6.7 Contracts with Affiliates; Joint Ventures.
(a) The Managing General Partner may itself, or may enter into an
agreement with the Special General Partner or an Affiliate of a General Partner
to, render services to the Partnership. Any such service rendered to the
Partnership by a General Partner or an Affiliate shall be on terms no less
favorable than those that the Partnership could obtain from unaffiliated sources
in the area rendering comparable services, except that the provisions of Section
6.4 shall apply to the rendering of services described in that Section.
(b) The Partnership may transfer Timber Interests or other assets to
joint ventures or other partnerships in which it is or thereby becomes a
participant, upon such terms and subject to such conditions consistent with
applicable law as the Managing General Partner deems appropriate.
6.8 Loans to or from a General Partner and Others.
A General Partner or any Affiliate of a General Partner may lend to the
Partnership funds needed by the Partnership for such periods of time as the
Managing General Partner may determine; provided, however, that (i) such General
Partner or Affiliate may not charge the Partnership interest in excess of the
rate (including points or other financing charges or fees) that would be charged
the Partnership (without reference to the Managing General Partner's or Special
General Partner's financial abilities or guaranties) by unrelated lenders on
comparable loans for the same purpose and (ii) to the extent such loan is
attributable to the Secondary Account, the principal amount of and accrued
interest on such loan (or the portion thereof so attributable to the Secondary
Account) shall not be due and payable until after the close of business on
December 31, 1999, except that the Managing General Partner shall cause the
Partnership to make a payment of principal and accrued interest on such loan (or
portion thereof attributable to the Secondary Account) from the Secondary
Account if the Managing General Partner determines that the net balance of
unreserved and uncommitted funds then attributable to the Secondary Account are
sufficient to permit a prepayment, in whole or in part, of any portion of the
principal amount of or accrued interest on the loan attributable to the
Secondary Account, which prepayment shall be in an amount equal to such
unreserved and uncommitted funds. The Partnership shall reimburse a General
Partner or its Affiliate, as the case may be, for any closing costs incurred by
such General Partner or Affiliate in connection with the borrowing of funds
obtained by such General Partner or Affiliate and loaned to the Partnership.
(a) The Partnership may lend or contribute funds to the Original
Limited Partner on terms and conditions established in the sole discretion of
the Managing General Partner, provided that such loans or contributions are made
in connection with the conduct of the business of the
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Partnership. The foregoing authority shall be exercised by the Managing General
Partner in its sole discretion and shall not create any right or benefit in
favor of the Original Limited Partner or any other Person. The Partnership may
lend funds to a General Partner or any Affiliate thereof, including the Original
Limited Partner, as permitted in this Section 6.8(b); provided, however, that
(A) the Partnership may not lend funds to the Managing General Partner, Special
General Partner or any of their respective Affiliates from the Primary Account,
unless such loan is made in accordance with the terms of Section 4.11, and (B)
the Partnership may not lend funds to the Managing General Partner or Special
General Partner from the Secondary Account unless such funds consist of funds
available in the Secondary Account after provision for working capital and such
reserves as the Managing General Partner deems appropriate and such loan shall
bear interest at the rate (including points or other financing charges) that the
Partnership would be charged by unrelated lenders on comparable loans and shall
be subject to prepayment on demand of the Managing General Partner.
(b) Notwithstanding the provisions of Section 6.8(a), assumption of
indebtedness by the Partnership pursuant to the Original Contribution Agreement
is hereby ratified by all Partners.
6.9 Indemnification of General Partners.
(a) For purposes of this Section 6.9:
(i) "Expense" means reasonable expenses, including court costs
and attorneys' fees.
(ii) "Indemnitee" means (A) any General Partner and any present
or former general partner of the Partnership, any Affiliate of any General
Partner and present or former general partner of the Partnership, and any
of their respective directors, officers or employees, (B) any Person who
while serving in any of the capacities referred to in clause (A) hereof
served at the Partnership's request as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar functionary of
another foreign or domestic limited partnership, corporation, general
partnership, joint venture, trust, employee benefit plan or other
enterprise, and (C) any Person nominated or designated by (or pursuant to
authority granted by) the Managing General Partner to serve in any of the
capacities referred to in clauses (A) or (B) hereof.
(iii) "Official Capacity" means the exercise of authority by or
on behalf of a "general partner" (as defined in Section 11.01(4) of the
Texas Act) under this Agreement or the Texas Act, other than service in any
of the capacities specified in clauses (B) or (C) of Section 6.9(a)(ii).
(iv) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any
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appeal in such an action, suit or proceeding, and any inquiry or
investigation that could lead to such an action, suit or proceeding.
(b) Indemnification. The Partnership shall indemnify every Indemnitee
against all judgments, penalties (including excise and similar taxes), fines,
amounts paid in settlement and Expenses actually incurred by the Indemnitee in
connection with any Proceeding in which the Indemnitee was, is, or is threatened
to be made a named defendant or respondent, by reason, in whole or in part, of
his serving or having served, or having been nominated or designated to serve,
in any of the capacities referred to in Section 6.9(a)(ii), if it is determined
in accordance with Section 6.9(d) that the Indemnitee (i) acted in good faith,
(ii) reasonably believed, in the case of conduct in the Indemnitee's Official
Capacity, that the conduct was in the Partnership's best interests and, in all
other cases, that the conduct was at least not opposed to the Partnership's best
interests, and (iii) in the case of any criminal Proceeding, had no reasonable
cause to believe that the conduct was unlawful; provided, however, that in the
event that an Indemnitee is found liable on the basis that personal benefit was
improperly received by the Indemnitee, whether or not the benefit resulted from
an action taken in the Indemnitee's Official Capacity, or the Indemnitee is
found liable to the Partnership or any Limited Partner, the indemnification
under this Section 6.9(b) (A) shall be limited to the extent of Expenses
actually incurred by the Indemnitee in respect of the Proceeding and (B) shall
not be made if the Indemnitee is found liable in the Proceeding for willful or
intentional misconduct in the performance of the Indemnitee's duty to the
Partnership or the Limited Partners. The termination of any Proceeding by
judgment, order, settlement or conviction, or on a plea of nolo contendere or
its equivalent, is not itself determinative that the Indemnitee did not meet the
requirements set forth in the first sentence of this Section 6.9(b). A Person
shall be considered to have been found liable in relation to any claim, issue or
matter only if the Person has been adjudged liable by a court of competent
jurisdiction and all appeals have been exhausted.
(c) Successful Defense. Without limitation of Section 6.9(b) and in
addition to the indemnification provided for in Section 6.9(b), the Partnership
shall indemnify every Indemnitee against Expenses incurred by such Person in
connection with any Proceeding in which he is a named defendant or respondent
because the Person served in any of the capacities referred or in Section
6.9(a)(ii), if such Person has been wholly successful, on the merits or
otherwise, in defense of the Proceeding.
(d) Determinations. Any indemnification under Section 6.9(b) (unless
ordered by a court of competent jurisdiction) shall be made by the Partnership
only upon a determination that indemnification of the Indemnitee is proper under
the circumstances because he has met the applicable standard of conduct. Such
determination shall be made (i) by the Managing General Partner if it is not at
the time named a defendant or respondent in the Proceeding, (ii) by a majority
vote of a quorum consisting of the general partners of the Partnership who at
the time were not named defendants or respondents in the Proceeding, (iii) by
special legal counsel selected by a vote of general partners of the Partnership
as provided by clause (ii) preceding or, if such a quorum cannot be obtained, by
the Managing General Partner or (iv) by the Original Limited Partner. The
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determination as to the reasonableness of expenses shall be made in the same
manner as the determination that indemnification is permissible (except that if
the determination that indemnification is permissible is made by special legal
counsel, the authorization of indemnification and determination of
reasonableness of expenses must be made in the manner by which special legal
counsel could be selected). In the event that a determination is made under this
Section 6.9(d) that an Indemnitee has met the applicable standard of conduct as
to some matters but not as to others, amounts to be indemnified may be
reasonably prorated.
(e) Advancement of Expenses. Expenses incurred by an Indemnitee who
was, is or is threatened to be made a named defendant or respondent in a
Proceeding shall be paid by the Partnership at reasonable intervals in advance
of the final disposition of such Proceeding, and without any of the
determinations specified in Section 6.9(d), after receipt by the Partnership of
(i) a written affirmation by such Indemnitee of the Person's good faith belief
that the Person has met the standard of conduct necessary for indemnification by
the Partnership under this Section 6.9 and (ii) a written undertaking by or on
behalf of such Indemnitee to repay the amount paid or reimbursed by the
Partnership if it shall ultimately be determined that the Person is not entitled
to be indemnified by the Partnership as authorized in this Section 6.9. Such
written undertaking described in clause (ii) above shall be an unlimited
obligation of the Indemnitee but need not be secured, and it may be accepted
without reference to financial ability to make repayment.
(f) Reimbursement of Expenses as Witness. Notwithstanding any other
provisions of this Section 6.9, the Partnership shall pay or reimburse all
Expenses incurred by an Indemnitee in connection with the Person's appearance as
a witness or other participation in a Proceeding involving or affecting the
Partnership at a time when the Person is not named a defendant or respondent in
the Proceeding.
(g) Employee Benefit Plans. For purposes of this Section 6.9, the
Partnership shall be deemed to have requested an Indemnitee to serve an employee
benefit plan whenever the performance by the Person of the Person's duties to
the Partnership also imposes duties on or otherwise involves services by the
Person to the plan or participants or beneficiaries of the plan. Excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall be deemed fines. Action taken or omitted by an Indemnitee
with respect to an employee benefit plan in the performance of his duties for a
purpose reasonably believed by the Person to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnerships.
(h) Other Indemnification and Insurance. The indemnification provided
by this Section 6.9 shall (i) not be deemed exclusive of, or to preclude, any
other rights to which those seeking indemnification may at any time be entitled
under the Articles of Incorporation or By-laws of any General Partner or any
Affiliate, any law, agreement or vote of the Limited Partners or otherwise, or
any policy or policies of insurance purchased and maintained by the Partnership,
any General Partner or any Affiliate on behalf of any Indemnitee, both as to
action in the Person's
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Official Capacity and as to action in any other capacity, (ii) continue as to a
Person who has ceased to be in the capacity by reason of which the Person was an
Indemnitee with respect to matters arising during the period the Person was in
such capacity, (iii) inure to the benefit of the heirs, executors,
administrators and successors of such a Person, and (iv) not be required if and
to the extent that the Person otherwise entitled to payment of such amounts
hereunder has actually received payment therefor under any insurance policy,
contract or otherwise. The Partnership may purchase and maintain insurance on
behalf of any or all Indemnitees, as the Managing General Partner shall
determine, against any liability that may be asserted against, or cost that may
be incurred by, any or all of them in connection with the Partnership's
activities, regardless of whether the Partnership would have the power to
Indemnify any or all of them against such liability under the provisions of this
Agreement or the Texas Act.
(i) Notice. Any Indemnification of or advance of Expenses to an
Indemnitee in accordance with this Section 6.9 shall be reported promptly in
writing to the Limited Partners and, in any case, within the six-month period
immediately following the date of the indemnification.
(j) Construction. The Indemnification provided by this Section 6.9
shall be subject to all valid and applicable laws, including without limitation,
Article 11 of the Texas Act, and, in the event this Section 6.9 or any of the
provisions hereof or the indemnification contemplated hereby is found to be
inconsistent with or contrary to any such valid laws, the latter shall be deemed
to control and this Section 6.9 shall be regarded as modified accordingly and,
as so modified, to continue in full force and effect.
(k) Continuing Offer, Reliance, etc. The provisions of this Section
6.9: (i) are for the benefit of, and may be enforced by, each Indemnitee, the
same as if set forth in their entirety in a written instrument duly executed and
delivered by the Partnership and the Indemnitee and (ii) constitute a continuing
offer to all present and future Indemnitees. The Partnership (A) acknowledges
and agrees that each present and future Indemnitee has relied upon and will
continue to rely upon the provisions of this Section 6.9 in becoming and serving
in the applicable capacity specified in Section 6.9(a)(ii), (B) waives reliance
upon, and all notices of acceptance of, such provisions by each Indemnitee and
(C) acknowledges and agrees that no present or future Indemnitee shall be
prejudiced in the Person's right to enforce the provisions of this Section 6.9
in accordance with their terms by any act or failure to act on the part of the
Partnership.
(l) Effect of Amendment. No amendment, modification or repeal of this
Section 6.9 or any provision hereof shall in any manner terminate, reduce or
impair the right of any past, present or future Indemnitee to be indemnified by
the Partnership, nor the obligation of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 6.9 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
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(m) Miscellaneous. (i) In no event may an Indemnitee subject the
Limited Partners to personal liability by reason of the indemnification
provisions set forth in this Agreement. Any indemnification pursuant to
this Section 6.9 shall be made only out of the assets of the Partnership.
(i) To the fullest extent permitted by law, an Indemnitee shall
not be denied indemnification in whole or in part under this Section 6.9
because the Indemnitee had an interest in the transaction with respect to
which the indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
(ii) The provisions of this Section 6.9 are for the benefit of
the Indemnitees and shall not be deemed to create any rights for the
benefit of any other Persons.
6.10 Liability of General Partners.
(a) The General Partners shall be liable to the Partnership and the
Limited Partners for willful or intentional misconduct, but neither a General
Partner nor their respective partners or their stockholders, directors or
officers shall be liable to the Partnership or the Limited Partners or to any
owner of a Class A Unit, Class B Unit, or Class C Unit or any Assignee thereof,
for errors in judgment or for any acts or omissions that do not constitute
willful or intentional misconduct.
(b) A General Partner may exercise any of the powers granted to it by
this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and a General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 6.10 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and Limited Partners of the
General Partners, their directors, officers and employees under this Section
6.10 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring in whole or
in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
6.11 Other Matters Concerning the General Partners.
(a) Each of the General Partners may rely on and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
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(b) Each of the General Partners may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors selected by it and any opinion or advice of such Person
as to matters which such General Partner believes to be within such Person's
professional or expert competence shall be full and complete authorization and
protection in respect to any action taken or suffered or omitted by such General
Partner hereunder in good faith and in accordance with such opinion or advice.
6.12 Tax Basis and Value Determinations.
To the extent that the Managing General Partner is required pursuant to the
provisions of this Agreement to establish fair market values or allocate amounts
realized, tax basis, Agreed Values or Net Agreed Values, the Managing General
Partner shall establish such values and make such allocations in a manner that
is reasonable and fair to the Original Limited Partner and its limited partners,
and, to the extent applicable, to the Special Limited Partners, taking into
account all applicable laws, governmental regulations, rulings and decisions.
The Managing General Partner may, in its sole discretion, modify or revise such
allocations in order to comply with such laws, governmental regulations, rulings
or decisions or to the extent it otherwise deems such modification or revision
necessary. Furthermore, in connection with the exploration for or development or
exploitation of the minerals and mineral interests underlying the Timberlands,
ownership of which was retained by IP, the Managing General Partner shall
determine the fair market value of any timber stumpage that is damaged in
connection with any such activities in a fair and reasonable manner and shall
charge IP such amount for those damages. The Managing General Partner is
authorized, to the extent deemed appropriate or desirable by the Managing
General Partner, to utilize the services of an independent appraiser in
establishing such values or allocations and the Managing General Partner shall
in such cases be entitled to rely on the values or allocations established by
such independent appraiser.
6.13 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or any other
agreement contemplated herein, (i) whenever a conflict of interest exists or
arises between a General Partner or any of its Affiliates, on the one hand, and
the Partnership or a Limited Partner, on the other hand, or (ii) whenever this
Agreement or any other agreement contemplated herein provides that a General
Partner shall act in a manner which is, or provide terms which are, fair and
reasonable to the Partnership, the Operating Partnership or the Limited
Partners, the General Partners shall resolve such conflict of interest, take
such action or provide such terms considering, in each case, the relative
interests of each party to such conflict, agreement, transaction or situation
and the benefits and burdens relating to such interests, any customary or
accepted industry practices and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by such General Partner,
the resolution, action or terms so made, taken or provided by such General
Partner shall not constitute a breach of this Agreement or any other agreement
contemplated herein or a
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breach of any standard of care or duty imposed herein or therein or under the
Texas Act or any other applicable law, rule or regulation.
ARTICLE VII
Rights and Obligations of Limited Partners
7.1 Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except as
provided by the Texas Act.
7.2 Management of Business.
The Limited Partners shall not take part in the operation, management or
control of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by an employee or agent of a
General Partner in his capacity as such shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners under this Agreement.
ARTICLE VIII
Books, Records, Accounting and Reports
8.1 Records, Accounting and Reports.
The Managing General Partner shall keep or cause to be kept complete and
accurate books with respect to the Partnership's business, which books shall at
all times be kept at the principal office of the Partnership. Any records
maintained by the Partnership in the regular course of its business, including
books of account, and records of Partnership proceedings may be kept on, or be
in the form of, punch cards, magnetic tape, photographs, micrographics, or any
other information storage device, provided that the records so kept can be
converted into clearly legible written form within a reasonable period of time.
The books of the Partnership shall be maintained for financial reporting
purposes on the accrual basis in accordance with generally accepted accounting
principles.
8.2 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
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8.3 Annual Reports.
(a) As soon as practicable, but in no event later than 90 days after
the close of each fiscal year, the Managing General Partner shall deliver to the
Original Limited Partners reports, at its request, containing financial
statements of the Partnership for the fiscal year, presented in accordance with
generally accepted accounting principles, including a balance sheet, statement
of income, a statement of Partners' capital and a statement of changes in
financial position, such statements to be audited by a nationally recognized
firm of independent public accountants selected by the General Partner.
(b) As soon as practicable, but in no event later than 90 days after
the close of each fiscal year, the Managing General Partner shall deliver to
each Special Limited Partner, who so requests, reports containing a statement of
financial position and a statement of income of the Partnership relating to the
Identified Property and the Specified General Revenue with respect to the series
of Class C Units held by such Limited Partner.
(c) As soon as practicable, but in no event later than 45 days after
the close of each calendar quarter, except the last calendar quarter of each
fiscal year, the Managing General Partner shall furnish to the Limited Partners
a quarterly report for the calendar quarter containing such financial and other
information as the Managing General Partner deems appropriate.
8.4 Other Information.
The Managing General Partner may release such information concerning the
operations of the Partnership to such sources as is customary in the industry or
required by law or regulation of any regulatory body. The Managing General
Partner shall furnish the Limited Partners or their representatives, at its
request, any further information required to be furnished under the Texas Act,
in such form as they may reasonably request relative to any phase of the
operations of the Partnership. The Limited Partners and their representatives
shall have free access during normal business hours to all records required to
be kept under the Texas Act relative to the operations of the Partnership. For
the term of the Partnership and for a period of five years thereafter, the
Managing General Partner shall maintain and preserve all books of account and
other relevant documents.
ARTICLE IX
Income Tax Matters
9.1 Preparation of Tax Returns.
The Managing General Partner shall arrange for the preparation and timely
filing of all returns of the Partnership income, gains, deductions and losses
necessary for Federal, state and local income tax purposes and will furnish to
the Limited Partners within 90 days after the close of the
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taxable year the tax information reasonably required for Federal, state and
local income tax reporting purposes. A copy of the Partnership's Federal income
tax return will be furnished to each Limited Partner upon request. The
classification, realization and recognition of income, gain, losses and
deductions and other items, shall be on the cash or accrual method of accounting
for Federal income tax purposes, as the Managing General Partner shall determine
in its sole discretion. The taxable year of the Partnership shall be the
calendar year.
9.2 Tax Elections.
Except as otherwise provided herein, the Managing General Partner shall, in
its sole discretion, determine whether to make any available election (including
the elections provided for in Sections 48(q)(4) and 168 of the Code). The
Managing General Partner shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder to cause the basis of
Partnership property to be adjusted for Federal income tax purposes as provided
by Sections 734 and 743 of the Code, subject to the reservation of the right to
seek to revoke any such election upon the Managing General Partner's
determination that such revocation is in the best interests of the Limited
Partners, provided that the Managing General Partner shall not seek to revoke
any such election, unless it receives an Opinion of Counsel that such revocation
would not result in the loss of the limited liability of the Limited Partners or
cause the Partnership to be taxed as a corporation for Federal income tax
purposes (unless the Partnership is already treated in all material respects as
an association taxable as a corporation due to changes in Federal income tax
laws).
9.3 Tax Controversies.
Subject to the provisions hereof, the Managing General Partner is
designated as the Tax Matters Partner (as defined in the Code) and is authorized
and required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. The Limited Partners agree to cooperate with the Managing General
Partner and to do or refrain from doing any or all things reasonably required by
the Managing General Partner to conduct such proceedings.
9.4 Organizational Expenses.
The Partnership shall elect to deduct expenses incurred in organizing the
Partnership ratably over a sixty-month period as provided in Section 709 of the
Code.
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9.5 Taxation as a Partnership.
No election shall be made by the Partnership, the General Partners or the
Limited Partners, (a) for the Partnership to be excluded from the application of
any of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or
from any similar provisions of any state tax laws or (b) for the Partnership to
be treated as an association taxable as a corporation for federal or state
income tax purposes.
ARTICLE X
Transfer of Interests
10.1 Transfer.
(a) The term "transfer", when used in this Article with respect to a
Partnership Interest, includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article.
Any transfer or purported transfer of any Partnership Interest not made in
accordance with this Article shall be null and void.
10.2 Transfer of Interest of General Partners.
A General Partner may not transfer all or any part of its Partnership
Interest as a General Partner, except that if a General Partner transfers to any
Person its partnership interest as a general partner of the Original Limited
Partner, such General Partner shall transfer its Partnership Interest as a
General Partner of the Partnership to such Person. The Limited Partners hereby
consent to any such transfer.
10.3 Transfer of Interest of a Limited Partner.
Except as otherwise provided in this Agreement (or an amendment hereto)
with respect to any Special Limited Partner, no Limited Partner may transfer any
part of its Partnership Interest as a Limited Partner except that a successor of
a Limited Partner may succeed to its Partnership Interest as a Limited Partner
in the Partnership.
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ARTICLE XI
Admission of Substituted Partners
11.1 Admission of the Limited Partners.
On the Commencement Date, the Initial Managing General Partner caused the
Partnership to issue a Class A Certificate and a Class B Certificate in the name
of the Initial Limited Partner, and the Initial Limited Partner was admitted to
the Partnership. Following the admission of the Initial Limited Partner to the
Partnership, the Initial Limited Partner transferred the Class A Certificate and
the Class B Certificate to the Original Limited Partner, and the Original
Limited Partner was admitted to the Partnership. In addition, the Special
Limited Partners will be issued Special Limited Partner Interests, and each
Person issued a Special Limited Partner Interest will be admitted to the
Partnership as a Special Limited Partner in respect of the Special Limited
Partner Interest issued to such Person.
11.2 Admission of Successor and Substitute Limited Partners.
The successor of the Partnership Interest of a Limited Partner and any
Permitted Transferees of the Partnership Interest of a Special Limited Partner
that has obtained the consent of the Managing General Partner for admission to
the Partnership as a substitute Limited Partner shall be admitted to the
Partnership as a substitute Limited Partner in respect of the Partnership
Interest to which such Person succeeds (or which has been transferred to such
Person) upon furnishing to the Managing General Partner (a) acceptance in form
satisfactory to the Managing General Partner of all the terms and conditions of
this Agreement and (b) such other documents or instruments as may be required in
order to effect its admission as a substitute Limited Partner.
11.3 Admission of Successor Managing General Partner.
A successor Managing General Partner selected pursuant to Section 12.1 or
the transferee of the entire Partnership Interest of the Managing General
Partner pursuant to Section 10.2 shall be admitted to the Partnership as a
substitute Managing General Partner.
11.4 Admission of Successor Special General Partner.
A successor Special General Partner selected pursuant to Section 12.2 or
the transferee of the entire Partnership Interest of the Special General Partner
pursuant to Section 10.2 shall be admitted to the Partnership as a Special
General Partner upon furnishing to the Managing General Partner (a) acceptance
in form satisfactory to the Managing General Partner of all the terms of this
Agreement and (b) such other documents as the Managing General Partner shall
require.
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11.5 Amendment of Agreement.
For the admission to the Partnership of any General Partner, the Managing
General Partner shall take all steps necessary and appropriate to prepare and
record an amendment of this Agreement and the Certificate of Limited
Partnership.
ARTICLE XII
Withdrawal or Removal of the General Partners
12.1 Withdrawal or Removal of the Managing General Partner.
The Managing General Partner shall automatically withdraw from the
Partnership or be removed as Managing General Partner if, and only if, it
withdraws from, or is removed as the managing general partner of, the Original
Limited Partner. Such withdrawal or removal shall be effective at the same time
as is its withdrawal or removal as managing general partner of the Original
Limited Partner. The Partners agree that the selection of a successor managing
general partner of the Original Limited Partner shall constitute selection by
each Partner of such successor as the successor Managing General Partner of the
Partnership. If no successor Managing General Partner is selected, the
Partnership shall be dissolved pursuant to Section 13.1.
12.2 Withdrawal or Removal of Special General Partner.
The Special General Partner shall automatically withdraw from the
Partnership or be removed as Special General Partner if, and only if, it
withdraws from, or is removed as special general partner of, the Original
Limited Partner. Such withdrawal or removal shall be effective at the same time
as is the Special General Partner's withdrawal or removal as special general
partner of the Original Limited Partner. In such event, the successor Special
General Partner shall be the same person, if any, as is the successor special
general partner of the Original Limited Partner. The Partners agree that the
selection of a successor special general partner of the Original Limited Partner
shall constitute selection by each Partner of such successor as the successor
Special General Partner of the Partnership. If, as provided in the IPT
Partnership Agreement, a successor Special General Partner is not selected, the
Managing General Partner shall have the rights, and be subject to the
obligations, of a successor to the Special General Partner under Section 12.3.
12.3 Interest of Departing Partner.
(a) A Departing Partner departing as a result of withdrawal or removal
pursuant to Section 13.1 or 13.2 of the IPT Partnership Agreement shall, at the
option of its successor exercisable prior to the effective date of its
departure, promptly receive in exchange for its Partnership Interest as General
Partner from its successor an amount in cash equal to the fair market value of
the Departing Partner's Partnership Interest as General Partner herein
determined as of the
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effective date of its departure in the manner specified in the IPT Partnership
Agreement. If the option is exercised, the Departing Partner shall, as of the
effective date of its departure, cease to share in any allocations or
distributions with respect to its Partnership Interest as General Partner under
this Agreement and the Partnership income, gain, loss, deduction and credit
shall be prorated and allocated as set forth in Section 5.2(h).
(b) If the successor to the Departing Partner does not exercise the
option described in subsection (a), the Departing Partner shall become a limited
partner of this Partnership and its Partnership Interest as a General Partner
shall be converted into Units of the Class or Classes then outstanding, without
any reduction in such Interest by reason of such transaction (subject to
proportionate dilution by reason of the admission of its successor). The number
of Units (or fraction thereof) of each Class into which the Partnership Interest
of such Departing Partner shall be converted shall be determined separately with
respect to each Class of Units and, with respect to each such Class, shall be
equal to the quotient of such Departing Partner's Percentage Interest
(immediately before such departure) divided by the Percentage Interest of all
limited partners (including the Limited Partner) in such Class (immediately
before such departure). Immediately following such conversion of the Departing
Partner's Partnership Interest, the Departing Partner shall contribute the Units
so received to the capital of the Original Limited Partner in accordance with
the terms of Section 13.3(b)(iii) of the IPT Partnership Agreement. This
Agreement will be amended to reflect such change.
(c) If the successor to a Departing Partner does not exercise the
option described in subsection (a), the successor shall at the effective date of
its admission to the Partnership contribute to the Partnership cash or property
having a Net Agreed Value such that its Capital Account, after giving effect to
such contribution, shall be equal to .99% in the case of a successor Managing
General Partner, or .01% in the case of a successor Special General Partner, of
the Capital Accounts of all Original Partners. In such event, such successor
shall be entitled to .99% or .01%, as the case may be, of all Partnership
allocations and distributions to the Original Partners.
ARTICLE XIII
Dissolution and Liquidation
13.1 Dissolution.
The Partnership shall be dissolved upon:
(a) the expiration of its term as provided in Section 1.6;
(b) notice of withdrawal, bankruptcy or dissolution of the Managing
General Partner, or any other event that results in its ceasing to be the
Managing General Partner;
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(c) an election to dissolve the Partnership given to the General
Partner by the Original Limited Partner;
(d) notice of withdrawal, bankruptcy or dissolution of the Special
General Partner; provided, however, the Managing General Partner and the
successor Special General Partner selected pursuant to Section 11.3 shall
continue the operations and business of the Partnership in accordance with
Section 13.2 until the end of the term for which it was formed unless earlier
dissolved in accordance with this Article;
(e) any other event that, under the Texas Act, would cause its
dissolution; or
(f) dissolution of the Original Limited Partner, unless the Original
Limited Partner is continued thereafter in accordance with the terms of the IPT
Partnership Agreement.
For purposes of this Section, bankruptcy of the Managing General Partner
shall be deemed to have occurred when, and only when, (i) it commences a
voluntary proceeding seeking liquidation, reorganization or other relief under
any bankruptcy, insolvency or other similar law now or hereafter in effect, (ii)
a final and nonappealable order for relief is entered against it under the
Federal bankruptcy laws as now or hereafter in effect or (iii) it executes and
delivers a general assignment for the benefit of its creditors.
13.2 Continuation of the Partnership.
Upon an event of dissolution described in Section 13.1(b) or (d), the
Partnership may be reconstituted and its business continued if:
(i) there remain one or more General Partners, and that General
Partner or those General Partners determine(s) to carry on the business of
the Partnership; or
(ii) within 90 days after the occurrence of the event of
dissolution, all remaining Partners agree in writing to continue the
business of the Partnership and, to the extent that they desire or if there
are no remaining General Partners, agree to the appointment, effective as
of the date of withdrawal, of one or more new General Partners.
13.3 Liquidation.
Upon dissolution of the Partnership, unless the Partnership is continued
pursuant to Section 13.2, the Managing General Partner, or in the event the
Managing General Partner has been dissolved or removed, become bankrupt as
defined in Section 13.1 or withdrawn, a liquidator or liquidating committee
selected by the Limited Partners shall be the Liquidator. The Liquidator (if
other than the Managing General Partner) shall be entitled to receive such
compensation for its services as may be approved by the Limited Partners. The
Liquidator shall agree not to resign at any
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time without 15 days' prior written notice and (if other than the Managing
General Partner) may be removed at any time, with or without cause, by written
notice of removal signed by the Limited Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall, within 30 days thereafter, be selected by the Limited Partners. The right
to appoint a successor or substitute Liquidator in the manner provided herein
shall be recurring and continuing for so long as the functions and services of
the Liquidator are authorized to continue under the provisions hereof, and every
reference herein to the Liquidator will be deemed to refer also to any such
successor or substitute Liquidator appointed in the manner herein provided.
Except as expressly provided in this Article XIII, the Liquidator appointed in
the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the Managing General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers, other than the limitations on sale set forth
in Section 15.1) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding-up and
liquidation of the Partnership as provided for herein. The Liquidator shall
liquidate the assets of the Partnership and apply and distribute the proceeds of
such liquidation in the following order of priority, unless otherwise required
by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including, without
limitation, Partners who are creditors, in order of priority provided by law;
(b) to the Partners, in proportion to and to the extent of the
positive balances in their respective Capital Accounts; and
(c) to the Partners in accordance with their respective percentage
interests; provided, however, that the Liquidator may place in escrow a reserve
of cash or other assets of the Partnership for contingent liabilities in an
amount determined by the Liquidator to be appropriate for such purposes.
13.4 Distribution in Kind.
Notwithstanding the provisions of Section 13.3 which require the
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if on dissolution of the Partnership the
Liquidator determines that an immediate sale of part or all of the Partnership's
assets would be impractical or would cause undue loss to the Partners, the
Liquidator may, in its sole discretion, defer for a reasonable time the
liquidation of any assets except those necessary to satisfy liabilities of the
Partnership (other than those to Partners) and may, in its sole discretion,
distribute to the Partners or to a trust, if approved by the Partners, in lieu
of cash, as covenants in common and
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in accordance with the provisions of Sections 13.3(c), undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any distributions in kind shall be subject to such conditions relating to the
disposition and management thereof as the Liquidator deems reasonable and
equitable and to any joint ownership agreements or other agreements governing
the ownership of such properties at such time. The Liquidator shall determine
the fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
13.5 Return of Capital.
The General Partners shall not be personally liable for the return of the
Capital Contributions of the Limited Partners or any portion thereof, it being
expressly understood that any such return shall be made solely from Partnership
assets.
13.6 Waiver of Partition.
Each Partner hereby waives any rights to partition of the Partnership
property.
ARTICLE XIV
Amendment of Partnership Agreement
14.1 Amendments.
(a) Amendments to this Agreement may be proposed by the Managing
General Partner or by any of the Limited Partners. Any such amendment shall be
proposed by submitting the proposed amendment in writing to the Managing General
Partner and, to the extent the consent or approval of any class of Limited
Partners of such amendment is required under this Agreement, to the Limited
Partners of such class. Subject to Sections 14.1(b), (c) and (d), any such
amendment shall become effective only upon the consent of each Limited Partner
affected by such amendment.
(b) Notwithstanding Section 14.1(a), amendments to this Agreement that
(i) do not adversely affect a Limited Partner in any material respect or (ii)
are necessary or desirable to satisfy any requirement, condition or guideline
contained in any opinion, directive, order, ruling or regulation of any Federal
or state agency or contained in any Federal or state statute or that are
necessary or desirable to facilitate the trading of IPT Units, or any class
thereof (or depositary units representing IPT Units or any class thereof), or
comply with any rule, regulation, guideline or requirement of any securities
exchange on which IPT Units, or any class thereof (or depositary units
representing IPT Units or any class thereof), are or will be listed for trading,
compliance with any of which the Managing General Partner deems to be in the
best interests of the Partners, or (iii) are required or contemplated by this
Agreement, or (iv) are necessary to qualify the Partnership as a limited
partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or that is advisable in the opinion of the
Managing General Partner to ensure that
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the Partnership will not be treated as an association taxable as a corporation
for Federal income tax purposes, may be made by the Managing General Partner
without the consent of the Limited Partner, provided however that, in the case
of clause (i) hereof, if a proposed amendment would adversely affect one Limited
Partner in a material respect but not the other Limited Partner, then such
former Limited Partner shall have the consent right referred to herein, and such
latter Limited Partner shall not have the consent right referred to herein.
(c) Notwithstanding Section 14.1(a), amendments to this Agreement that
are necessary to conform this Agreement to any amendments made to the IPT
Partnership Agreement may be made by the Managing General Partner without the
consent of the Limited Partners.
(d) Unless approved by all Partners, no amendment to this Agreement
shall be permitted unless the Partnership has received an Opinion of Counsel
that such amendment would not (i) result in the loss of limited liability of the
Limited Partners under this Agreement or (ii) cause the Partnership to be
treated in all material respects as an association taxable as a corporation for
Federal income tax purposes (unless the Partnership is already treated in all
material respects as an association taxable as a corporation due to changes in
Federal income tax laws). In addition, no amendment that would increase the
duties or liabilities of a General Partner, decrease the rights of a General
Partner in its capacity as such or change a General Partner's Percentage
Interest may be made without the consent of the Managing General Partner.
ARTICLE XV
Merger
15.1 Authority. The Partnership may merge or consolidate with one or more
limited partnerships formed under the laws of the State of Texas or another
state of the United States of America pursuant to a written agreement of merger
or consolidation ("Merger Agreement") in accordance with this Article.
15.2 Procedure for Merger or Consolidation. Merger or consolidation of the
Partnership pursuant to this Article requires the prior written consent of the
General Partners. If the General Partners determine, in the exercise of their
sole discretion, to consent to the merger or consolidation, the General Partners
shall approve the Merger Agreement, which shall set forth:
(a) The names and states of domicile of the limited partnerships
proposing to merge or consolidate;
(b) The name and state of domicile of the limited partnership into
which they propose to merge or consolidate (hereafter designated as the
"Surviving Limited Partnership");
(c) The terms and conditions of the proposed merger or consolidation;
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(d) The manner and basis of exchanging or converting the general and
limited partnership interests of each merging limited partnership for, or into,
cash, property, or general or limited partnership interests, rights, securities
or obligations of the Surviving Limited Partnership; and (i) if any general or
limited partnership interests of either merging limited partnership are not to
be exchanged or converted solely for, or into, cash, property, or general or
limited partnership interests, rights, securities or obligations of the
Surviving Limited Partnership, the cash, property, or general or limited
partnership interests, rights, securities or obligations of any limited
partnership (other than the Surviving Limited Partnership), corporation, trust
or other entity which the holders of such general or limited partnership
interests are to receive in exchange for or upon conversion of, their general or
limited partnership interests, and (ii) in the case of general or limited
partnership interests represented by certificates, upon the surrender of such
certificates, which cash, property, or general or limited partnership interests,
rights, securities or obligations of the Surviving Limited Partnership or any
limited partnership (other than the Surviving Limited Partnership), corporation,
trust or other entity, or evidences thereof, are to be delivered;
(e) A statement of any changes in the certificate of limited
partnership of the Surviving Limited Partnership to be effected by such merger
or consolidation; and
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 15.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided
that if the effective time of the Merger is to be later than the date of the
filing of the certificate of merger, it shall be fixed no later than the time of
the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or desirable.
15.3 Approval by Limited Partner of Merger or Consolidation.
(a) The Managing General Partner of the Partnership, upon approval of
the Merger Agreement by both General Partners, shall direct that the Merger
Agreement be submitted to a vote of the Limited Partners either at a meeting or
by written consent, in either case in accordance with the requirements of
Article XV. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of meeting or the written consent.
(b) The Merger Agreement shall be approved upon receiving the
affirmative vote or consent of the Original Limited Partner and the holder(s) of
majority of each series of Class C Units then outstanding, if any.
(c) After such approval by vote or consent of the Limited Partners,
and at any time prior to the filing of the certificate of merger pursuant to
Section 15.4, the merger or
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consolidation may be abandoned pursuant to provisions therefor, if any, set
forth in the Merger Agreement.
15.4 Certificate of Merger. Upon the required approval by the General
Partners and Limited Partners of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State in conformity with the
requirements of the Texas Act.
15.5 Effect of Merger. (a) Upon the effective date of the certificate of
merger,
(i) all of the rights, privileges, and powers of each partnership
that has merged or consolidated, all property, real, personal and mixed,
all debts due to any of those partnerships, and all other things and causes
of action belonging to each of those partnerships are vested in the
Surviving Partnership and after the merger or consolidation are the
property of the Surviving Partnership to the extent they were of each
constituent partnership;
(ii) the title to any real property vested by deed or otherwise
in any of those partnerships does not revert and is not in any way impaired
because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security
interests in property of any of those partnerships is preserved unimpaired;
and
(iv) all debts, liabilities, and duties of those partnerships
attach to the Surviving Partnership, and may be enforced against it to the
same extent as if the debts, liabilities and duties had been incurred or
contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall
not be deemed to result in a transfer or assignment of assets or liabilities
from one entity to another having occurred.
ARTICLE XVI
Limitations
16.1 Sale of Substantially All Assets.
Except in connection with the termination of the Partnership pursuant to
Article XIII hereof, the Managing General Partner may not sell or exchange all
or substantially all the assets of the Partnership without the consent of the
Original Limited Partner and the holders of the outstanding Class C Units, if
any. The foregoing limitation on the Managing General Partner's ability to sell
or exchange all or substantially all the Partnership's assets shall not (i)
affect the right of the Managing General Partner to encumber any or all of the
assets of the Partnership for Partnership obligations
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and (ii) apply to any forced sale of any or all of the assets of the Partnership
pursuant to foreclosure of, or other realization upon, any such encumbrance.
ARTICLE XVII
Special Provisions
17.1 Withdrawal of Acreage by the Original Limited Partner; Title to the
Timberlands.
(a) Whenever IP exercises its right to withdraw certain designated
acreage pursuant to Section 18.2 of the IPT Partnership Agreement, the Original
Limited Partner shall withdraw such designated acreage from the Partnership and
may cause the Partnership to execute such deeds and other instruments as IP
deems necessary or desirable to evidence the fact that the Partnership has no
interest in any such acreage withdrawn by the Original Limited Partner from and
after the date designated by IP pursuant to Section 18.2 of the IPT Partnership
Agreement.
(b) If the Original Limited Partner withdraws acreage pursuant hereto,
the Managing General Partner, based upon whatever method it deems reasonable,
shall allocate the Carrying Value of any such property among all other
Contributed Properties attributed to the Accounting Unit to which such withdrawn
property had been attributed. The Carrying Values of such other Contributed
Properties shall be increased accordingly and the Carrying Value of any such
withdrawn property shall be deemed, upon its withdrawal, to be zero. To the
extent the withdrawn property consists of Original Timber Interests included in
a separate timber account, the Managing General Partner may, in its discretions,
elect to increase only the Carrying Value of the units of timber included in
such separate timber account.
(c) In the event the Carrying Values of Contributed Properties are
increased in accordance with paragraph (b) hereof, the original Agreed Values of
such properties shall be increased by an equal amount. To the extent the
withdrawn property consists of Original Timber Interests included in a separate
timber account, the tax basis of the units of timber included in such separate
timber account shall be reduced accordingly. (Any increase in the Agreed Value
of, or decrease in the tax basis of, Original Timber Interests resulting from
the withdrawal of property pursuant hereto shall be taken into account in
determining the amount of gain to be allocated pursuant to Section 5.2(b) with
respect to such property.)
(d) Subject to Section 17.1(a) above and to such liens, encumbrances,
security interests, equities or claims as do not materially interfere with the
ownership or benefits of the Timberlands contributed to the Partnership as
contemplated by the Registration Statement, IP represents to the Partnership
that IP has good title to the Timberlands and, upon the execution and delivery
of the Conveyance Agreement, the Partnership will have good title to the
Timberlands. For purposes of this Section 17.1(d), the term "Timberlands" shall
be defined as set forth in the Registration Statement.
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17.2 Right of IP to Retain or Purchase Mineral Interests.
(a) All minerals and mineral interests in the Original Timber
Interests and the right to explore for, develop and market any such minerals and
mineral interests are owned by IP. Upon the contribution by the Initial Limited
Partner to the Partnership of the Original Timber Interests pursuant to Sections
3.1 and 3.2, therefore, the Partnership did not acquire ownership of any
minerals or mineral interests in the Original Timber Interests or the right to
explore for, develop and market any such minerals and mineral interests. The
Managing General Partner shall execute, acknowledge and file, or cause to be
executed, acknowledged and filed, any and all deeds, conveyances, leases or
other instruments as may be necessary, from time to time during the term of this
Agreement, in order to evidence in IP ownership of, or the benefits of ownership
to, such minerals or mineral interests. To the extent the Partnership holds any
minerals or mineral interests intended to be retained by IP and IP has elected,
pursuant to Section 17.5(a) of the IPT Partnership Agreement to have such
minerals or mineral interests deemed to be an additional capital contribution to
the Original Limited Partner, such minerals or mineral interests shall be deemed
to be an additional Capital Contribution to the Partnership by the Original
Limited Partner pursuant to Section 3.3(a). In such event, the Agreed Value of
such minerals or mineral interests should be attributed entirely to the
Secondary Account. To the extent such minerals or mineral interests are
determined to be owned by the Partnership as a matter of law, if the Partnership
is unable to transfer such minerals or mineral interests, and if IP is unable to
make an election to cause a deemed capital contribution to the Original Limited
Partner of such minerals or mineral interests, the Agreed Value of such minerals
or mineral interests shall in any event be attributed entirely to the Secondary
Account.
(b) If, in connection with the acquisition of additional Timber
Interests by the Partnership during the term of this Agreement, the Timber
Interests to be so acquired include interests in the minerals underlying such
Timber Interests, the Partnership shall inform IP thereof and shall offer IP the
exclusive right to acquire such mineral interests by payment to the Partnership
of that portion of the aggregate purchase price of the Timber Interest to be so
acquired as the Managing General Partner may reasonably determine to be the
allocable portion of the aggregate purchase price attributable to such mineral
interests. The notice to be furnished to IP in accordance herewith shall be so
furnished at least 20 business days prior to the proposed date for closing of
the proposed purchase by the Partnership, and IP shall notify the Partnership of
its election to purchase such mineral interests on or before the close of
business on the first business day next preceding the first anniversary of the
closing of the acquisition of such Timber Interests by the Partnership. If IP
does so elect to purchase any such mineral interests, the Managing General
Partner shall execute, acknowledge and file, or cause to be executed,
acknowledged and filed, any and all such deeds, conveyances, leases or other
instruments as may be necessary in order to evidence ownership of such mineral
interests by IP. If IP fails or refuses to elect to purchase such mineral
interests on or before such business day preceding the first anniversary date,
the Partnership shall be under no further obligation to IP with respect to such
mineral interests.
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17.3 Matters Relating to the Class C Units (Series I).
(a) On the Restatement Date, Prudential made a Capital Contribution to
the Partnership of cash in an amount equal to $2,209,687, and unconditionally
agreed to contribute an additional $19,887,181 on July 18, 1996, in exchange for
the Class C Units (Series I) as such Units relate to the Identified Property
with respect to which such Units were issued. Concurrently with such Capital
Contribution, Prudential was admitted to the Partnership as a Special Limited
Partner and became the owner of the Special Limited Partner Interest relating to
the Class C Units (Series I) (which have been subdivided into ten thousand
(10,000) Units), having the rights, powers, privileges, duties, and preferences
specified in this Agreement. No other Class C Units (Series I) shall be issued
by the Partnership. For purposes of applying the provisions of this Agreement:
(i) the Class C Percentage Interest with respect to the Class C Units (Series I)
is (I) 98% during the Initial Period with respect to the Class C Units (Series
I) and (II) 2% thereafter; (ii) the Identified Property with respect to which
the Class C Units (Series I) are issued is the entire interest in Alexander
Plantation owned by the Partnership; (III) the Initial Period with respect to
the Class C Units (Series I) means the period commencing on the Restatement Date
and ending on the earlier of (A) the end of the calendar month in which the
amount of timber Harvested by Alexander Plantation since the Restatement Date
equals or exceeds 4,000,000 short tons of timber and (B) the end of the day
immediately before the fifteenth anniversary of the Restatement Date.
(b) Immediately following the Capital Contribution provided in clause
(a) herein, Prudential made an additional Capital Contribution to the
Partnership of cash in an amount of $434,264 in exchange for the Class C Units
(Series I) as such Units relate to the Specified General Revenue Percentage
Interest with respect to which such Units were issued. For purposes of applying
the provisions of this Agreement: (A) the distinct source of Specified General
Revenue with respect to the Class C Units (Series I) is all of IPTO's
Recreational Income attributable to the Timberlands it owns that are located in
the South Central Region; and (B) the Class C General Revenue Percentage
Interest of the Class C Units (Series I) that relates to the Specified General
Revenue described in clause (A) above shall be 1% for 1996 and for each
subsequent calendar year shall be the percentage obtained by multiplying 100% by
a fraction, (I) the numerator of which is equal to 14,588 and (II) the
denominator of which is equal to the total acreage owned by the Partnership that
is located in the South Central Region.
(c) At any time the Partnership shall, at the election of the Managing
General Partner made by furnishing 15 days' prior written notice thereof to the
Special Limited Partner holding the Class C Units (Series I), have the right to
redeem the Class C Units of such Special Limited Partner Interest, in whole but
not in part, provided, however, that
(i) the Managing General Partner has determined, in its sole
discretion, that it is advisable for the Partnership to proceed with a
Major Partnership Transaction (in which case, the Class C Units (Series I)
may be redeemed immediately prior to
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the effectiveness thereof) or the Partnership has received notice from the
holders of Class C Units (Series I) in accordance with the last sentence of
this Section 17.3(c), and
(ii) in consideration for such redemption, the Partnership shall
distribute to such Special Limited Partner (A) the class A shares issued by
Alexander Plantation and held by the Partnership and (B) cash in an amount
equal to such Special Limited Partner's Capital Account balance with
respect to such Class C Units as adjusted immediately prior to such
redemption pursuant to Section 3.5 and as reduced by the fair market value
of the class A shares issued by Alexander Plantation and held by the
Partnership that are to be distributed to such Special Limited Partner.
In connection with the liquidation of the Partnership, the Managing General
Partner undertakes and agrees to cause the Partnership to exercise its right
under this Section 17.3(c) to redeem the Class C Units (Series I) then
outstanding, if any. If an amendment to the Partnership Agreement is made
pursuant to Section 14.1(b) or Section 14.1(c) that adversely affects, in any
material respect, the Special Limited Partners holding Class C Units (Series I),
the Managing General Partner shall, within 10 days following its receipt of
notice from the Special Limited Partners holding a majority of the outstanding
Class C Units (Series I) wherein such holders request redemption of their Units,
cause the Partnership to redeem all outstanding Class C Units (Series I) in
accordance with this Section 17.3(c).
(d) At any time from and after July 1, 1998, the Partnership shall, at
the election of the Managing General Partner made by furnishing 15 days' prior
written notice thereof to the Special Limited Partner holding the Class C Units
(Series I), have the right to redeem the Class C Units of such Special Limited
Partner, in whole but not in part, provided, however, that
(i) in consideration for such redemption, the Partnership shall
distribute to such Special Limited Partner (A) the class A shares issued by
Alexander Plantation and held by the Partnership and (B) cash in an amount
equal to such Special Limited Partner's Capital Account balance with
respect to such Class C Units as adjusted immediately prior to such
redemption pursuant to Section 3.5 and as reduced by the fair market value
of the class A shares issued by Alexander Plantation and held by the
Partnership that are to be distributed to such Special Limited Partner, and
(ii) the Partnership shall distribute to such Special Limited
Partner a redemption premium, payable in cash, equal to the product of (A)
the percentage set forth in the right column below in accordance with the
date of redemption set forth in the left column below and (B) the fair
market value of the Class C Units (Series I):
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Percentage of the Fair Market
If the Redemption Takes Place Value of the Class C Units (Series I)
---------------------------------- -------------------------------------
On or before June 30, 2001 5.00%
From July 1, 2001 to June 30, 2006 3.00%
From July 1, 2006 to June 30, 2011 1.50%
From and after July 1, 2016 .05%
All determinations of the fair market value of the Class C Units (Series I)
shall be made by the Managing General Partner.
(e) At any time after the third anniversary of the end of the Initial
Period with respect to the Class C Units (Series I), the Partnership shall, at
the election of the Managing General Partner made by furnishing 15 days' prior
written notice to each Special Limited Partner holding Class C Units (Series I),
have the right, and Special Limited Partners holding a majority of the Class C
Units (Series I) then outstanding shall, by furnishing 15 days' prior written
notice to the Managing General Partner, have the right to require the
Partnership, to redeem all outstanding Class C Units (Series I), in whole but
not in part, in consideration for cash in an amount equal to such Special
Limited Partner's Capital Account balance with respect to such Class C Units as
adjusted immediately prior to such redemption pursuant to Section 3.5.
(f) For purposes of applying the provisions of this Agreement, the
Specified General Revenue with respect to the Class C Units (Series I) shall be
treated as a separate, non-amortizable asset of the Partnership (the "Series I
Revenue Asset") and the following rules shall apply with respect thereto:
(i) On the issuance of the Class C Units (Series I), the Carrying
Value of the Series I Revenue Asset shall be adjusted to reflect its fair
market value, which the Managing General Partner and Prudential have agreed
is equal to $43,426,400;
(ii) In connection with any event requiring an adjustment to the
Capital Accounts of the Special Limited Partners holding Class C Units
(Series I) in accordance with Section 3.5, the provisions of Section 3.5
shall be applied by taking into account any Unrealized Gain or Unrealized
Loss with respect to the Series I Revenue Asset by treating the Partnership
as if it had sold substantially all of its assets immediately before such
adjustment.
(iii) In connection with a sale or other disposition by the
Partnership of substantially all of its assets --
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(A) a portion of the value received by the Partnership in
exchange therefore must be allocated to the Series I Revenue Asset
based on the fair market value of that asset and such portion shall be
treated as Specified General Revenue with respect to the Class C Units
(Series I); and
(B) gain or loss from the disposition of the Series I Revenue
Asset shall then be computed for purposes of Sections 5.1(c) and
5.2(a)(iii) by taking into account the Carrying Value or tax basis
allocable to that asset, as the case may be, and such gain or loss
shall be allocated among the Original Partners and the Special Limited
Partners holding Class C Units (Series I) by treating such gain or
loss as an item attributable to the Specified General Revenue with
respect to the Class C Units (Series I).
(iv) At any time that it is necessary to determine the fair
market value of the Series I Revenue Asset, the fair market value of such
asset shall be computed by discounting the projected net revenues of the
Partnership from such asset to their present value, using a discount rate
determined by the Managing General Partner in its reasonable discretion,
with the consent of the holders of a majority of the Outstanding Class C
Units (Series I) which consent will not be unreasonably withheld.
For purposes of this Section 17.3(f), a sale or other disposition by the
Partnership of substantially all of its assets means a sale or other disposition
of assets with a fair market value equal to 90% or more of the fair market value
of all the Partnership's assets immediately before such sale or other
disposition.
(g) Notwithstanding anything to the contrary in this Agreement,
Prudential may at any time transfer all or any portion of its Class C Units to
any Person provided that such transfer is exempt from all applicable
registration requirements under any state, federal, or foreign securities laws
and otherwise, such transfer does not violate any applicable law regulating the
transfer of securities, and the transferee has provided the Managing General
Partner with an opinion of counsel, which opinion shall be reasonably
satisfactory to the Managing General Partner, to that effect. Any Permitted
Transferee of all or any part of the Class C Units of Prudential may be admitted
to the Partnership as a substitute Special Limited Partner pursuant to Section
11.2 only if the Managing General Partner consents to such admission, which
consent may be given or withheld in the sole and absolute discretion of the
Managing General Partner; provided that if Treasury Regulations are adopted that
would allow the Partnership to be treated as a partnership for federal income
tax purposes without regard to whether the Partnership lacks the corporate
characteristics of free transferability of interests, continuity of life,
centralization of management, and limited liability, the Managing General
Partner shall be deemed to consent to the admission of any such Permitted
Transferee.
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(h) For purposes of Section 3.3(c), an Operating Deficiency shall be
considered to exist with respect to the Identified Property with respect to
Class C Units (Series I) to the extent, and only to the extent, that the General
Manager of Alexander Plantation has requested the Partnership to make an
additional capital contribution pursuant to Section 3.1(b) of the limited
liability company agreement of Alexander Plantation.
(i) For purposes of Section 4.10(b)(i)(B) --
(i) the amount distributable under Section 4.10(b)(i)(B) to any
Special Limited Partner holding Class C Units (Series I) for the period
ending September 30, 1996 shall equal one-quarter of the amount determined
by multiplying (i) such Special Limited Partner's Specified General Revenue
Percentage Interest with respect to the Class C Units (Series I) by (ii)
the Partnership's total projected Distributable Cash from the Specified
General Revenue with respect to the Class C Units (Series I) for 1996; and
(ii) the amount distributable under Section 4.10(b)(i)(B) to any
Special Limited Partner holding Class C Units (Series I) for the period
ending December 31, 1996 shall be increased or decreased, as the case may
be, so that the total amount distributed pursuant to Section 4.10(b)(i)(B)
to each such Special Limited Partner with respect to the Class C Units
(Series I) for periods ending during 1996 equals one-half of the amount
determined by multiplying (i) such Special Limited Partner's Specified
General Revenue Percentage Interest with respect to the Class C Units
(Series I) by (ii) the Partnership's total Distributable Cash from the
Specified General Revenue with respect to the Class C Units (Series I) for
all of 1996.
For 1996 and the year that the Class C Units (Series I) are redeemed (if such
Units are not being redeemed in connection with the liquidation of the
Partnership), Section 5.3(f) shall be applied by allocating a ratable portion of
the items attributable to the Specified General Revenue with respect to the
Class C Units (Series I) for such year to each month during that year.
ARTICLE XVIII
General Provisions
18.1 Definitions.
The following definitions shall for all purposes, unless otherwise clearly
indicated, apply to the terms used in this Agreement.
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"Accounting Unit" means the Primary Account or the Secondary Account,
whichever the case may be.
"Additional Capital Contribution Amount" has the meaning assigned to such
term in Section 3.3(c)(i).
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 3.5(d).
"Advancing Partner" has the meaning assigned to such term in Section
3.3(c)(ii).
"Affiliate" means any Person that directly or indirectly controls, is
controlled by, or is under common control with the Person in question. As used
in the definition of "Affiliate," the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Affiliated Corporation" means a corporation of which all of the
outstanding shares of stock are owned by the Partnership.
"Affiliated Partnership" means a partnership which is an Affiliate of the
Partnership and in which the Partnership owns a partnership interest.
"Affiliated Partnership Agreement" means the partnership agreement entered
into by the partners of an Affiliated Partnership.
"Aggregate Distribution Shortfall Preferred Return" means, with respect to
each Special Limited Partner, at the time of any determination, an amount equal
to the aggregate amount of the Distribution Shortfall Preferred Return of such
Special Limited Partner for each calendar quarter ending on or before the date
of such determination.
"Agreed Value" (a) of a Contributed Property transferred to the Partnership
by WCFR pursuant to Sections 3.1(a) and (c) and 3.2(a) and (c) means such
property's Agreed Value as determined in accordance with the provisions of the
Original Contribution Agreement, and (b) of any other Contributed Property
transferred to the Partnership, means the fair market value of such property as
determined by the Managing General Partner using such reasonable method of
valuation as may be adopted by the Managing General Partner. The Agreed Value of
any property shall reflect (i) any adjustment made pursuant to Section
3.5(b)(iii), (ii) any adjustments made by the Managing General Partner pursuant
to Section 6.12 relating to an allocation between the Accounting Units and (iii)
any adjustment made upon the withdrawal of property pursuant to Section 16.1 (as
if such adjusted Agreed Value constituted the Agreed Value of such property at
the time it was contributed to the Partnership).
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"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership of IP Timberlands Operating Company, Ltd., as it may be amended from
time to time.
"Alexander Plantation" means Alexander Plantation, LLC, a Delaware limited
liability company.
"Assignee" means a Non-citizen Assignee (as defined in the IPT Partnership
Agreement) or a person to whom one or more Depositary Units (as defined in the
IPT Partnership Agreement) or Units have been transferred, by assignment of a
depositary receipt, or otherwise, in a manner permitted in the IPT Partnership
Agreement and who thereby has an interest in the Original Limited Partner
equivalent to that of a limited partner but (a) limited to the rights and
obligations appurtenant to a Unit to share in distributions, including
liquidating distributions, provided in the IPT Partnership Agreement and (b)
otherwise subject to the limitations under the Texas Act on the rights of an
assignee who has not become a substituted limited partner.
"Book-Tax Disparity" means, with respect to a Contributed Property or
Adjusted Property, as of any date of determination the difference between the
Carrying Value of such Contributed Property or Adjusted Property, and the
adjusted basis thereof for Federal income tax purposes, as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
3.5, and such balance had the Capital Account been maintained strictly in
accordance with tax accounting principles.
"Bulk Sale" means a sale of standing timber that does not qualify for
capital gains treatment under Section 631(b) of the Code.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Section 3.5.
"Capital Contribution" means any cash and any Contributed Property which a
Partner contributes to the Partnership pursuant to Sections 3.1, 3.2 or 3.3.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depletion
(computed as a separate item of deduction), depreciation and cost recovery
deductions charged to the Partners' Capital Accounts pursuant to Section 3.5(a)
with respect to such property, as well as any other charges to such Carrying
Values for sales, retirements and other disposition of assets included in a
Contributed Property, as of the time of determination, and (b) with respect to
any other property, the adjusted basis of such property for Federal income tax
purposes as of the time of determination. The Carrying Value of any property so
determined shall be adjusted to reflect (i) any adjustment made pursuant to
Section 3.5(d), (ii) any adjustments made by the Managing General Partner
pursuant to Section 6.12
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relating to an allocation between the Accounting Units and (iii) any adjustment
made upon the withdrawal of property pursuant to Section 16.1.
"Certificate of Limited Partnership" means the Amended and Restated
Certificate of Limited Partnership filed with the Secretary of State of the
State of Texas on April 1, 1996, as it may be amended or restated from time to
time in accordance with Section 6.1.
"Class A Capital Account" means that Capital Account maintained for the
Original Limited Partner pursuant to Section 3.5 with respect to such Original
Limited Partner's Class A Unit.
"Class A Certificate" means a non-negotiable certificate issued by the
Partnership, substantially in the form of Annex I to this Agreement, evidencing
ownership of one Class A Unit.
"Class A Limited Partner" means the Original Limited Partner and any
successor thereto, in its capacity as the owner of the Class A Unit.
"Class A Portion" means (a) with respect to Primary Account Cash or the Net
Agreed Value of the WCFR Primary Account Property, 95.96% of such cash or Net
Agreed Value, whichever the case may be, and (b) with respect to Secondary
Account Cash or the Net Agreed Value of the WCFR Secondary Account Property,
4.04% of such cash or Net Agreed Value, whichever the case may be.
"Class A Unit" means that certain class of Unit representing the
Partnership Interest of the Original Limited Partner as a Class A Limited
Partner.
"Class B Capital Account" means that Capital Account maintained for the
Original Limited Partner pursuant to Section 3.5 with respect to such Original
Limited Partner's Class B Unit.
"Class B Certificate" means a non-negotiable certificate issued by the
Partnership, substantially in the form of Annex II to this Agreement, evidencing
ownership of one Class B Unit.
"Class B Limited Partner" means the Original Limited Partner and any
successor thereto, in its capacity as the owner of the Class B Unit.
"Class B Portion" means (a) with respect to Primary Account Cash or the Net
Agreed Value of the WCFR Primary Account Property, 4.04% of such cash or Net
Agreed Value, whichever the case may be, and (b) with respect to Secondary
Account Cash or the Net Agreed Value of the WCFR Secondary Account Property,
95.96% of such cash or Net Agreed Value, whichever the case may be.
"Class B Unit" means the certain class of Unit representing the Partnership
Interest of the Original Limited Partner, in its capacity as a Class B Limited
Partner.
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"Class C Capital Account" means the Capital Account maintained for a
Special Limited Partner in accordance with Section 3.5 with respect to such
Partner's Class C Units.
"Class C Certificate" means a certificate issued by the Partnership to a
Special Limited Partner evidencing ownership of one or more Class C Units of a
specified series substantially in the form of Annex III hereto with such changes
as are appropriate in respect of the Class C Units of such series.
"Class C General Revenue Percentage Interest" means the percentage interest
that a series of Class C Units is specified to have in any distinct source of
Specified General Revenue.
"Class C Percentage Interest" means the percentage interest that a series
of Class C Units is specified to have in the Distributable Cash from Identified
Property with respect to such series of Class C Units and the items of income,
gain, loss, deduction, and credit attributable to such Identified Property.
"Class C Units" means that certain Class of Units (which may be issued in
separate series) representing the Partnership Interest of a Special Limited
Partner.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
"Commencement Date" means March 29, 1996.
"Contributed Property" means each Contributing Partner's interest in each
property (other than cash) contributed to the Partnership by such Contributing
Partner. Once the Carrying Value of a Contributed Property is adjusted pursuant
to Section 3.5(d), such property shall no longer constitute a Contributed
Property for purposes of Section 5.2(b).
"Contributing Partner" means each Partner contributing a Contributed
Property to the Partnership.
"Cut Timber" means timber that has been harvested from Timberland and is
held or sold, whichever the case may be, as logs.
"Default Notice" has the meaning assigned to such term in Section
3.3(c)(ii).
"Defaulting Partner" has the meaning assigned to such term in Section
3.3(c)(ii).
"Departing Partner" means a General Partner, as of the effective date of
any withdrawal or removal of such General Partner pursuant to Section 12.1 or
12.2, as the case may be.
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"Designated Rate" means a rate per annum equal to 18%.
"Distributable Cash from the Identified Property" means, with respect to
any period, all cash received by the Partnership properly allocable to such
period that is attributable to the Identified Property with respect to a
specific series of Class C Units; provided, that in any case in which the
Identified Property is an interest in an entity, cash received by the
Partnership within 15 days after the end of a period shall be considered
allocable to such period.
"Distributable Cash from Specified General Revenue" means, with respect to
any period, (a) all cash received by the Partnership during such period that is
attributable to a source of Specified General Revenue, less (b) all expenses and
other expenditures incurred by the Partnership during such period that are
appropriately allocable to such cash flow, less (c) any reserves established by
the Managing General Partner, in its reasonable discretion, in respect of
contingencies, liabilities or other reasonably anticipated expenditures relating
to such Specified General Revenue.
"Distribution Shortfall" has the meaning assigned to such term in Section
4.10(b)(ii).
"Distribution Shortfall Preferred Return" means, with respect to each
Special Limited Partner, an amount equal to the Designated Rate per calendar
quarter, determined on the basis of a 360-day year and a 30-day month, of the
average daily balance of such Special Limited Partner's Undistributed Cash
Amount, such Distribution Shortfall Preferred Return to commence on the first
day on which there is an Undistributed Cash Amount.
"Election Date" has the meaning assigned to such term in Section
3.3(c)(ii).
"First Agreement" means the First Amended and Restated Agreement of Limited
Partnership of IP Timberlands Operating Company, Ltd., dated March 29, 1996.
"General and Administrative Overhead" means those customary, routine and
necessary costs and expenses incurred or generated by the Managing General
Partner which are associated with or attributable to the administration of the
business of the Partnership including, but not limited to, an allocable portion
of the cost of office services, telephone, postage, office occupancy, computer
services, accounting and legal services, regulatory reporting, and an allocable
portion of salaries, employee benefit costs and other similar costs of employees
and officers of the Managing General Partner, computed on a cost basis in
accordance with generally accepted accounting principles.
"General Partners" means IP, IPFR and their successors.
"Identified Property" means the property (or properties) of the Partnership
that is identified as the property with respect to which a series of Class C
Units has been issued.
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"Identified Property Percentage Interest" means (a) for each Special
Limited Partner with respect to each series of Class C Units held by such
Special Limited Partner, the product of (i) the Class C Percentage Interest with
respect to such series of Class C Units and (ii) a fraction, the numerator of
which is the number of Class C Units of such series that are held by such
Special Limited Partner and the denominator of which is the total outstanding
Class C Units of such series and (b) for the Original Partners as a group with
respect to any Identified Property, 100% minus the Class C Percentage Interest
of the series of Class C Units that has an interest in such Identified Property.
"Initial Limited Partner" means WCFR with respect to the 99% limited
partner interest issued pursuant to Section 2.1(b) of the Original Contribution
Agreement.
"Initial Managing General Partner" means WCFR with respect to the .99%
managing general partner interest issued pursuant to Section 2.1(b) of the
Original Contribution Agreement.
"Initial Period" means the period specified with respect to any series of
Class C Units.
"Initial Term" means that period beginning with the Commencement Date and
ending at the close of business on December 31, 1999.
"IP" means International Paper Company, a New York corporation, and any
successor to International Paper Company by merger or consolidation or by sale
of all or substantially all of the assets of International Paper Company.
"IPFR" means IP Forest Resources Company, a Delaware corporation.
"IPT Partnership Agreement" means the agreement of limited partnership of
the Original Limited Partner.
"IPT Unit" means a partnership interest of a limited partner in the
Original Limited Partner, including both Class A and Class B partnership
interests and partnership interests represented by depositary units.
"Limited Partner" means the Original Limited Partner and the Special
Limited Partner.
"Liquidator" has the meaning specified in Section 13.3.
"Major Partnership Transaction" means a transaction pursuant to which the
Partnership or IPT will be involved in (a) a sale or transfer of a substantial
portion of its assets, (b) a public or private offering of its interests (other
than an offering of additional Class C Units of any series), (c) a merger or
consolidation, (d) a recapitalization in which all or a substantial portion of
the outstanding Class A Units or Class B Units are exchanged for or converted
into other securities of
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the Partnership or any other Person(s), (e) a redemption by the Partnership of
the Class A Unit or the Class B Unit, (f) a leveraged or management buy-out, (g)
a liquidation of the Partnership, or (h) any other transaction which (A) the
Managing General Partner determines is in the best interest of the Partnership,
the Original Limited Partner, or the Unitholders of the Original Limited
Partner, (B) is being undertaken for a business reason wholly independent of
obtaining the rights resulting under this Agreement in respect of outstanding
Class C Units upon a Major Partnership Transaction, (C) shall require the
approval or consent of the Special Limited Partner, and (D) either (x) with
respect to which the Special Limited Partner has not approved after a request
therefor, or (y) with respect to which the Managing General Partner has
determined that it is in the best interests of the Partnership, the Original
Limited Partner or the Unitholders of the Original Limited Partner that the
contemplated transaction not be disclosed to the Special Limited Partner.
"Managing General Partner" means IPFR and its successors.
"Merchantable Timber" means all timber, regardless of species, in stands
aged 15 years or older.
"Net Agreed Value" means (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any indebtedness either assumed by the
Partnership upon such contribution or to which such properties are subject when
contributed, (b) in the case of any property currently distributed to a Partner
pursuant to Section 4.10, the Partnership's Carrying Value of such property at
the time such property is distributed reduced by any indebtedness either assumed
by such Partner upon such distribution or to which such property is subject at
the time of distribution and (c) in the case of any property distributed to a
Partner in liquidation of the Partnership pursuant to Sections 13.3 and 13.4,
the fair market value of such property at the time of such distribution (as
determined pursuant to Section 13.4) reduced by any indebtedness either assumed
by such Partner upon such distribution or to which such property is subject at
the time of distribution.
"Operating Deficiency" has the meaning assigned to such term in Section
3.3(c)(i).
"Opinion of Counsel" means a written opinion of counsel acceptable to the
Managing General Partner.
"Original Certificate of Limited Partnership" means the original
Certificate of Limited Partnership of the Partnership filed with the Secretary
of State of the State of Texas on March 25, 1996.
"Original Contribution Agreement" means that certain agreement, dated March
29, 1996 entered into between WCFR, IP and the Partnership wherein WCFR and IP
contributed and conveyed to the Partnership certain designated assets and the
Partnership agreed to assume certain designated liabilities.
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"Original Limited Partner" means IP Timberlands, Ltd., a limited
partnership organized under the Texas Act, and any successors thereof.
"Original Partners" means the Original Limited Partner, the Managing
General Partner and the Special General Partner.
"Original Primary Account Property" means the WCFR Primary Account Property
conveyed to the Partnership pursuant to the Original Contribution Agreement. The
Managing General Partner may, in its sole discretion, periodically revise the
estimate and reduce or enlarge the units of timber treated as Original Primary
Account Property based upon the actual rate at which timber is harvested or
disposed of or such other consideration as it deems appropriate. Any such
adjustment made by the Managing General Partner shall be conclusive and binding
upon the Partners.
"Original Secondary Account Property" means the WCFR Secondary Account
Property conveyed to the Partnership pursuant to the Original Contribution
Agreement.
"Original Timber Interests" means the undivided ownership interests in
Timber Interests originally contributed by WCFR in exchange for the managing
general partner interest, the Class A Unit and the Class B Unit pursuant to
Sections 3.1(a) and (c) and 3.2(a) and (c).
"Partner" means the General Partners or the Limited Partners.
"Partner Loan" has the meaning assigned to such term in Section 3.3(c)(ii).
"Partnership" means the limited partnership established by this Agreement.
"Partnership Interest" means the interest of a Partner in the Partnership.
"Permitted Transferee" means any transferee of Class C Units that acquires
such Class C Units in a transfer that is permitted pursuant to this Agreement or
any amendment hereto.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Primary Account" means a separate Accounting Unit in which there shall be
reflected the Capital Contributions of the Original Primary Account Property and
all other Capital Contributions attributed to such Accounting Unit, the results
of the ownership, operation, maintenance and sale or other disposition of the
Timber Interests or other assets or properties of the Partnership during the
Initial Term to the extent provided in Article IV hereof and all charges,
credits and distributions in respect of such Accounting Unit as provided in this
Agreement.
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"Primary Account Cash" means, with respect to any contribution of cash to
the Partnership by the Original Limited Partner, that portion of such cash that
was contributed to the Original Limited Partner by the partners thereof pursuant
to Sections 3.1, 3.2 or 3.3 of the IPT Partnership Agreement and attributed to
the Original Limited Partner's Primary Account (as defined in the IPT
Partnership Agreement) under the provisions of the IPT Partnership Agreement.
"Primary Account Factor" means, (a) with respect to either timber located
on a particular tract of Timberland or a particular aggregation of Standing
Timber, contributed to, purchased by or sold by the Partnership, that percentage
utilized by the Managing General Partner to allocate to the Primary Account, a
portion of the total Agreed Value assigned, purchase price paid or sales price
received, whichever the case may be, with respect to such timber, such
percentage being established either by discounted cash flows, asset values,
number of timber units or any combination of the foregoing, reasonably
attributed to the Primary Account by the Managing General Partner, and (b) with
respect to the land attributable to a tract of Timberland contributed to,
purchased by or sold by the Partnership, no portion of the Agreed Value
assigned, purchase price paid or sales price received, whichever the case may
be, with respect to such land.
"Primary Account Percentage Interest" means (a) as to the Managing General
Partner, .99%, (b) as to the Special General Partner, .01%, (c) as to the
Original Limited Partner in its capacity as the Class A Limited Partner, 95% and
(d) as to the Original Limited Partner in its capacity as the Class B Limited
Partner, 4%.
"Primary Account Portion" of a Timber Interest means that portion of the
Agreed Value or Net Agreed Value, whichever the case may be, of such Timber
Interest arrived at by multiplying (A) the Primary Account Factor times (B) the
Agreed Value or Net Agreed Value, whichever the case may be, of such Timber
Interest.
"Prudential" means The Prudential Insurance Company of America, a mutual
insurance company organized under the laws of the State of New Jersey, on behalf
of its separate account, PruTimber Fund Three.
"Recapture Income" means any gain recognized by the Partnership (but
computed without regard to any adjustment required by Section 734 or 743 of the
Code) upon the disposition of any property or asset of the Partnership that is
not a capital gain due to the recapture of certain deductions previously taken
with respect to such property or asset.
"Recreational Income" means gross revenues received by the Partnership as
access fees, lease payments and other compensation for hunting and fishing
rights, less any expenses incurred by the Partnership that are properly
allocable to those revenues.
"Residual Gain" or "Residual Loss" means any net gain or net loss, as the
case may be, of the Partnership recognized for Federal income tax purposes
resulting from a sale, exchange or other
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disposition of a Contributed Property or an Adjusted property, to the extent
such net gain or net loss is not allocated pursuant to Section 5.2(b)(i)(1) or
5.2(b)(ii)(1) to eliminate Book-Tax Disparities.
"Restatement Date" means the effective date of this Agreement.
"Secondary Account" means a separate Accounting Unit in which there shall
be reflected the Capital Contribution of the Original Secondary Account Property
and all other Capital Contributions attributed to such Accounting Unit, the
results of the ownership, operation, maintenance and sale or other disposition
of the Timber Interests or other assets or properties of the Partnership
following expiration of the Initial Term, and such results during the Initial
Term as provided in Article IV hereof, and all charges, credits and
distributions in respect of such Accounting Unit as provided in this Agreement.
"Secondary Account Cash" means, with respect to any contribution of cash to
the Partnership by the Original Limited Partner, that portion of such cash
contributed to the Original Limited Partner by the partners thereof pursuant to
Sections 3.1, 3.2 or 3.3 of the IPT Partnership Agreement and attributed to the
Original Limited Partner's Secondary Account (as defined in the IPT Partnership
Agreement) under the provisions of the IPT Partnership Agreement.
"Secondary Account Factor" means (a) with respect to timber located on a
particular tract of Timberland or a particular aggregation of Standing Timber
contributed to, purchased by or sold by the Partnership, that percentage of the
total Agreed Value assigned, purchase price paid or sales price received,
whichever the case may be, of such timber arrived at by subtracting the Primary
Account Factor with respect to such timber from 100%, and (b) with respect to
the land attributable to a tract of Timberland contributed to, purchased by or
sold by the Partnership, 100% of the total Agreed Value assigned, purchase price
paid or sales price received, whichever the case may be, with respect to such
land.
"Secondary Account Percentage Interest" means (a) as to the Managing
General Partner, .99%, (b) as to the Special General Partner, .01%, (c) as to
the Original Limited Partner in its capacity as the Class A Limited Partner, 4%
and (d) as to the Original Limited Partner in its capacity as the Class B
Limited Partner, 95%.
"Secondary Account Portion" of a Timber Interest means that portion of the
Agreed Value or Net Agreed Value, whichever the case may be, of such Timber
Interest arrived at by multiplying (a) the Secondary Account Factor times (b)
the Agreed Value or Net Agreed Value, whichever the case may be, of such Timber
Interest.
"Section 631(a) Cut" means a cutting or harvesting of timber that qualifies
for capital gains treatment under Section 631(a) of the Code (or any successor
thereto).
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"Section 631(b) Sale" means a sale or other disposition of timber that
qualifies for capital gains treatment under Section 631(b) of the Code (or any
successor thereto).
"Sell or exchange" means to dispose of for value, but shall not include (a)
the contribution of all or substantially all of the assets of the Partnership to
a limited partnership or other entity organized under the laws of a State of the
United States, provided that immediately after such contribution such limited
partnership or other entity is controlled by the Partnership, the Original
Limited Partner or the Managing General Partner, and further provided that the
provisions of the limited partnership agreement or other governing documents of
such limited partnership or other entity, as the case may be, to which all or
substantially all the assets of the Partnership are contributed are in all
material respects as favorable to the Limited Partners as are the provisions of
this agreement, or (b) any distribution to Partners of the Partnership of any
securities or interests received by the Partnership in return for such
contribution.
"South Central Region" means all of the lands owned by IPTO in Alabama,
Mississippi and the Louisiana parishes of Concordia, East Carroll, East
Feliciana, East Baton Rouge, Livingston, Madison, St. Helena, St. Tammany,
Tangipahoa, Teusas, Washington and West Feliciana.
"Special General Partner" means IP or its successors.
"Specified General Revenue" means, with respect to any series of Class C
Units, revenues of the Partnership from specified sources.
"Specified General Revenue Percentage Interest" means (a) for each Special
Limited Partner with respect to each distinct source of Specified General
Revenue, the percentage equal to the sum of the product, with respect to each
series of Class C Units held by such Special Limited Partner(s) that have an
interest in such Specified General Revenue, of (i) the Class C General Revenue
Percentage Interest with respect to each such series of Class C Units and (ii) a
fraction, the numerator of which is the number of Class C Units of such series
that are held by such Special Limited Partner and the denominator of which is
the total outstanding Class C Units of such series, and (b) for the Original
Partners as a group with respect to any Specified General Revenue, 100% minus
the sum of the Class C General Revenue Percentage Interests of each series of
Class C Units that has an interest in such Specified General Revenue.
"Special Limited Partner" means any Limited Partner that has been issued
Class C Units in connection with its admission to the Partnership as a Limited
Partner.
"Special Limited Partner Interest" means the Partnership Interest owned by
any Special Limited Partner.
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"Standing Timber" means timber that has not been cut, harvested or
otherwise severed from the land, the Partnership's ownership interest in which
is pursuant to a Timber Deed or a Timber Cutting Contract.
"Substantially all of the assets of the partnership" means assets of the
Partnership with a fair market value exceeding 50 percent of the fair market
value of all the assets of the Partnership, as determined in good faith by the
Managing General Partner.
"Texas Act" means the Texas Revised Limited Partnership Act, Article
6132a-1 of the Revised Civil Statutes of the State of Texas, as it may be
amended from time to time, and any successor to such Act.
"Timber Cutting Contracts" means any contract pursuant to which the
Partnership is granted the right to cut timber on another Person's Timberlands
subject to payment of a stipulated price per unit of timber as the timber is
cut.
"Timber Deed" means an instrument pursuant to which the Partnership is
granted fee ownership of Standing Timber.
"Timber Interests" means direct or indirect interests in timber properties
(including roads or any other related properties) held through Timber Deeds,
Timber Cutting Contracts or fee interests in Timberland.
"Timberland" means a fee interest in land suitable for the development,
cultivation and growth of commercial timber stands.
"Transferred Gain" means that part of any gain (which may include such gain
in its entirety) ultimately recognized upon the disposition of property that was
originally acquired upon an involuntary conversion qualifying under Section 1033
of the Code, or a like-kind exchange qualifying under Section 1031 of the Code,
which part, but for Section 5.2(e), would be attributed to an Accounting Unit
under the provisions of Sections 5.2(a) or 5.2(b) other than the Accounting Unit
to which such part would have been attributed had it been recognized upon such
involuntary conversion or like-kind exchange.
"Undistributed Cash Amount" means, with respect to each Special Limited
Partner as of any time the amount by which (a) the sum of (i) the aggregate
amount of cash distributable to such Special Limited Partner pursuant to Section
4.10(b)(i) for all prior calendar quarters and (ii) such Special Limited
Partner's Unpaid Distribution Shortfall Preferred Return exceeds (b) the
aggregate amount of cash that has actually been distributed by the Partnership
to such Partner up to that point in time.
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"Unit" means the Partnership Interest of the Original Limited Partner, in
its capacity as either the Class A Limited Partner or the Class B Limited
Partner.
"Unpaid Distribution Shortfall Preferred Return" means, with respect to any
Special Limited Partner at the time of any determination, the Aggregate
Distribution Shortfall Preferred Return of such Special Limited Partner through
the calendar quarter ending immediately prior to the date of such determination,
minus the aggregate amount of any distributions made to the Limited Partner
pursuant to Section 4.10(b)(i)(C) commencing on the Restatement Date and ending
immediately prior to the date of such determination.
"Unrealized Gain" attributable to a Partnership property means, as of any
date of determination, the excess, if any, of the fair market value of such
property as of such date of determination over the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to Section 3.5(d) as of such date).
"Unrealized Loss" attributable to a Partnership property means, as of any
date of determination, the excess, if any, of the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to Section 3.5(d) as of such date) over the fair market value of such
property as of such date of determination.
"WCFR" means West Coast Forest Resources Limited Partnership, a Texas
limited partnership which, prior to the Commencement Date, conducted business
under the name IP Timberland Operating Company.
"WCFR Partnership Agreement" means the agreement of limited partnership of
WCFR.
"WCFR Primary Account Property" means any property contributed to the
Partnership by WCFR pursuant to the Contribution Agreement which property,
immediately prior to its contribution, was treated as Primary Account Property
under the WCFR Partnership Agreement.
"WCFR Secondary Account Property" means any property contributed to the
Partnership by WCFR pursuant to the Contribution Agreement which property,
immediately prior to its contribution, was treated as Secondary Account Property
under the WCFR Partnership Agreement.
18.2 Addresses and Notices.
The address of each Partner for all purposes shall be the address set forth
on the signature page of this Agreement or such other address of which each
other Partner has received written notice. Any notice, demand, request or report
required or permitted to be given or made to a Partner under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent to the Partner at such address by first class mail or by other
means of written communication.
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18.3 Titles and Captions.
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
18.4 Pronouns and Plurals.
Whenever the context may require, any pronoun used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns, pronouns and verbs shall include the plural and vice versa.
18.5 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purpose of this Agreement.
18.6 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
18.7 Integration.
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
18.8 Creditors.
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditors of the Partnership.
18.9 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
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18.10 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties, notwithstanding that all
the parties are not signatories to the original or the same counterpart. Each
party shall become bound by the Agreement immediately upon affixing its
signature hereto, independently of the signature of any other party.
18.11 Applicable Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, without regard to the principles
of conflicts of law.
18.12 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
18.13 Opinions Regarding Taxation as a Partnership.
Notwithstanding any other provision of this Agreement, the requirement, as
a condition to any action proposed to be taken under this Agreement, that the
Partnership be furnished an Opinion of Counsel or an Opinion of Independent
Counsel to the effect that the proposed transaction would not result in the
Partnership being treated as an association taxable as a corporation for Federal
income purposes, shall not be applicable if the Partnership is at such time
treated in all material respects as a corporation for Federal income tax
purposes.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the Managing
General Partner, the Special General Partner and the Limited Partners on this
28th day of June, 1996.
MANAGING GENERAL PARTNER:
IP FOREST RESOURCES COMPANY
By: ______________________________________________
SPECIAL GENERAL PARTNER:
INTERNATIONAL PAPER COMPANY
By: ______________________________________________
LIMITED PARTNERS:
IP TIMBERLANDS, LTD (the Original
Limited Partner)
By: IP Forest Resources Company, its
Managing General Partner
By: ______________________________________________
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, on
behalf of its separate account, PruTimber Fund
Three (Prudential)
By: ______________________________________________
[Title]
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<PAGE>
ANNEX I
CERTIFICATE
for
CLASS A LIMITED PARTNER'S UNIT
in
IP TIMBERLANDS OPERATING COMPANY, LTD.
CLASS A UNIT
IP FOREST RESOURCES COMPANY, as the Managing General Partner of IP
Timberlands Operating Company, Ltd., a Texas limited partnership (the
"Partnership"), hereby certifies that IP Timberlands, Ltd., a Texas limited
partnership, is a Class A Limited Partner of the Partnership, as set forth in
the Agreement of Limited Partnership of the Partnership and in the Amended and
Restated Certificate of Limited Partnership filed for record in the Office of
the Secretary of State of the State of Texas (copies of which are on file at the
Partnership's principal office in [New York, New York]) and is the owner of one
Class A Unit of limited partnership interest in the Partnership.
This Certificate is not negotiable or transferable except as specified in
Article X of the Agreement of Limited Partnership and except by operation of
law.
IP FOREST RESOURCES COMPANY
Managing General Partner of
IP Timberlands Operating Company, Ltd.
DATED: By:
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<PAGE>
ANNEX II
CERTIFICATE
for
CLASS B LIMITED PARTNER'S UNIT
in
IP TIMBERLANDS OPERATING COMPANY, LTD.
CLASS B UNIT
IP FOREST RESOURCES COMPANY, as the Managing General Partner of IP
Timberlands Operating Company, Ltd., a Texas limited partnership (the
"Partnership"), hereby certifies that IP Timberlands, Ltd., a Texas limited
partnership, is a Class B Limited Partner of the Partnership, as set forth in
the Agreement of Limited Partnership of the Partnership and in the Amended and
Restated Certificate of Limited Partnership filed for record in the Office of
the Secretary of State of the State of Texas (copies of which are on file at the
Partnership's principal office in [New York, New York]) and is the owner of one
Class B Unit of limited partnership interest in the Partnership.
This Certificate is not negotiable or transferable except as specified in
Article X of the Agreement of Limited Partnership and except by operation of
law.
IP FOREST RESOURCES COMPANY
Managing General Partner of
IP Timberlands Operating Company, Ltd.
DATED: By:
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<PAGE>
ANNEX III
CERTIFICATE
for
CLASS C LIMITED PARTNER'S UNIT SERIES (I)
in
IP TIMBERLANDS OPERATING COMPANY, LTD.
CLASS C UNIT
IP FOREST RESOURCES COMPANY, as the Managing General Partner of IP
Timberlands Operating Company, Ltd., a Texas limited partnership (the
"Partnership"), hereby certifies that The Prudential Insurance Company of
America, a mutual insurance company organized under the laws of the State of New
Jersey, is a Class C Limited Partner of the Partnership, as set forth in the
Agreement of Limited Partnership of the Partnership and in the Second Amended
and Restated Certificate of Limited Partnership filed for record in the Office
of the Secretary of State of the State of Texas (copies of which are on file at
the Partnership's principal office in Purchase, New York) and is the owner of
one Class C Unit-Series (I) limited partnership interest in the Partnership.
This Certificate is not negotiable or transferable except as specified in
Article X of the Second Amended and Restated Agreement of Limited Partnership
and except by operation of law.
IP FOREST RESOURCES COMPANY
Managing General Partner of
IP Timberlands Operating Company, Ltd.
DATED: June 28, 1996 By:
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Second Amended and Restated
Agreement of Limited Partnership
of
West Coast Forest Resources Limited Partnership
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF WEST
COAST FOREST RESOURCES LIMITED PARTNERSHIP (this "Agreement"), dated effective
March 29, 1996 (the "Effective Date"), is by and among R-H TIMBER CO., LLC, an
Oregon limited liability company ("R-HCo") (acting by and through its two
members, Roseburg Resources Co., an Oregon corporation, and Mid-Valley
Resources, Inc., an Oregon corporation), as Managing General Partner, IP FOREST
RESOURCES COMPANY ("IPFR"), a Delaware corporation, as Special General Partner,
and IP TIMBERLANDS, LTD. ("IPT"), a Texas limited partnership, as Limited
Partner. Capitalized terms used in this Agreement have the meanings assigned to
such terms either in Article 2 of this Agreement or in Article I of the
Contribution Agreement.
Recitals
A. WHEREAS, IP Timberland Operating Company, Ltd. ("IPTO"), is a Texas
limited partnership formed in 1985 pursuant to the Texas Uniform Limited
Partnership Act, of which International Paper Company ("IP"), a New York
corporation, is the special general partner, IPFR is the managing general
partner, and IPT is the limited partner; and
B. WHEREAS, prior to the execution of this Agreement, the Partnership (1)
contributed all of its assets including the Excluded Timber Contracts but
excluding the Western Region Assets and the Horse Barn to a newly formed limited
partnership in exchange for a general partner interest and a limited partner
interest therein and (2) then distributed such limited partner interest to IPT
and such general partner interest to IPFR; and
C. WHEREAS, prior to the execution of this Agreement, IP assigned its
special general partner interest in IPTO to IPFR; and
D. WHEREAS, prior to the execution of this Agreement, R-HCo paid IPTO
$50,000,000 as an advance against R-HCo's obligation to make certain capital
contributions to IPTO pursuant to the Contribution Agreement; and
E. WHEREAS, pursuant to the Contribution Agreement, R-HCo agreed to make
certain capital contributions to IPTO and, by executing this Agreement, R-HCo,
IPFR, and IPT agreed (1) to
Second Amended and Restated Agreement of Limited Partnership/Page 1
<PAGE>
continue IPTO as the West Coast Forest Resources Limited Partnership, (2) to
admit R-HCo as Managing General Partner, (3) to convert IPFR's managing general
partner interest into the Special General Partner Interest, and (4) to modify
the rights and obligations of the three partners, all as specified in this
Agreement; and
F. WHEREAS, concurrently with the execution of this Agreement and in
accordance with the Contribution Agreement, the Partnership (1) purchased (a)
the Nursery and Seed Orchards from IP in consideration for the issuance to IP of
the NSO Acquisition Note, and (b) the McIntosh Log Yard from IP in consideration
for the issuance to IP of the McIntosh Acquisition Note, and (2) sold the Horse
Barn Assets to IP in consideration for payment by IP to the Partnership of
$76,000; and
G. WHEREAS, prior to the execution of this Agreement, IP repaid to the
Partnership a portion of certain promissory notes, of which IP is the obligor,
and the cash amount of such repayment equaled the sum of the Note Repayment
Requirement; and
H. WHEREAS, concurrently with the execution of this Agreement, the
Partnership will repay the Bank Loan Credit Obligations out of the cash proceeds
received by the Partnership in respect of the New Loan, the Capital Contribution
by the Managing General Partner, the Capital Contribution by the Special General
Partner, the Promissory Note Repayment Proceeds, and other cash on hand.
Agreements
NOW, THEREFORE, for the reasons recited above and in consideration of the
benefits to be received by them under this Agreement, the Partners agree as
follows:
Article 1
The Partnership
1.1 Formation. The Partners hereby continue IPTO as a Texas limited
partnership pursuant to the Act and on the terms and conditions set forth in
this Agreement.
1.2 Admission and Conversion of Partners. Simultaneously with the
continuation of the Partnership pursuant to this Agreement, (a) R-HCo shall
contribute to the Partnership the cash amount stipulated in Section 3.1, and
R-HCo shall be admitted to the Partnership as its Managing General Partner; and
(b) IPFR shall contribute to the Partnership the cash amount stipulated in
Section 3.1, and IPFR's general partner interests shall be converted to the
Special General Partner Interest. After giving effect to these transactions:
Second Amended and Restated Agreement of Limited Partnership/Page 2
<PAGE>
(a) The name and address of the Managing General Partner is:
R-H Timber Co., LLC
c/o Arthur Andersen LLP
111 S.W. Columbia, Suite 1400
Portland, Oregon 97201
(b) The name and address of the Special General Partner is:
IP Forest Resources Company
Two Manhattanville Road
Purchase, New York 10477
Attention: James W. Guedry
(c) The name and address of the Limited Partner is:
IP Timberlands, Ltd.
Two Manhattanville Road
Purchase, New York 10577
Attention: James W. Guedry
1.3 Name and Address. As of the Effective Date, the name of the Partnership
shall be changed from IPTO to West Coast Forest Resources Limited Partnership.
All business of the Partnership shall be conducted in the name of the
Partnership or, with the consent of the other Partners, under such assumed names
as the Managing General Partner deems necessary or appropriate to comply with
the requirements of any jurisdiction in which the Partnership may be required to
qualify. The address of the Partnership is:
West Coast Forest Resources Limited Partnership
c/o Arthur Andersen LLP
111 S.W. Columbia, Suite 1400
Portland, Oregon 97201
1.4 Purposes. The purposes of the Partnership are (a) to hold, manage,
protect, conserve, and Harvest the Western Region Assets and other Permitted
Assets in accordance with this Agreement; (b) to acquire other Permitted Assets;
(c) to make such other investments and engage in such other activities as are
permitted by this Agreement or as the Partners may otherwise agree; and (d) to
engage in related activities and incidental activities.
1.5 Powers. The Partnership shall have the right and power to do all acts
necessary, appropriate, proper, advisable, incidental, or convenient to, or in
furtherance of, the purposes of the
Second Amended and Restated Agreement of Limited Partnership/Page 3
<PAGE>
Partnership mentioned in Section 1.4, including the rights and powers that may
be exercised by the Managing General Partner pursuant to Article 6.
1.6 Principal Place of Business. The principal place of business of the
Partnership shall be the address mentioned in Section 1.3. The Managing General
Partner may change the principal place of business to another place within the
continental United States on 10 Business Days' notice to the other Partners.
1.7 Term. The term of the Partnership shall continue, subject to the filing
of the amended certificate of limited partnership (the "Amended Certificate")
described in the Texas Revised Limited Partnership Act (the "Act") in the office
of the Secretary of State of Texas in accordance with the Act, until the
Partnership is dissolved, wound up, and terminated pursuant to Article 11.
1.8 Filings in Texas. The Managing General Partner shall cause the Amended
Certificate to be filed in the office of the Secretary of State of Texas and
take all other actions reasonably necessary to perfect and maintain the status
of the Partnership, as continued in accordance with this Agreement, as a limited
partnership under the laws of Texas. When required by the Act, the Managing
General Partner shall cause further amendments to the Amended Certificate to be
filed in the office of the Secretary of State of Texas. These further amendments
may be executed on behalf of the Partnership by the Managing General Partner.
1.9 Other Filings. The Managing General Partner shall execute and cause to
be filed original and amended certificates of limited partnership, and shall
take all other actions reasonably necessary to perfect, continue, and maintain
the status of the Partnership as a limited partnership or similar type entity
under the laws of all other jurisdictions in which the Partnership engages in
business.
1.10 Registered Agent. The registered agent for service of process on the
Partnership in Texas shall be Larry J. Waks, Sutherland, Asbill & Brennan, 111
Congress Avenue, 23rd Floor, Austin, Texas 78701-4079, or any successor
registered agent appointed by the Managing General Partner in accordance with
the Act.
1.11 Cancellation of Certificate. On dissolution, winding up, and
termination of the Partnership, the Managing General Partner or the other Person
or Persons appointed as Liquidator shall promptly execute a certificate of
cancellation and cause it to be filed (a) with the Secretary of State of Texas
in accordance with the Act and (b) with the appropriate officers of other
jurisdictions where the Managing General Partner or Liquidator deems such filing
to be necessary or advisable.
1.12 Title to Partnership Assets. All Partnership Assets owned by the
Partnership on the Effective Date and all Partnership Assets contributed to the
Partnership pursuant to the Contribution
Second Amended and Restated Agreement of Limited Partnership/Page 4
<PAGE>
Agreement shall be owned by the Partnership as an entity, and no Partner shall
have any ownership interest in any Partnership Asset in that Partner's own name
or right. Each Partner's interest in the Partnership shall be personal property
for all purposes.
1.13 Payments of Individual Obligations. The Partnership's credit and
assets shall be used solely for the benefit of the Partnership. No Partnership
Asset may be Transferred or encumbered for, or in payment of, an individual
obligation of a Partner.
1.14 Independent Activities; Transactions with Affiliates.
(a) Time Devoted to Partnership. The Managing General Partner and its
Affiliates shall be required to devote only so much time to the affairs of the
Partnership as may be necessary to manage and operate the Partnership. The
Managing General Partner and its Affiliates are free to serve any other Person
or enterprise in any capacity that they deem appropriate in their reasonable
discretion.
(b) Competitive Activities. To the extent permitted by Applicable Law,
each Partner and its Affiliates may engage in all activities they choose,
including activities that are competitive with the Partnership or any other
Partner, without offering interests in those activities to the Partnership or
any other Partner. Neither this Agreement nor any activity undertaken pursuant
to this Agreement shall prevent a Partner or its Affiliates from engaging in
such activities or require a Partner or its Affiliates to permit the Partnership
or any other Partner or its Affiliates to participate in such activities. As a
material part of the consideration for the execution of this Agreement by the
other Partners, each Partner hereby waives, relinquishes, and renounces all
rights to participate in the activities conducted by the other Partners outside
the Partnership.
1.15 Fiscal Year. The fiscal year of the Partnership (the "Fiscal Year")
shall continue to be the same as the taxable year of the Partnership for federal
income tax purposes. The taxable year of the Partnership for federal income tax
purposes shall continue to be the calendar year, or such portion thereof during
which the Partnership shall be in existence, unless otherwise required by the
Code or Treasury Regulations.
Article 2
Defined Terms
The capitalized terms used in this Agreement have the following meanings or
are defined in the following places:
Second Amended and Restated Agreement of Limited Partnership/Page 5
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2.1 "Act" means the Texas Revised Limited Partnership Act, Vernon's Ann.
Civ. St. art 6132a-1 et seq., as amended from time to time, and the
corresponding provisions of any succeeding law.
2.2 "Action" means an action, suit, arbitration, inquiry, proceeding, or
investigation by or before any court or agency or commission of Government or
any arbitrator or arbitral panel.
2.3 "Adjusted Capital Account Balance" means, with respect to any General
Partner, the balance in such Partner's Capital Account as of the end of the
relevant Allocation Year, and with respect to the Limited Partner, the balance
in such Partner's Capital Account as of the end of the relevant Allocation Year,
after giving effect, in the case of the Limited Partner, to the following
adjustments:
(a) increase such Capital Account balance by any amounts which such
Partner is obligated to restore pursuant to this Agreement or is deemed to
be obligated to restore pursuant to any relevant provision of the
Allocation Regulations; and
(b) decrease such Capital Account balance for all the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Balance is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
2.4 "Adjusted Property" means any Partnership Asset, the Book Value of
which has been adjusted in accordance with the Allocation Regulations pursuant
to Section 3.7(d).
2.5 "Adjusted Value" means, with respect to any Adjusted Property, the fair
market value of such Partnership Asset at the time such Partnership Asset became
an Adjusted Property, as determined in accordance with Section 3.1 or Section
3.2, as the case may be.
2.6 "Advance Contribution Interest" has the meaning assigned to such term
in the Contribution Agreement.
2.7 "Advance Contribution Payment" has the meaning assigned to such term in
the Contribution Agreement.
2.8 "Affiliate" means, for any Person:
(a) another Person directly or indirectly controlling, controlled by,
or under common control with that Person;
Second Amended and Restated Agreement of Limited Partnership/Page 6
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(b) an officer, director, general partner, or trustee of that Person;
or
(c) an officer, director, general partner, or trustee of a Person
described in clauses (a) or (b).
As used in this definition, "control" refers to the power, directly or
indirectly through one or more intermediaries, to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise.
2.9 "Agreed Value" of any Contributed Property means the fair market value
of such Contributed Property at the time of its contribution to the Partnership,
as agreed to by all Partners.
2.10 "Agreement" means this Second Amended and Restated Agreement of
Limited Partnership, as hereafter amended or modified from time to time in
accordance with its terms.
2.11 "Allocation Date" means the last day of any Allocation Year.
2.12 "Allocation Regulations" means Treasury Regulation Sections 1.704-1(b)
and 1.704-2 as in effect on the Effective Date.
2.13 "Allocation Year" means each of (a) the period commencing on the
Effective Date and ending on December 31, 1996 (sometimes referred to as the
"first" Allocation Year); (b) any subsequent 12-month period commencing on
January 1 and ending on December 31; or (c) any portion of a period described in
clauses (a) or (b) above for which the Partnership is required to allocate Net
Income, Net Loss, or other items of Partnership income, gain, loss, or deduction
pursuant to Article 4.
2.14 "Amended Certificate" has the meaning assigned to such term in Section
1.7.
2.15 "Applicable Law" means a law, common-law principle, statute, code,
ordinance, decree, requirement, order, judgment, decree, rule, regulation,
standard, determination, policy, license, or permit of a unit of Government that
has jurisdiction over the Person, property, or activity in question and that now
or hereafter applies to or affects that Person, property, or activity, as same
may be amended from time to time. For the Partnership and each Partner,
Applicable Law includes the Act, the Code, and the Treasury Regulations.
2.16 "Applicable Percentage" means, at the time of any determination, the
percentage determined by multiplying 5% by the number equal to the sum of (i)
the number of Fiscal Years that have commenced after the Effective Date and
before the date of the determination plus (ii) one.
Second Amended and Restated Agreement of Limited Partnership/Page 7
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2.17 "Approved Cash Reserves" means only those Cash Reserves established by
the Managing General Partner (a) in order to comply with the New Credit
Agreement as in effect on the date hereof or (b) with the approval of the
Special General Partner.
2.18 "Available Cash" means, as of any date of determination, (a) all cash
and cash equivalents of the Partnership from any source on hand on such date,
less (b) all Approved Cash Reserves of the Partnership on such date.
2.19 "Available Operating Cash" means, as of any date of determination, (a)
all cash and cash equivalents of the Partnership from Harvests conducted in the
ordinary course of business on hand on such date (other than Excess Proceeds)
and the cash and cash equivalents received by the Partnership from the
investment of any of the foregoing amounts into a Permitted Investment on hand
on such date, less (b) all Approved Cash Reserves of the Partnership, on such
date, determined on a cumulative basis from the Effective Date through the end
of the most recently completed calendar quarter. For purposes of determining
whether Available Cash distributed by the Partnership on any Distribution Date
constitutes Available Operating Cash or Excess Proceeds, all Available Cash
distributed by the Partnership to its Partners on any date from any source shall
be treated as constituting Available Operating Cash until the sum of all amounts
of Available Cash theretofore distributed by the Partnership pursuant to Section
5.1 equals the cumulative amount of Available Operating Cash generated by the
Partnership during the period commencing on the Effective Date and ending as of
the end of the calendar quarter immediately preceding the Distribution Date. All
remaining amounts of Available Cash distributed by the Partnership on such date
shall be deemed to be Excess Proceeds.
2.20 "Bankruptcy" means a Voluntary Bankruptcy or an Involuntary
Bankruptcy.
2.21 "Board feet" (not capitalized) means "board feet (Scribner scale)."
2.22 "Book Value" means, as of the time of determination, (a) with respect
to a Contributed Property, the Agreed Value of such Contributed Property,
reduced (but not below zero) by all depreciation, amortization, and cost
recovery charged to the Partners' Capital Accounts in respect of such
Contributed Property; (b) with respect to an Adjusted Property, the Adjusted
Value of such Adjusted Property, reduced (but not below zero) by all
depreciation, amortization, and cost recovery charged to the Partners' Capital
Accounts in respect of such Adjusted Property; and (c) with respect to any other
Partnership Asset, the adjusted basis of such Partnership Asset for federal
income tax purposes. The Book Value of any Partnership Asset shall be adjusted
from time to time in accordance with Section 3.7(d) and to reflect changes,
additions, or other adjustments to the Book Value for dispositions and
acquisitions of Partnership Assets.
Second Amended and Restated Agreement of Limited Partnership/Page 8
<PAGE>
2.23 "Book-Tax Disparity" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Book Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date.
2.24 "Business Day" means a day when banks are not required or authorized
to close in Portland, Oregon, New York, New York or in Dallas, Texas.
2.25 "Capital Account," when used in respect of any Partner, means the
Capital Account maintained for such Partner in accordance with Section 3.7, as
said Capital Account may be increased or decreased from time to time pursuant to
Section 3.7.
2.26 "Capital Contribution," when used with respect to the Interest of any
Partner, means the amount of cash and the Net Agreed Value of any other property
contributed or deemed to have been contributed to the capital of the Partnership
in respect of such Interest by or on behalf of such Partner.
2.27 "Cash Reserves" means those cash reserves of the Partnership
established by the Managing General Partner, in its reasonable discretion, to
provide for the proper conduct of the business of the Partnership.
2.28 "Code" means the Internal Revenue Code of 1986, as amended, or any
corresponding provisions of succeeding law.
2.29 "Common Capital" means the amount determined by multiplying the
aggregate Capital Account balances of the General Partners immediately after the
Partnership's receipt of the Capital Contributions required by Section 3.1(b)
(as adjusted in accordance with Sections 3.1(a) and 3.7(d) in connection with
such Capital Contributions) by a fraction, the numerator of which is 0.01 and
the denominator of which is 0.99; provided, however, that immediately after any
Redetermination Event, the Limited Partner's Common Capital shall be adjusted to
equal the amount determined by multiplying the aggregate positive Capital
Account balances of such other Partners immediately after such Redetermination
Event (as adjusted in accordance with Section 3.7(d) in connection with such
Redetermination Event and as adjusted to reflect any Capital Contributions made
by, or distributions made to, such other Partners in connection with such
Redetermination Event) by a fraction, the numerator of which is the Percentage
Interest of the Limited Partner immediately before such Redetermination Event
and the denominator of which is the aggregate Percentage Interests of the
General Partners immediately before such Redetermination Event.
2.30 "Contributed Property" means each Partnership Asset, in such form as
may be permitted by the Act, contributed to the Partnership (or deemed to have
been contributed to the
Second Amended and Restated Agreement of Limited Partnership/Page 9
<PAGE>
Partnership on the termination and reconstitution of the Partnership pursuant to
Section 708 of the Code or otherwise) with an Agreed Value that differs from its
adjusted tax basis. Once the Book Value of a Contributed Property is adjusted
pursuant to Section 3.7(d), such Contributed Property shall no longer constitute
a Contributed Property, but shall be deemed to be an Adjusted Property.
2.31 "Contribution Agreement" means that certain Contribution Agreement
dated as of March 5, 1996, as amended by the First Amendment to Contribution
Agreement, dated as of the date hereof, among R-HCo, IPFR, the Partnership, IPT,
IP, and the members of R-HCo.
2.32 "Cumulative Limited Partner Priority Return" means, at the time of any
determination, an amount equal to the aggregate amount of the Limited Partner
Priority Return for each Fiscal Quarter ending after the Effective Date and on
or before the date of such determination.
2.33 "Cure Certificate" has the meaning assigned to such term in Section
11.2(a).
2.34 "Debt" means:
(a) an indebtedness for borrowed money or the deferred purchase
price of property;
(b) an indebtedness evidenced by a note, bond, or other instrument;
(c) an obligation as lessee under a capital lease;
(d) an obligation secured by a mortgage, pledge, security interest,
encumbrance, lien, or charge of any kind on a Partnership Asset, whether or
not the Partnership has assumed or become liable for the obligation secured
thereby;
(e) an obligation under an interest rate swap agreement;
(f) a trade credit; and
(g) an obligation under a direct or indirect guarantee of (including
an obligation, contingent or otherwise, to assure a credit against loss in
respect of) an indebtedness or obligation of the kind referred to in clause
(a), (b), (c), (d), (e), or (f) above.
2.35 "Designated Rate" means a rate per annum equal to (a) 7% from and
including the Effective Date to but excluding the date that is 24 months after
the Effective Date; and (b) 15% thereafter.
2.36 "Distribution Date" means, (a) with respect to each calendar quarter
prior to the commencement of the liquidation of the Partnership, each January
15, April 15, July 15, and October 15, and, (b) with respect to the dissolution
and liquidation of the Partnership in accordance
Second Amended and Restated Agreement of Limited Partnership/Page 10
<PAGE>
with Article 11, the date of the final distribution of Partnership Assets in
liquidation in accordance with Section 11.3(e).
2.37 "Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
2.38 "Effective Date" has the meaning assigned to that term in the preamble
of this Agreement.
2.39 "Excess Proceeds" has the meaning assigned to such term in
Section 6.8.
2.40 "Fiscal Quarter" means (a) the period commencing on the Effective Date
and ending on June 30, 1996; (b) any subsequent three-month period commencing on
each of January 1, April 1, July 1, and October 1 and ending on the last date
immediately preceding the next Fiscal Quarter; and (c) the Liquidation Quarter.
2.41 "Fiscal Year" has the meaning assigned to such term in Section 1.15.
2.42 "Foreclosure Condition" has the meaning assigned to such term in
Section 6.9(g).
2.43 "Full-Cost Partner" means any Partner that does not have any share of
the Partnership's Book-Tax Disparities in its Contributed Properties or its
Adjusted Properties. A Partner's share of the Partnership's Book-Tax Disparities
in all of its Contributed Properties and Adjusted Properties, if any, will be
reflected by any difference between such Partners' Capital Account balance, as
maintained pursuant to Section 3.7, and the hypothetical balance of such
Partner's Capital Account, computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
2.44 "GAAP" means United States generally accepted accounting principles in
effect from time to time, applied consistently with the accounting principles
previously followed by the Partnership, except as otherwise provided in this
Agreement or agreed upon by the General Partners.
2.45 "Gains from Capital Transactions" means any item of income or gain
(other than an item specially allocated pursuant to Section 4.3 or 4.4)
realized, or deemed to have been realized, by the Partnership from any
transaction characterized for federal income tax purposes as a sale or exchange
of all or any portion of the Partnership Assets (including any increase in the
Book Value of any Partnership Asset pursuant to Section 3.7(d)), other than a
transaction the gain or loss from which is determined and characterized pursuant
to Section 631 of the Code.
2.46 "General Partner" means the holder of a General Partner Interest that
is admitted to the Partnership as a general partner in accordance with the
Agreement and is shown on the books
Second Amended and Restated Agreement of Limited Partnership/Page 11
<PAGE>
and records of the Partnership as the General Partner of the Partnership, which
on the Effective Date shall consist of the Managing General Partner and the
Special General Partner.
2.47 "General Partner Interest" means an Interest having the rights and
obligations of a General Partner, as provided in this Agreement, which Interests
shall on the Effective Date be held by the Managing General Partner and the
Special General Partner.
2.48 "Government" means an agency, board, bureau, commission, court,
department, government or instrumentality of (a) the United States of America;
(b) a state, commonwealth, territory, Indian tribe, or possession of the United
States of America; or (c) a county, parish, municipality, district, or other
governmental subdivision or entity of, or in, a state of the United States of
America.
2.49 "Guaranteed Debt" means the amount of any indebtedness of the
Partnership the payment of which is guaranteed by the Special General Partner.
2.50 "Harvest" means, as a verb, to cut merchantable timber and remove the
logs from the site, to sell merchantable timber on the stump (whether by timber
deed or cutting contract), or otherwise to reduce the inventory of merchantable
timber in the Partnership Assets, other than by a Land Sale. "Harvest" means, as
a noun, the cutting of merchantable timber and removal of the logs from the
site, the sale of merchantable timber on the stump (whether by timber deed or
cutting contract), or any other reduction of the inventory of merchantable
timber in the Partnership Assets, other than by means of a Land Sale. A Harvest
shall be deemed to have occurred on the earlier of (a) the date the subject
timber is physically cut and removed or delivered to the buyer or other
transferee and (b) the date when the Managing General Partner receives the
purchase price or other consideration for the Harvest.
2.51 "Harvest Year" means (i) the period that begins on, and includes, the
Effective Date and ends on, and includes, March 31, 1997, and (ii) each
succeeding one-year period, beginning on, and including, each April 1, and
ending on, and including, the immediately succeeding March 31.
2.52 "Indemnitee" means a General Partner, Withdrawing General Partner, any
Person who is or was an officer, director, partner, or trustee of a General
Partner or a Withdrawing General Partner, or any Person who is or was serving at
the request of a General Partner or a Withdrawing General Partner as a director,
officer, partner, or trustee of another Person.
2.53 "Independent Accountant" means Arthur Andersen LLP or another
internationally recognized accounting firm selected by the Managing General
Partner, subject to the approval of the Special General Partner (which approval
shall not be unreasonably withheld).
Second Amended and Restated Agreement of Limited Partnership/Page 12
<PAGE>
2.54 "Independent Appraiser" means Atterbury Consultants, Inc., or, if
Atterbury Consultants, Inc. is unable or unwilling to serve in that capacity or
either the Managing General Partner or the Special General Partner reasonably
objects to Atterbury Consultants, Inc.'s serving in that capacity on a
particular engagement, such other independent Person selected by the Special
General Partner (subject to the approval of such selection by the Managing
General Partner, which approval will not be unreasonably withheld) who is a
recognized expert in the valuation of forestlands and who is not an Affiliate of
a Partner.
2.55 "Interest" means the entire interest of a Partner in the Partnership
at the time of a determination, including the right of such Partner to receive,
enjoy, or participate in any and all benefits to which a Partner may be entitled
as provided in this Agreement, together with the obligations of such Partner to
comply with all the terms and provisions of this Agreement.
2.56 "Involuntary Bankruptcy" means, for any Person, without the consent or
acquiescence of that Person:
(a) the entering or approving of an order or petition seeking the
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or other similar relief of that Person under any present or
future bankruptcy, insolvency, or similar statute, law, or regulation;
(b) the filing of a petition seeking such relief against that Person,
if the petition is not dismissed within 60 days; or
(c) the entering of an order appointing a trustee, custodian,
receiver, or liquidator of that Person or of all or a substantial part of
the property of that Person, if the order is not dismissed within 60 days.
2.57 "IP" means International Paper Company, a New York corporation.
2.58 "IPFR" means IP Forest Resources Company, a Delaware corporation.
2.59 "IPT" means IP Timberlands, Ltd., a Texas limited partnership.
2.60 "IPTO" means IP Timberland Operating Company, Ltd., a Texas limited
partnership.
2.61 "Land Sale" means the sale, leasing, or other disposition of land that
is a Partnership Asset (including merchantable timber that is sold or otherwise
disposed of in connection with the land transaction).
2.62 "Lien" means, with respect to any Partnership Asset, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement
Second Amended and Restated Agreement of Limited Partnership/Page 13
<PAGE>
(other than any easement not materially impairing usefulness or marketability),
encumbrance, preference, priority, or other security agreement or preferential
arrangement of any kind or nature whatsoever on or with respect to such
Partnership Asset (including any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
2.63 "Limited Partner" means IPT in its capacity as the limited partner of
the Partnership.
2.64 "Limited Partner Interest" means the Interest of the Limited Partner,
having the rights and obligations provided in this Agreement.
2.65 "Limited Partner Priority Return" means, with respect to the Limited
Partner, an amount equal to the Designated Rate per annum, determined on the
basis of a 365-day year, of the average daily balance of the Limited Partner's
Unrecovered Preferred Capital from time to time during the period to which the
Limited Partner Priority Return relates, commencing on the Effective Date.
2.66 "Liquidating Event" has the meaning assigned to such term in Section
11.1(a).
2.67 "Liquidation Notice" has the meaning assigned to such term in Section
11.2(a).
2.68 "Liquidation Quarter" means the fiscal period in which the dissolution
and liquidation of the Partnership occurs, such period commencing on the day
following the last day of the immediately preceding Fiscal Quarter and ending on
the Distribution Date established for the final distribution of Partnership
Assets pursuant to Section 11.3.
2.69 "Liquidator" has the meaning assigned to such term in Section 11.3.
2.70 "Losses from Capital Transactions" means any items of loss or
deduction (other than an item specially allocated pursuant to Section 4.3 or
4.4) realized, or deemed to have been realized, by the Partnership from any
transaction characterized for federal income tax purposes as a sale or exchange
of all or any portion of the Partnership Assets (including any decrease in the
Book Value of any Partnership Asset pursuant to Section 3.7(d)), other than a
transaction, the gain or loss from which is determined and characterized
pursuant to Section 631 of the Code.
2.71 "Managing General Partner" means R-HCo, in its capacity as the
managing general partner of the Partnership.
2.72 "Managing General Partner Interest" means the Interest of the Managing
General Partner, having the rights and obligations provided in this Agreement.
Second Amended and Restated Agreement of Limited Partnership/Page 14
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2.73 "Measurement Date" means the date upon which any of the following
events occurs: (a) an Optional Liquidation Event; (b) the receipt by the
Partnership of a notice of a Partner's intent to withdraw from the Partnership
or call for the liquidation of the Partnership; or (c) any other event that
requires an adjustment to the Book Value of Partnership Assets in accordance
with Section 3.7(d); provided, however, that the date on which the Managing
General Partner and the Special General Partner make the Capital Contributions
required pursuant to Section 3.1(b) shall not be treated as a Measurement Date.
2.74 "Merchantable timber" (not capitalized) means, for conifers, timber
that, when cut, will produce at least one 16-foot log with at least a 5-inch top
diameter inside the bark, and, for hardwoods, timber that, when cut, will
produce at least one 16-foot log with at least a 6-inch top diameter inside the
bark.
2.75 "Minimum Gain Attributable to Partner Nonrecourse Debt" means that
amount determined in accordance with the principles of Treasury Regulation
Section 1.704-2(i)(3).
2.76 "Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such Contributed Property, net of any liabilities secured by
any such Contributed Party that the Partnership is considered to have assumed,
or taken subject to, pursuant to Section 752 of the Code, and, (b) in the case
of any Partnership Asset distributed to a Partner, the Adjusted Value of such
Partnership Asset (as adjusted immediately before such distribution pursuant to
Section 3.7(d)), net of any liabilities secured by such Partnership Asset that
the Partner is considered to have assumed, or taken subject to, pursuant to
Section 752 of the Code.
2.77 "Net Income" means, for each Allocation Year, the excess, if any, of
the Partnership's items of income and gain for such Allocation Year over the
Partnership's items of loss and deduction for such Allocation Year, determined
in accordance with Section 703(a) of the Code; provided, however, that the items
included in the calculation of Net Income (a) shall be determined in accordance
with Section 3.7(b), (b) shall not include any items specially allocated
pursuant to Section 4.3 or 4.4, and (c) shall not include any Gains from Capital
Transactions or Losses from Capital Transactions; provided, further, that except
as stated in clauses (b) and (c) above, any item of income, gain, loss, or
deduction otherwise required to be separately stated pursuant to Section
703(a)(1) of the Code shall be included in the calculation of Net Income. Except
as otherwise provided in the preceding sentence, the allocation of Net Income
pursuant to Section 4.1 is intended to be an allocation of Partnership net or
"bottom line" taxable income, as described in Treasury Regulation Section
1.704-1(b)(1)(vii).
2.78 "Net Losses" means, for each Allocation Year, the excess, if any, of
the Partnership's items of loss and deduction for such Allocation Year over the
Partnership's items of income and gain
Second Amended and Restated Agreement of Limited Partnership/Page 15
<PAGE>
for such Allocation Year, determined in accordance with Section 703(a) of the
Code; provided, however, that the items included in the calculation of Net
Losses (a) shall be determined in accordance with Section 3.7(b), (b) shall not
include any items specially allocated pursuant to Section 4.3 or 4.4, and (c)
shall not include any Gains from Capital Transactions or Losses from Capital
Transactions; provided, further, that except as stated in clauses (b) and (c)
above, any item of income, gain, loss, or deduction otherwise required to be
separately stated pursuant to Section 703(a)(1) of the Code shall be included in
the calculation of Net Losses. Except as otherwise provided in the preceding
sentence, the allocation of Net Losses pursuant to Section 4.2 is intended to be
an allocation of Partnership net or "bottom line" taxable loss, as described in
Treasury Regulation Section 1.704-1(b)(1)(vii).
2.79 "New Credit Agreement" means the Credit Agreement, dated as of March
29, 1996, among the Partnership, as Borrower, R-HCo, as Guarantor, the several
lenders from time to time party thereof and NationsBank, N.A., as Agent.
2.80 "Nonrecourse Built-In Gain" means, with respect to any Contributed
Property or Adjusted Property that is subject to a lien or negative pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Section 4.7 if such Properties were
disposed of in a taxable transaction in full satisfaction of such liabilities
and for no other consideration.
2.81 "Nonrecourse Deductions" means any and all items of loss, deduction,
or expenditure (including any expenditure described in Section 705(a)(2)(B) of
the Code) that, in accordance with the principles of Treasury Regulation Section
1.704-2(c), are attributable to a Nonrecourse Liability.
2.82 "Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(3).
2.83 "Optional Liquidation Event" has the meaning assigned to such term in
Section 11.2.
2.84 "Optional Liquidation Notice" has the meaning assigned to such term in
Section 11.2(a).
2.85 "Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
2.86 "Partner Nonrecourse Deductions" means any and all items of loss,
deduction, or expenditure (including any expenditure described in Section
705(a)(2)(B) of the Code) that, in
Second Amended and Restated Agreement of Limited Partnership/Page 16
<PAGE>
accordance with the principles of Treasury Regulation Section 1.704-2(i)(2), are
attributable to a Partner Nonrecourse Debt.
2.87 "Partners" means, collectively, the General Partners and the Limited
Partner, and shall also include each Person hereafter admitted to the
Partnership as a general partner or limited partner and, from and after a Person
ceases to be a Partner, shall exclude that Person.
2.88 "Partnership" means West Coast Forest Resources Limited Partnership
(formerly named IP Timberland Operating Company, Ltd.), a Texas limited
partnership, as continued pursuant to this Agreement and as said Partnership may
from time to time be hereafter constituted.
2.89 "Partnership Assets" means all right, title, and interest of the
Partnership in and to all or any cash, timber, forestlands, and other real and
personal property and assets, tangible or intangible, owned by, contributed to,
or acquired by the Partnership.
2.90 "Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
2.91 "Percentage Interest" means 98% with respect to the Managing General
Partner, 1% with respect to the Special General Partner, and 1% with respect to
the Limited Partner; provided, however, that immediately after any
Redetermination Event, the Percentage Interests of the Partners shall be
adjusted to reflect their relative Capital Account balances at that time (as
adjusted in accordance with Section 3.7(d) in connection with such
Redetermination Event); provided, further, that the Limited Partner's Capital
Account balance shall be taken into account for this purpose only to the extent
of the Limited Partner's Common Capital (as adjusted in connection with such
Redetermination Event).
2.92 "Permitted Assets" means:
(a) the Western Region Assets held by IPTO at the Effective Date;
(b) other timber and forestlands;
(c) vehicles, equipment, facilities, and other property used to
operate, Harvest, replant, and otherwise manage the timber and forestlands
owned by the Partnership;
(d) Permitted Investments;
(e) timber sales contracts, timber cutting rights, timber deeds, and
other instruments, agreements, and documents necessary or convenient to the
ownership of the Permitted Assets and the operation of the business of the
Partnership; and
Second Amended and Restated Agreement of Limited Partnership/Page 17
<PAGE>
(f) other incidental property necessary or convenient to the ownership
of the Permitted Assets and the operation of the business of the
Partnership.
2.93 "Permitted Investments" shall have the meaning assigned to such term
in the New Credit Agreement as in effect as of the Effective Date.
2.94 "Permitted Transfer" has the meaning assigned to such term in Section
10.2.
2.95 "Permitted Transferee" means any Person that acquires all or any part
of an Interest pursuant to a Permitted Transfer.
2.96 "Person" means a natural person, corporation, partnership, limited
partnership, trust, estate, joint stock company, association, limited liability
company, or other legal person or entity, other than a unit of Government.
2.97 "Preferred Capital" means, immediately after the Partnership's receipt
of the Capital Contributions required by Section 3.1(b), the amount by which the
Limited Partner's Capital Account balance at that time (as adjusted in
accordance with Section 3.7(d) in connection with such Capital Contributions),
exceeds the Common Capital of the Limited Partner at that time; provided,
however, that immediately after any Redetermination Event, the Limited Partner's
Preferred Capital shall be adjusted to equal the amount by which the Limited
Partner's Capital Account balance at that time (as adjusted in accordance with
Section 3.7(d) in connection with such Redetermination Event and as adjusted to
reflect any Capital Contributions made by, or distributions made to, the Limited
Partner in connection with such Redetermination Event) exceeds the Limited
Partner's Common Capital (as adjusted in connection with such Redetermination
Event).
2.98 "Preferred Capital Portion of the Limited Partner Interest" means, in
connection with any redemption pursuant to Section 10.10, that part of the
Limited Partner Interest with a value equal to the amount by which (a) the
Limited Partner's Capital Account balance at that time (as adjusted in
accordance with Section 3.7(d) immediately prior to such redemption) exceeds (b)
the amount determined by multiplying (i) the aggregate Capital Account balances
of all Partners other than the Limited Partner (as adjusted in accordance with
Section 3.7(d) immediately prior to such redemption and as adjusted to reflect
any Capital Contributions made by, or distributions made to, the General
Partners in connection with such redemption) by (ii) a fraction, the numerator
of which is the Percentage Interest of the Limited Partner immediately prior to
such redemption and the denominator of which is the aggregate Percentage
Interests of all other Partners immediately prior to such redemption.
2.99 "Priority Shortfall" has the meaning assigned to such term in Section
6.9(d).
Second Amended and Restated Agreement of Limited Partnership/Page 18
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2.100 "Priority Shortfall Condition" has the meaning assigned to such term
in Section 6.9(d).
2.101 "R-HCo" has the meaning assigned to such term in the preamble of this
Agreement.
2.102 "Redemption Notice" is defined in Section 10.10(b).
2.103 "Redetermination Event" means any event that triggers an adjustment
to the Book Value of Partnership Assets and the Capital Accounts of the Partners
pursuant to Section 3.7(d), including as a Redetermination Event any
distribution made to the Limited Partner pursuant to Section 10.10, but
excluding from treatment as a Redetermination Event any Capital Contribution
made by the Managing General Partner pursuant to Section 3.1(c) or by the
Special General Partner pursuant to Section 3.1(d).
2.104 "Regulatory Allocations" has the meaning assigned to such term in
Section 4.4.
2.105 "Rescission Notice" has the meaning assigned to such term in Section
11.2(b).
2.106 "Responsible Officers" has the meaning assigned to such term in
Section 6.4(b).
2.107 "Retirement Date" has the meaning assigned to such term in Section
10.11(e).
2.108 "Retirement Notice" has the meaning assigned to such term in Section
10.11(e).
2.109 "Retirement Partner" has the meaning assigned to such term in Section
10.11(e).
2.110 "Roseburg" means Roseburg Resources Co., an Oregon corporation.
2.111 "Roseburg Sale" has the meaning assigned to such term in Section
6.8(a)(iii).
2.112 "Section 1033 Sale Windows" means (a) the 60-day period prior to and
including March 31, 1997, or (b) the 60-day period prior to and including March
31, 1998.
2.113 "Special General Partner" means IPFR, in its capacity as the Special
General Partner of the Partnership, and any successor thereto.
2.114 "Special General Partner Interest" means the Interest of the Special
General Partner, having the rights and obligations as provided in this
Agreement.
2.115 "Subsidiary" means a corporation, partnership, or other Person of
which any shares of stock or other ownership interests having ordinary voting
power are at the time owned by the Partnership.
2.116 "Substituted Partner" means a Person admitted to the Partnership as a
Partner pursuant to Section 10.6.
Second Amended and Restated Agreement of Limited Partnership/Page 19
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2.117 "Taxes" means any and all taxes (including net income, franchise,
value added, ad valorem, sales, use, excise, severance, and property (personal
and real, tangible and intangible) taxes) and levies, imposts, duties, charges,
assessments, or withholding of any similar nature whatsoever, general or
special, ordinary or extraordinary, together with any and all penalties, fines,
additions to tax, and interest thereon.
2.118 "Tentative Value of Western Region Assets" has the meaning assigned
to that term in the Contribution Agreement.
2.119 "Transfer" means, (a) as a noun, any voluntary or involuntary,
transfer, sale, pledge, hypothecation, or other encumbrance or disposition and,
(b) as a verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate, or otherwise encumber or dispose of.
2.120 "Treasury Regulations" mean the regulations promulgated under the
Code, as such regulations are in effect on the Effective Date and any successor
provisions thereto.
2.121 "Unpaid Priority Return" means, at the time of any determination, the
Cumulative Limited Partner Priority Return through the Fiscal Quarter ending
immediately prior to the date of such determination (or, in the case of a
redemption effected in accordance with Section 10.10, through and including the
day immediately preceding the Redemption Date), minus (a) the aggregate amount
of any distributions made to the Limited Partner pursuant to Section 5.1(a)
during the period commencing on the Effective Date and ending immediately prior
to the date of such determination and (b) the aggregate amount, if any, by which
any distributions made to the Limited Partner pursuant to Section 10.10 exceed
the excess of (i) the Limited Partner's Preferred Capital at the time of each
such distribution over (ii) the amount, if any, at such time, by which (A) the
cumulative Net Income and Gains from Capital Transactions allocated pursuant to
Section 4.1(e) to the Limited Partner since the Effective Date exceeds (B) the
cumulative amount of distributions made to the Limited Partner pursuant to
Section 5.1(a) since the Effective Date.
2.122 "Unrealized Gain" attributable to any Partnership Asset means, as of
any date of determination, the excess, if any, of (a) the fair market value of
such Partnership Asset (as determined in accordance with Section 3.1 or Section
3.2, as the case may be) as of such date over (b) the Book Value of such
Partnership Asset as of such date.
2.123 "Unrealized Loss" attributable to any Partnership Asset means, as of
any date of determination, the excess if any, of (a) the Book Value of such
Partnership Asset as of such date over (b) the fair market value of such
Partnership Asset (as determined in accordance with Section 3.1 or Section 3.2,
as the case may be) as of such date.
Second Amended and Restated Agreement of Limited Partnership/Page 20
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2.124 "Unrecovered Preferred Capital" means, at the time of any
determination, with respect to the Limited Partner, the amount equal to the sum
of (a) the Limited Partner's Preferred Capital at such time and (b) the Limited
Partner's Unpaid Priority Return at such time.
2.125 "Valuation Report" has the meaning assigned to such term in Section
3.2.
2.126 "Value of Western Region Assets" has the meaning assigned to that
term in the Contribution Agreement.
2.127 "Voluntary Bankruptcy" means, for any Person:
(a) the inability of that Person generally to pay its debts as they
become due;
(b) the admission in writing by that Person of its inability to pay
its debts generally;
(c) a general assignment by that Person for the benefit of creditors;
(d) the filing of a petition or answer by that Person:
(i) seeking to adjudicate itself to be bankrupt or insolvent;
(ii) seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of itself or its debts under any law relating to
bankruptcy, insolvency, or reorganization or relief of debtors; or
(iii) seeking, consenting to, or acquiescing in the entry of an
order for relief or the appointment of a receiver, trustee, custodian,
or other similar official for such Person or for any substantial part
of its property; or
(e) the taking by that Person of any corporate or partnership action
to authorize any action described above.
2.128 "Western Region Assets" means the assets of the Partnership on the
Effective Date, after giving effect to the acquisitions and divestitures
contemplated by the Contribution Agreement, consisting principally of
forestlands, timber, and related assets in Washington and Oregon.
2.129 "Withdrawal Date" has the meaning assigned to such term in Section
10.11.
2.130 "Withdrawal Notice" has the meaning assigned to such term in Section
10.11.
2.131 "Withdrawing Partner" has the meaning assigned to such term in
Section 10.11.
2.132 "Withdrawing General Partner" means a Withdrawing Partner that is a
General Partner or a Retiring Partner that is a General Partner, as the case may
be.
Second Amended and Restated Agreement of Limited Partnership/Page 21
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Article 3
Capital Contributions; Capital Accounts
3.1 Revaluation of Partnership Assets; Capital Contributions of the
Partners.
(a) On the Effective Date, immediately prior to the Partnership's
receipt of the Capital Contributions required by Section 3.1(b), all Partnership
Assets shall be revalued to reflect the Tentative Value of the Western Region
Assets, the Capital Accounts of IPT and IPFR shall be correspondingly adjusted
in accordance with Section 3.7(d)(i) after taking into account the allocations
required pursuant to Section 4.6(c) for the period ending immediately before the
Effective Date, and the Capital Accounts of IPT and IPFR immediately after such
tentative revaluation and the allocation of such tentative revaluation among
Partnership Assets shall be as reflected in Exhibit A attached hereto. On the
final determination of the Value of the Western Region Assets in accordance with
the terms of the Contribution Agreement:
(i) The revaluation of Partnership Assets made pursuant to the
preceding sentence shall, effective as of the Effective Date, be
redetermined based on such final value by redetermining the adjustment to
the Capital Accounts of IPT and IPFR and by allocating such final value
among Partnership Assets consistently with the allocation reflected in
Exhibit A attached hereto, all of which shall be reflected as a revised
Exhibit A that shall be prepared by the Special General Partner, subject to
the approval of the Managing General Partner; and
(ii) Any other provision of this Agreement the application of which is
affected by a revaluation of Partnership Assets and a corresponding
adjustment to the Capital Accounts of the Partners in accordance with
Section 3.7(d)(i) shall, effective as of the Effective Date, be reapplied,
based on the redetermined revaluation of Partnership Assets and adjustment
to Capital Accounts.
The provisions of the Agreement that must be reapplied and redetermined,
effective as of the Effective Date, on the final determination of the Value of
the Western Region Assets shall include the determination of the Common Capital
of the Limited Partner and the Preferred Capital of the Limited Partner. The
Common Capital and the Preferred Capital of the Limited Partner are reflected on
Exhibit C attached hereto, and on the final determination of the Value of the
Western Region Assets, the Common Capital and the Preferred Capital of the
Limited Partner shall be reflected on a revised Exhibit C that shall be prepared
by the Special General Partner, subject to the approval of the Managing General
Partner. For purposes of this Agreement, any distribution of the Title Defect
Acreage to IPT or IPFR that is deemed to occur upon the Partnership's conveyance
of such acreage
Second Amended and Restated Agreement of Limited Partnership/Page 22
<PAGE>
to Newco pursuant to Section 7.05(a) of the Contribution Agreement shall be
deemed to occur immediately prior to the revaluation required pursuant to this
Section 3.1(a).
(b) On the Effective Date, (i) each of R-HCo and IPFR shall, in
accordance with the Contribution Agreement, contribute cash to the Partnership,
as a Capital Contribution, in the amount set forth below opposite such Person's
name; (ii) R-HCo shall, concurrently with its Capital Contribution to the
Partnership, be admitted to the Partnership as the Managing General Partner and
shall become the owner of the Managing General Partner Interest, having the
rights, powers, privileges, duties, and preferences specified in this Agreement;
and, (iii) concurrently with IPFR's Capital Contribution to the Partnership,
IPFR shall become the Special General Partner and its Interest shall be
converted into the Special General Partner Interest, having the rights, powers,
privileges, duties, and preferences specified in this Agreement:
R-HCo Managing General Partner Interest $300,000,000
IPFR Special General Partner Interest $ 1,654,035
The Capital Contribution of R-HCo stated above shall include the Advance
Contribution Payment and the Advance Contribution Interest as provided in
accordance with the terms of the Contribution Agreement. The Capital
Contribution of IPFR may be adjusted in accordance with the terms of the
Contribution Agreement. Any such adjustment shall be effective as of the
Effective Date. The Limited Partner will not be required to make any Capital
Contribution to the Partnership in respect of its Limited Partner Interest on
the Effective Date, and from and after the Effective Date, its Interest shall be
converted to the Limited Partner Interest, having the rights, powers,
privileges, duties, and preferences specified in this Agreement. Immediately
after the Capital Contributions required pursuant to this Section 3.1(b) are
made, the Capital Accounts of the Partners and the Adjusted Value of Partnership
Assets shall be as reflected in Exhibit D, and on the final determination of the
Value of the Western Region Assets a revised Exhibit D shall be prepared by the
Special General Partner, subject to the approval of the Managing General
Partner.
(c) Upon an election made pursuant to Section 10.10, the Managing
General Partner shall have the right, but not the obligation, to contribute cash
to the Partnership, as a Capital Contribution, to fund its Percentage Interest
share (as determined immediately prior to any Capital Contribution pursuant to
this Agreement) of the Partnership's redemption of all or any portion of the
Preferred Capital Portion of the Limited Partner Interest, in an amount that
shall not exceed the Managing General Partner's Percentage Interest share (as
determined immediately prior to any Capital Contribution pursuant to this
Agreement) of the Preferred Capital Portion of the Limited Partner Interest
(determined, for purposes of this Section 3.1(c) only, without regard to any
Capital
Second Amended and Restated Agreement of Limited Partnership/Page 23
<PAGE>
Contribution that the Managing General Partner may choose to make
hereunder in connection with such election pursuant to Section 10.10 and any
corresponding Capital Contribution that the Special General Partner would be
required to make pursuant to Section 3.1(d)).
(d) If the Managing General Partner elects to make a Capital
Contribution pursuant to Section 3.1(c) or Section 6.9(b), the Special General
Partner shall contribute cash to the Partnership as a Capital Contribution in an
amount equal to 1/98th of the Capital Contribution made by the Managing General
Partner pursuant thereto.
(e) A Partner shall not make any Capital Contribution to the
Partnership except (i) as provided in this Agreement or (ii) as agreed to by all
Partners.
3.2 Valuation of Partnership Assets; Determination of Fair Market Value.
(a) Unless the Special General Partner and the Managing General
Partner otherwise agree in accordance with Section 3.2(b), within five Business
Days after each Measurement Date, an Independent Appraiser shall be selected to
determine the fair market value of Partnership Assets. The Independent Appraiser
so selected shall prepare a report (the "Valuation Report") that specifies the
fair market value of each Partnership Asset and shall deliver such Valuation
Report to each Partner as promptly as reasonably practical. Any final Valuation
Report of the Independent Appraiser pursuant to this Section 3.2(a) shall be
final and binding on the Partnership and all Partners for all purposes relating
to this Agreement.
(b) If, after any Measurement Date, the Special General Partner and
the Managing General Partner reach an agreement as to the fair market value of
Partnership Assets, the Managing General Partner shall prepare a report (the
"Valuation Report") that specifies the fair market value of each Partnership
Asset and shall deliver such Valuation Report to each Partner as promptly as
reasonably practical. Any final Valuation Report that is prepared by the
Managing General Partner pursuant to this Section 3.2(b) and approved by the
Special General Partner shall be final and binding on the Partnership and all
Partners for all purposes relating to this Agreement.
3.3 Disposition of Capital Contributions and Withdrawals. Except as
otherwise specifically provided in this Agreement or the Contribution Agreement,
the proceeds of all Capital Contributions shall be held or expended by the
Managing General Partner in furtherance of the purposes of the Partnership.
Except as set forth in Articles 10 and 11, no Partner shall have the right to
withdraw from the Partnership or to demand a return of all or any part of its
Capital Contribution during the term of the Partnership, and any return of such
Capital Contribution shall be made solely from the Partnership Assets and only
in accordance with the terms of Sections 10.10, 10.12, and 11.3.
Second Amended and Restated Agreement of Limited Partnership/Page 24
<PAGE>
3.4 Negative Capital Accounts of the Partners.
(a) Notwithstanding any other provision of this Agreement, at no time
during the term of the Partnership, upon dissolution and liquidation of the
Partnership, or upon the Limited Partner's withdrawal from the Partnership shall
the Limited Partner have any obligation to the Partnership or the other Partners
to restore any negative balance in its Capital Account.
(b) Each General Partner shall be unconditionally obligated to restore
any negative balance in such General Partner's Capital Account (adjusted in
accordance with this Section) upon the dissolution and liquidation of the
Partnership or withdrawal by such General Partner from the Partnership.
3.5 Return of Capital Contributions. Except as otherwise provided in this
Agreement, no Partner shall have the right to demand the return of all or any
part of its Capital Contribution until the Partnership has been dissolved and
terminated, or to demand or receive property other than cash in return for its
Capital Contribution. No Partner shall be personally liable for the return of
any portion of the Capital Contributions of any other Partner; the return of
those Capital Contributions shall be made solely from the Partnership Assets.
3.6 No Interest; Consent to Distributions. No Partner shall have the right
to receive any interest on such Partner's Capital Contributions or Capital
Account, and neither General Partner shall be entitled to any payments or other
compensation for assuming personal liability for any debt or obligation of the
Partnership. To the extent any monies that any Partner is entitled to receive
pursuant to this Agreement would constitute a return of capital, each Partner
hereby consents to the withdrawal of that capital.
3.7 Maintenance of Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv), and shall adjust such Capital Account on each Allocation Date
in accordance with the following rules. The Capital Account maintained for any
Partner shall be increased by (i) the cash amount or Net Agreed Value of all
Capital Contributions made, or deemed to have been made, to the Partnership by
such Partner and (ii) all items of Partnership income and gain (including income
and gain exempt from tax) computed in accordance with Section 3.7(b) and
allocated to such Partner pursuant to Article 4, and decreased by (iii) the cash
amount or Net Agreed Value of all actual and deemed distributions of cash or
property made to such Partner and (iv) all items of Partnership deduction and
loss computed in accordance with Section 3.7(b) and allocated to such Partner
pursuant to Article 4.
Second Amended and Restated Agreement of Limited Partnership/Page 25
<PAGE>
(b) For purposes of computing the amount of any item of income, gain,
loss, or deduction to be reflected in the Partners' Capital Accounts, the
determination, recognition, and classification of any such item shall be the
same as its determination, recognition, and classification for federal income
tax purposes; provided, however, that:
(i) Any income of the Partnership that is exempt from United States
federal income tax and not otherwise taken into account in computing Net
Income and Net Losses shall be added to such Net Income or Net Losses;
(ii) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code
expenditures pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i)
and not otherwise taken into account in computing Net Income and Net Losses
shall be subtracted from such Net Income or Net Losses;
(iii) Gain or loss resulting from any disposition of a Partnership
Asset with respect to which gain or loss is recognized for United States
federal income tax purposes shall be computed by reference to the Book
Value of the Partnership Asset disposed of, notwithstanding that the
adjusted tax basis of such Partnership Asset differs from its Book Value;
and
(iv) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery, or amortization
attributable to any Partnership Asset shall be determined as if the
adjusted basis of such Partnership Asset were equal to the Book Value of
that Partnership Asset; provided, however, that if such Partnership Asset
has a zero adjusted basis for federal income tax purposes, depreciation,
cost recovery, or amortization shall be determined using any reasonable
method that the Managing General Partner may adopt.
(c) A transferee of an Interest shall succeed to a pro rata portion of
the Capital Account of the transferor relating to the Interest so transferred;
provided, however, that if the transfer causes a termination of the Partnership
pursuant to Section 708(b)(1)(B) of the Code, the Partnership Assets shall be
deemed to have been distributed in liquidation of the Partnership to the
Partners (including any transferee of an Interest that is a party to the
transfer causing such termination) and recontributed by such Partners in
reconstitution of the Partnership. In such event, the Book Values of the
Partnership Assets shall be adjusted immediately prior to such deemed
distribution pursuant to Section 3.7(d)(ii), and such Book Values shall then
constitute the Agreed Values of such Partnership Assets upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with the principles
of this Section 3.7.
Second Amended and Restated Agreement of Limited Partnership/Page 26
<PAGE>
(d) Consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(f):
(i) Immediately prior to any Capital Contribution made by an existing
Partner or by a new Partner in connection with the admission of such
Partner to the Partnership, (A) the Book Value of each Partnership Asset
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership Asset, and (B) the Capital
Accounts of the Partners shall be adjusted upward or downward to reflect
the Unrealized Gain or Unrealized Loss in all Partnership Assets, as if
such Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of all Partnership Assets immediately prior to such Capital
Contribution and had then been allocated to the Partners, at such time,
pursuant to Article 4.
(ii) Immediately prior to any actual or deemed distribution to a
Partner of any Partnership Asset (other than a distribution of cash
pursuant to Section 5.1), (A) the Book Value of each Partnership Asset
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership Asset, and (B) the Capital
Accounts of the Partners shall be adjusted upward or downward to reflect
the Unrealized Gain or Unrealized Loss in all Partnership Assets, as if
such Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of all Partnership Assets immediately prior to such distribution and
had then been allocated to the Partners, at such time, pursuant to Article
4.
(e) If the Partnership's income, gain, loss, or deductions are
adjusted pursuant to Section 482 of the Code or any similar provision under
state, local, or foreign law, and such adjustment results in a deemed Capital
Contribution to the Partnership by any Partner or a deemed distribution by the
Partnership to any Partner, the Capital Account of such Partner shall be
increased by the amount of such deemed Capital Contribution or decreased by the
amount of such deemed distribution, as the case may be.
(f) The foregoing provisions of this Article 3 and the other
provisions of this Agreement relating to the maintenance of Capital Accounts are
intended to comply with Treasury Regulation Section 1.704-l(b) and shall be
interpreted and applied in a manner consistent with such Treasury Regulations.
If the Managing General Partner, with the consent of the Special General Partner
and the Limited Partner, determines that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto, are computed in
order to comply with such Treasury Regulations, the Managing General Partner may
make such modification.
3.8 Liability of General Partner. All debts and other obligations of the
Partnership shall be paid or discharged first with Partnership Assets before any
General Partner shall be
Second Amended and Restated Agreement of Limited Partnership/Page 27
<PAGE>
obligated to pay or discharge such debts or other obligations. Except as
otherwise provided in Section 3.4(b), neither General Partner shall be liable
for the return of the Capital Contribution of the Limited Partner.
Article 4
Allocations
4.1 Allocation of Net Income. After giving effect to the special
allocations set forth in Sections 4.3 and 4.4, as of each Allocation Date, Net
Income, if any, and Gains from Capital Transactions, if any, for the Allocation
Year ending on such Allocation Date shall be allocated in the following order of
priority; provided, however, that all Net Income for the Allocation Year shall
be allocated prior to the allocation of any Gains from Capital Transactions:
(a) first--100% to the Special General Partner in an amount equal to
the amount, if any, by which (i) the cumulative Net Losses and Losses from
Capital Transactions allocated to the Special General Partner pursuant to
Section 4.2(d) for the current and all prior Allocation Years exceeds (ii)
the cumulative Net Income and Gains from Capital Transactions allocated to
the Special General Partner pursuant to this Section 4.1(a) for all prior
Allocation Years;
(b) second--100% to the Managing General Partner in an amount equal to
the amount, if any, by which (i) the cumulative Net Losses and Losses from
Capital Transactions allocated to the Managing General Partner pursuant to
Section 4.2(e) for the current and all prior Allocation Years exceeds (ii)
the cumulative Net Income and Gains from Capital Transactions allocated to
the Managing General Partner pursuant to this Section 4.1(b) for all prior
Allocation Years;
(c) third--to the Partners in proportion to and to the extent of the
amount, if any, by which (i) the cumulative Net Losses and Losses from
Capital Transactions allocated to each such Partner pursuant to Section
4.2(c) for the current and all prior Allocation Years exceeds (ii) the
cumulative Net Income and Gains from Capital Transactions allocated to such
Partner pursuant to this Section 4.1(c) for all prior Allocation Years;
(d) fourth--to the Partners in proportion to and to the extent of the
amount, if any, by which (i) the cumulative Net Losses and Losses from
Capital Transactions allocated to each such Partner pursuant to Section
4.2(b) for the current and all prior Allocation Years exceeds (ii) the
cumulative Net Income and Gains from Capital Transactions allocated to such
Partner pursuant to this Section 4.1(d) for all prior Allocation Years;
Second Amended and Restated Agreement of Limited Partnership/Page 28
<PAGE>
(e) fifth--100% to the Limited Partner, until the Limited Partner has
been allocated an amount equal to the amount, if any, by which (i) the
Cumulative Limited Partner Priority Return as of the current Allocation
Date exceeds (ii) the cumulative Net Income and Gains from Capital
Transactions allocated to the Limited Partner pursuant to this Section
4.1(e) for all prior Allocation Years; and
(f) sixth--the balance of Net Income and Gains from Capital
Transactions, if any, to the Partners in accordance with their Percentage
Interests.
4.2 Allocation of Net Losses. After giving effect to the special
allocations set forth in Sections 4.3 and 4.4, as of each Allocation Date, Net
Losses, if any, and Losses from Capital Transactions, if any, for the Allocation
Year ending on such Allocation Date shall be allocated in the following order of
priority; provided, however, that all Net Losses for the Allocation Year shall
be allocated prior to the allocation of any Losses from Capital Transactions:
(a) first--to the Partners in proportion to and to the extent of the
amount, if any, by which (i) the cumulative Net Income and Gains from
Capital Transactions allocated to each such Partner pursuant to Section
4.1(f) for all prior Allocation Years exceeds (ii) the sum of the
cumulative Net Losses and Losses from Capital Transactions allocated to
such Partner pursuant to this Section 4.2(a) for all prior Allocation
Years;
(b) second--to the Partners in accordance with their respective
Percentage Interests until (i) the amount by which (A) the sum of the
cumulative Net Losses and Losses from Capital Transactions allocated to the
Partners for the current and all prior Allocation Years exceeds (B) the
cumulative Net Income and Gains from Capital Transactions allocated to the
Partners for all prior Allocation Years equals (ii) $100,000,000;
(c) third--among the Partners in proportion to and to the extent of
their positive Adjusted Capital Account Balances, until the Limited
Partner's Adjusted Capital Account Balance is reduced to zero;
(d) fourth--100% to the Special General Partner in an amount equal to
the excess, if any, of (i) the amount of the Guaranteed Debt over (ii) the
amount by which (x) the cumulative Net Losses and Losses from Capital
Transactions allocated to the Special General Partner pursuant to this
Section 4.2(d) for all prior Allocation Years exceeds (y) the cumulative
Net Income and Gains from Capital Transactions allocated to the Special
General Partner pursuant to Section 4.1(a) for all prior Allocation Years;
and
(e) fifth--the balance of Net Losses and Losses from Capital
Transactions, if any, 100% to the Managing General Partner.
Second Amended and Restated Agreement of Limited Partnership/Page 29
<PAGE>
4.3 Special Allocations. The following special allocations of items of
Partnership income, gain, loss, or deduction (the amount of each such item being
determined by applying the rules of Section 3.7(b)) shall be made in the
following order of priority:
(a) Qualified Income Offset. If the Limited Partner unexpectedly
receives any adjustments, allocations, or distributions described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, items of Partnership
income and gain shall be specially allocated to the Limited Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, any deficit in the Limited Partner's Adjusted Capital
Account Balance as quickly as possible; provided, however, that an
allocation pursuant to this Section 4.3(a) shall be made only if and to the
extent that the Limited Partner would have a deficit Adjusted Capital
Account Balance after all other allocations provided for in Sections 4.1,
4.2, and 4.3 have been tentatively made, as if this Section 4.3(a) were not
in the Agreement.
(b) Protective Allocation. If the Limited Partner has a deficit
balance in its Capital Account at the end of any Allocation Year, the
Limited Partner shall be specially allocated items of Partnership income
and gain in the amount of such deficit balance as quickly as possible;
provided, however, that an allocation pursuant to this Section 4.3(b) shall
be made only if and to the extent that the Limited Partner would have a
deficit balance in its Capital Account after all other allocations provided
for in Sections 4.1, 4.2, and 4.3 have been tentatively made, as if Section
4.3(a) and this Section 4.3(b) were not in the Agreement.
(c) Partnership Minimum Gain Chargeback. If there is a net decrease in
Partner-ship Minimum Gain during any Allocation Year, each Partner shall be
allocated items of Partnership income and gain for such Allocation Year
(and, if necessary, subsequent Allocation Years) equal to that Partner's
share of the net decrease in Partnership Minimum Gain during such
Allocation Year (within the meaning of Treasury Regulation Section
1.704-2(g)(2)). The items to be so allocated shall be determined in
accordance with Treasury Regulation Sections 1.704-2(f)(6) and
1.704-2(j)(2)(i). This Section 4.3(c) is intended to comply with the
chargeback requirements in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(d) Chargeback of Minimum Gain Attributable to Partner Nonrecourse
Debt. Notwithstanding the other provisions of this Article 4 (other than
Section 4.3(c)), if there is a net decrease in Minimum Gain Attributable to
Partner Nonrecourse Debt during any Allocation Year, any Partner with a
share of Minimum Gain Attributable to Partner Nonrecourse Debt at the
beginning of such Allocation Year shall be allocated items of
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Partnership income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) equal to that Partner's share of the net
decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt
determined consistently with Treasury Regulation Sections 1.704-2(g)(2) and
1.704-2(j)(2)(ii). This Section 4.3(d) is intended to comply with the
chargeback requirement in Treasury Regulation Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Allocation
Year shall be allocated to the Partners in accordance with their Percentage
Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Partner that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulation Section 1.704-2(i). If more than one Partner bears the
Economic Risk of Loss with respect to a Partner Nonrecourse Debt, the
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(g) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (i) the amount of Partnership
Minimum Gain and (ii) the total amount of Nonrecourse Built-in Gain shall
be allocated to the Partners in accordance with their respective Percentage
Interests.
(h) Section 754 Adjustments. If an adjustment to the adjusted tax
basis of any Partnership Asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) to be taken into account
in determining Capital Accounts as the result of a distribution to a
Partner in complete liquidation of its Interest, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the Partnership Asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Partners in accordance with their interests in the
Partnership, if Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Partner to whom such distribution was made, if Treasury
Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies.
(i) Additional Allocations of Section 482 Items. If any deemed Capital
Contribution described in Section 3.7(e) gives rise to an additional item
of deduction, loss, or expenditure pursuant to Section 482 of the Code that
is allocable pursuant to Article 4, such item shall be specially allocated
to the Partner that is deemed to have made the Capital
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Contribution. Similarly, if any deemed distribution described in Section
3.7(e) gives rise to an additional item of income or gain pursuant to
Section 482 of the Code that is allocable pursuant to Article 4, such item
shall be specially allocated to the Partner that is deemed to have received
the distribution.
4.4 Curative Allocations.
(a) Definition. The "Regulatory Allocations" consist of allocations
pursuant to Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(h), and
4.5. Notwithstanding any other provision of this Agreement, other than the
Regulatory Allocations, the Regulatory Allocations shall be taken into account
in allocating items of income, gain, loss, and deduction among the Partners so
that, to the extent possible, the net amount of such allocations of such other
items and the Regulatory Allocations to each Partner shall be equal to the net
amount that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred.
(b) Authority of Special General Partner. The Special General Partner,
subject to the consent of the Managing General Partner, shall have reasonable
discretion, with respect to each Allocation Year, to (i) apply the provisions of
Section 4.4(a) in whatever order is likely to minimize the economic distortions
that might otherwise result from the Regulatory Allocations and (ii) divide all
allocations pursuant to Section 4.4(a) among the Partners in a manner that is
likely to minimize such economic distortions.
4.5 Loss Limitation. The Net Losses and Losses from Capital Transactions
allocated pursuant to Section 4.2 and the items of loss or deduction allocated
pursuant to Sections 4.3 and 4.4 shall not exceed the maximum amount of Net
Losses, Losses from Capital Transactions, and items of loss or deduction that
can be so allocated without causing the Limited Partner to have a deficit in its
Adjusted Capital Account Balance at the end of any Allocation Year. All Net
Losses, Losses from Capital Transactions, and items of loss or deduction in
excess of the limitation set forth in this Section 4.5 shall be allocated to the
General Partners in accordance with the priorities established in Sections 4.2
(d) and 4.2(e).
4.6 Other Allocation Rules.
(a) Unrealized Gains and Unrealized Losses. Net Income, Net Losses,
Gains from Capital Transactions, Losses from Capital Transactions, and any other
items of income, gain, loss, or deduction shall be allocated to the Partners
pursuant to this Article 4 as of the Allocation Date established for each
Allocation Year; provided, however, that, for purposes of this Article 4, any
Unrealized Gain or Unrealized Loss reflected as an adjustment to the Partners'
Capital Accounts and the Book Value of Partnership Assets pursuant to Section
3.7(d) shall be treated as Gains from Capital Transactions, Losses from Capital
Transactions, or such other items, as the case may be, that
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are allocated among the Partners pursuant to this Article 4 as of the date of
any such adjustment (including any allocations required by Sections 10.12(b) and
11.6).
(b) Sale of Interest. In the case of a Partner whose entire Interest
in the Partnership is retired or sold, the Partnership's taxable year shall
close with respect to such Partner, and such Partner's distributive share of all
items of Net Income, Net Losses, and any other items of income, gain, loss, or
deduction shall be determined using the interim closing of the books method
pursuant to Section 706 of the Code and Treasury Regulation Section
1.706-1(c)(2)(i). Except as provided in Section 4.6(c), in all other cases in
which it is necessary to determine the Net Income, Net Losses, or any other
items allocable to any period, Net Income, Net Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined by the
Managing General Partner, with the approval of the Special General Partner,
using any permissible method under Section 706 of the Code and the Treasury
Regulations thereunder.
(c) Interim Closing on the Admission of R-HCo. All allocations
pursuant to this Article 4 for the first Allocation Year shall be made, based on
an interim closing of the Partnership's books immediately before the Effective
Date, by treating such Allocation Year as consisting of two Allocation Years,
the first of which ends on the day before the Effective Date and the second of
which begins on the Effective Date. For purposes of applying the preceding
sentence, any item of expense or loss attributable to the Swap-Breakage Costs
(as defined in the Contribution Agreement) shall be allocated to the portion of
the first Allocation Year that ends immediately before the Effective Date.
4.7 Tax Allocations: Code Section 704(c) - Adoption of the Remedial
Allocation Method.
(a) Book-Tax Disparity. In the case of any Partnership Asset that has
a Book-Tax Disparity due to the contribution of that asset subject to such a
disparity or the adjustment of the Book Value of that Partnership Asset pursuant
to Section 3.1(a) or Section 3.7(d), subsequent tax allocations of income, gain,
loss, and deduction with respect to that Partnership Asset shall be made, as
permitted by Sections 704(b) and (c) and the Treasury Regulations thereunder, in
accordance with the remedial allocation method of Treasury Regulation Section
1.704-3(d).
(b) Elections. Any elections or other decisions relating to
allocations pursuant to this Section 4.7 shall be made by the Managing General
Partner, with the approval of the Special General Partner, in any manner that
(i) reasonably reflects the purpose and intention of this Agreement, (ii) is
consistent with allocating net taxable income or loss to each Full-Cost Partner
equal to the net income or net loss (as determined in accordance with Section
3.7(b)) allocated to
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each such Partner, and (iii) complies with Section 704(c) of the Code and the
Treasury Regulations thereunder.
(c) Affect of Allocations. Allocations pursuant to this Section 4.7
are solely for purposes of United States federal income taxes and shall not
affect or in any way be taken into account in computing (i) any Partner's
Capital Account or share of Net Income, Net Losses, or other items of income,
gain, deduction or loss computed in accordance with Section 3.7(b), or (ii)
distributions pursuant to any provision of this Agreement.
Article 5
Cash Distributions
5.1 Quarterly Distributions. On each Distribution Date, distributions in
cash shall be made to the Partners in the following order and priority:
(a) first, to the extent of Available Cash constituting Available
Operating Cash, 100% to the Limited Partner until the Limited Partner has
received an amount equal to the Unpaid Priority Return; and
(b) thereafter, at the discretion of the Managing General Partner and
to the extent of any remaining Available Cash constituting Available
Operating Cash, to all Partners in accordance with their respective
Percentage Interests.
5.2 No Other Distributions. The Partnership shall make no distributions to
the Partners except (a) as provided in Sections 5.1, 6.3, and 6.9(b) and in
Articles 10 and 11 or (b) as agreed to by all Partners.
Article 6
Management
6.1 General Authority of the Managing General Partner. Except for the tax
matters to be managed by the Special General Partner and subject to the
limitations and restrictions set forth in this Agreement, the Managing General
Partner (a) shall manage, control, and direct the business and affairs of the
Partnership, (b) shall conduct the day-to-day business and affairs of the
Partnership in the name, and on behalf, of the Partnership, and (c) may exercise
any and all rights and powers available to general partners under the Act, all
without the further consent of the other Partners or the Partnership (except as
otherwise specifically required by this Agreement). Subject to the same
exceptions, limitations, and restrictions (including the limitations on
Harvests, Lands Sales, and
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<PAGE>
Transfers of Partnership Assets), the rights and powers of the Managing General
Partner under this Section 6.1 include the following:
(a) To acquire by purchase, lease, or otherwise any Permitted Asset
that may be necessary, convenient or incidental to accomplish the purposes
of the Partnership;
(b) To operate, maintain, improve, construct, own, grant options with
respect to, sell, convey, assign, mortgage, and lease any real estate and
any personal property necessary, convenient, or incidental to accomplish
the purposes of the Partnership;
(c) To execute agreements, contracts, documents, certificates, and
instruments necessary or convenient in connection with the acquisition,
disposition, management, maintenance, and operation of Partnership Assets,
or in connection with managing the affairs of the Partnership;
(d) To execute amendments to this Agreement and the Amended
Certificate in accordance with this Agreement, both as Managing General
Partner and, if required, as attorney in fact for the Special General
Partner and the Limited Partner under any power of attorney granted by the
Special General Partner or the Limited Partner to the Managing General
Partner;
(e) To execute, in furtherance of the purposes of the Partnership, any
deed, lease, bill of sale, contract, mortgage, deed of trust, or other
instrument purporting to convey or encumber any or all Partnership Assets;
(f) To care for and distribute funds to the Partners by way of cash,
income, return of capital, or otherwise, all in accordance with this
Agreement, and perform all matters in furtherance of the purposes of the
Partnership or this Agreement;
(g) To arrange for or contract on behalf of the Partnership for the
services of independent contractors, including lawyers, the Independent
Appraiser, the Independent Accountant, and other accountants;
(h) To engage in any kind of activity and perform and carry out
contracts of any kind (including contracts of insurance covering risks to
Partnership Assets and the Partnership and liability of the Managing
General Partner and the Special General Partner) necessary or incidental
to, or in connection with, the accomplishment of the purposes of the
Partnership, as may be lawfully carried on or performed by a limited
partnership under the laws of each jurisdiction in which the Partnership is
then formed or qualified to conduct business;
Second Amended and Restated Agreement of Limited Partnership/Page 35
<PAGE>
(i) To take, or refrain from taking, all actions not expressly
proscribed or limited by this Agreement, as may be necessary or appropriate
to accomplish the purposes of the Partnership;
(j) To institute, prosecute, defend, settle, compromise, and dismiss
lawsuits and other judicial and administrative proceedings by or against
the Partnership or the Partners in connection with activities arising out
of, connected with, or incidental to this Agreement, and to engage counsel
or others in connection with these actions; and
(k) To acquire any Permitted Asset.
6.2 Right of Other Persons to Rely on the Managing General Partner.
(a) Any Person dealing with the Partnership may rely (without duty of
further inquiry) upon a certificate about any one or more of the following
matters signed by the Managing General Partner:
(i) The identity of the Managing General Partner, the Special General
Partner, and the Limited Partner;
(ii) The existence or nonexistence of any fact that constitutes a
condition precedent to acts by the Managing General Partner or that is
otherwise germane to the affairs of the Partnership;
(iii) The identity of Persons authorized to execute and deliver any
instrument, agreement, or document of the Partnership; and
(iv) Any act or failure to act by the Partnership or any other matter
whatsoever involving the Partnership.
(b) The signature of the Managing General Partner shall be necessary
and sufficient to convey title to Partnership Assets. The Managing General
Partner may disclose a copy of this Agreement to any Person to confirm the
Managing General Partner's authority; provided, however, that the Person to whom
such copy is disclosed shall first agree in writing to maintain the
confidentiality of the terms of this Agreement. The Managing General Partner may
execute any "statement of partnership" or other documents needed to effectuate
this or any other provision of this Agreement.
6.3 Restrictions on the Authority of the Managing General Partner. Without
the consent of all other Partners (which consent, except as otherwise provided
below, may be withheld in the sole discretion of a Partner for any reason or for
no reason), the Managing General Partner shall not:
Second Amended and Restated Agreement of Limited Partnership/Page 36
<PAGE>
(a) Transfer any Partnership Asset or conduct any Harvest or Land
Sale, except for mortgages and deeds of trust to secure the New Financing
or indebtedness incurred in connection with the redemption of the Preferred
Capital Portion of the Limited Partner Interest effected in accordance with
Section 10.10 and as except otherwise provided in this Agreement;
(b) Knowingly do any act in contravention of this Agreement or
engage in activities inconsistent with the purposes of the Partnership;
(c) Except as otherwise provided in this Agreement, do any act that
would make it impossible to carry on the ordinary business of the
Partnership;
(d) Possess Partnership Assets, or assign rights in specific
Partnership Assets, for other than a Partnership purpose;
(e) Do any act that would subject the Limited Partner to liability as
a general partner (or the equivalent of a general partner) in any
jurisdiction;
(f) Cause or permit the Partnership to voluntarily take any action
that would cause a Bankruptcy of the Partnership;
(g) Cause or permit the Partnership to amend or modify, or refinance,
existing indebtedness for borrowed money; provided, however, that the
Managing General Partner may amend the New Credit Agreement on behalf of
the Partnership in accordance with that certain letter agreement, dated as
of March 29, 1996, from the Agent under the New Credit Agreement to the
Partnership if (i) the Managing General Partner first notifies the Special
General Partner of such proposed amendments (which notice shall be in
writing and shall contain the proposed text of the amendments) as soon as
possible after the Managing General Partner is notified of same and (ii) on
or before the close of business Dallas, Texas time on the third full
Business Day after being notified of the proposed amendments the Special
General Partner does not conclude in its reasonable discretion that such
proposed amendments would have a material adverse effect on the Interests
of the Special General Partner or the Limited Partner;
(h) Cause or permit the Partnership to acquire, by purchase or
contribution, any Partnership Assets other than Permitted Assets;
(i) Cause or permit the Partnership, except as provided in Section
6.8(g), to create a Subsidiary or acquire an interest in a Subsidiary;
Second Amended and Restated Agreement of Limited Partnership/Page 37
<PAGE>
(j) Cause or permit the Partnership to change its Fiscal Year (for
which consent may not unreasonably be withheld);
(k) Except as permitted under Article 10, cause or permit the
admission of any Person to the Partnership as a Partner or issue any
additional interests in the Partnership;
(l) Cause or permit the Partnership to merge or consolidate with or
into another partnership, a corporation, or any other Person;
(m) Cause or permit the Partnership to create or contribute to any
multi-employer or single-employer plan, as defined in Section 4001 of the
Employee Retirement Income Security Act of 1974 and the laws, rules, and
regulations promulgated thereunder, as each of the same may be amended from
time to time; or
(n) Cause or permit the Partnership to incur indebtedness for borrowed
money, other than the New Financing, the Additional Properties Acquisition
Notes or indebtedness incurred in connection with the redemption of the
Preferred Capital Portion of the Limited Partner Interest effected in
accordance with Section 10.10.
6.4 Duties of the Managing General Partner.
(a) Separate Operations. The Managing General Partner shall cause the
Partner-ship to conduct its business and operations separately from the business
and operations of R-HCo and its Affiliates. In furtherance of this duty, the
Managing General Partner shall:
(i) segregate Partnership Assets and not allow Partnerships funds or
Partnership Assets to be commingled with the funds or other assets of, held
by, or registered in the name of R-HCo or any Affiliate of R-HCo;
(ii) maintain separate books and financial records for the
Partnership;
(iii) observe all Partnership formalities required by Applicable Law
or this Agreement, such as keeping minutes of meetings and obtaining
authorization for acts of the Partnership that require authorization;
(iv) cause the Partnership to pay its liabilities from Partnership
Assets; and
(v) cause the Partnership to conduct its dealings in its own name, and
as a separate and independent Person, not in the name of R-HCo or any
Affiliate of R-HCo.
(b) Responsible Officers. Upon the execution of this Agreement, the
Managing General Partner shall furnish the Partnership a resolution of its
management committee or a certificate of an officer or authorized representative
authorized by the management committee,
Second Amended and Restated Agreement of Limited Partnership/Page 38
<PAGE>
naming those officers and authorized representatives (the "Responsible
Officers") of the Managing General Partner who will be responsible for managing
and operating the Partnership in accordance with this Agreement (a copy of which
shall be provided to each other Partner). Thereafter, if the Managing General
Partner intends to add new Responsible Officers or remove old Responsible
Officers, the Managing General Partner shall promptly furnish the Partnership
with a new, updated resolution or certificate (a copy of which shall be provided
to each other Partner). The Managing General Partner undertakes and agrees to
cause the Responsible Officers to conduct the affairs of the Partnership in
accordance with this Agreement and Applicable Law.
(c) Certain Notices. Within 10 Business Days after a Responsible
Officer has actual knowledge of any such event, the Managing General Partner
shall notify the Partners of (i) the occurrence of each Optional Liquidation
Event, Liquidating Event, and other event that, with notice or lapse of time or
both, would constitute an Optional Liquidation Event or Liquidating Event, and
(ii) the responsive action that the Managing General Partner has taken and
proposes to take in respect of such event.
(d) General. The Managing General Partner shall take all necessary or
appropriate actions (i) to maintain the Partnership's valid existence as a
limited partnership under the laws of the State of Texas and of every other
jurisdiction in which such existence is necessary to protect the limited
liability of the Limited Partners and (ii) to accomplish the Partnership's
purposes, including the acquisition, management, maintenance, preservation, and
operation of Permitted Assets in accordance with this Agreement and Applicable
Law.
(e) Time. The Managing General Partner shall devote to the Partnership
such time as is necessary or appropriate to perform properly the Managing
General Partner's obligations to the Partnership.
(f) Best Interests of Partnership. The Managing General Partner shall
conduct the affairs of the Partnership in the best interests of the Partnership,
including the safekeeping and use of all Partnership Assets for the exclusive
benefit of the Partnership (subject to existing rights of other Persons, if
any). The Managing General Partner shall not conduct the affairs of the
Partnership in a manner that benefits the Managing General Partner, to the
detriment of any other Partner.
(g) Licenses and Permits. The Managing General Partner shall maintain
on behalf of the Partnership all Government licenses, permits, registrations,
authorizations, use agreements, consents, orders, and approvals necessary or
appropriate to conduct the Partnership's business.
Second Amended and Restated Agreement of Limited Partnership/Page 39
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(h) Costs, Expenses, and Taxes. The Managing General Partner shall
cause the Partnership to pay when due all costs, expenses, and taxes payable by
the Partnership.
6.5 Compensation and Expenses.
(a) Compensation and Reimbursement. Except as otherwise provided in
this Section 6.5 and in that certain Timberland Management Agreement, a copy of
which is attached hereto as Exhibit B, no Partner, Affiliate of a Partner, or
officer, director, or employee of a Partner or Affiliate of a Partner shall
receive from the Partnership (i) a salary, fee, or draw for services rendered to
or on behalf of the Partnership or (ii) reimbursement for expenses incurred on
behalf of the Partnership.
(b) Expenses. The Partnership shall reimburse the Managing General
Partner and the Special General Partner (as the Tax Matters Partner, subject to
the terms of the Contribution Agreement) on a monthly basis for (i) all direct
and indirect expenses they incur and all payments they make on behalf of the
Partnership (including salary, bonus, incentive compensation, and other amounts
paid to any Person to perform services for the Partnership, or for the Managing
General Partner or the Special General Partner in the discharge of its
respective duties to the Partnership), and (ii) all other necessary and
appropriate expenses allocable to the Partnership or otherwise reasonably
incurred by the Managing General Partner or the Special General Partner (as Tax
Matters Partner) in connection with operating the Partnership's business
(including reasonable expenses allocated to the Managing General Partner by its
Affiliates). The Managing General Partner or the Special General Partner, as
applicable, shall determine the fees and expenses that are allocable to the
Partnership in any reasonable manner determined by the Managing General Partner
or the Special General Partner, respectively, in its sole discretion.
Reimbursement of a General Partner pursuant to this Section 6.5(b) shall be in
addition to reimbursement to the General Partners pursuant to the indemnity
provided by Section 6.10.
6.6 Covenant Not to Withdraw, Transfer, or Dissolve. Except as otherwise
permitted by this Agreement, prior to the closing of the redemption of the
Preferred Capital Portion of the Limited Partner Interest in accordance with
Section 10.10, the Managing General Partner shall not (a) take any action to
file a certificate of dissolution or its equivalent for itself, (b) take any
action that would cause a Voluntary Bankruptcy of itself, (c) withdraw or
attempt to withdraw from the Partnership, (d) exercise any power under the Act
to dissolve the Partnership, (e) except as otherwise provided in this Agreement,
Transfer all or any part of its Interest in the Partnership as Managing General
Partner, or (f) petition for judicial dissolution of the Partnership. Further,
subject to the terms of Section 6.9(a), the Managing General Partner shall
continue to carry out the duties of the Managing General Partner under this
Agreement until the Partnership is dissolved and liquidated pursuant to Article
11.
Second Amended and Restated Agreement of Limited Partnership/Page 40
<PAGE>
6.7 Affiliated Transactions. The Partnership shall not enter into any
agreements or transactions of any kind with any Affiliate except for:
(a) Transactions carried out pursuant to the Timberland Management
Agreement, a copy of which is attached to this Agreement as Exhibit B;
(b) Transactions approved in writing by all Partners;
(c) Transactions that receive a favorable fairness opinion from an
investment banker of national reputation, which investment banker shall be
chosen by the Managing General Partner, subject to approval by the Special
General Partner (which approval may not be unreasonably withheld);
(d) Any transaction or series of transactions in an aggregate amount
of no greater than $10,000,000 per fiscal year, which transaction or series
of transactions (i) is no less fair and equitable to the Partnership than
would be in the case of a transaction with an unaffiliated third party and
(ii) is disclosed in writing to the other Partners before it is
consummated; and
(e) The Roseburg Sale.
6.8 Restrictions on Harvests and Land Sales.
(a) The Restrictions. Notwithstanding any other provision of this
Agreement to the contrary, the Managing General Partner may not cause the
Partnership to conduct any Harvest or Land Sale, except in accordance with the
rules in this Section. The restrictions in this Section 6.8 are in addition to
all other restrictions in this Agreement that may also apply to a transaction,
such as the restrictions in Section 6.7 on transactions with Affiliates of the
Partnership.
(b) Transactions Contemplated by the Contribution Agreement. The
Managing General Partner may cause the Partnership to conduct any Harvest or
make any Land Sale required by the main body of the Contribution Agreement,
disregarding transactions permitted by the exhibits to the Contribution
Agreement.
(c) Like-Kind Exchange. The Managing General Partner may cause the
Partnership to sell or exchange timber (as a Harvest) or forestlands (as a Land
Sale) for other timber or forestlands in a like-kind exchange that qualifies, at
least in part, under Section 1031 of the Code. The fair market value of all
non-like kind property received by the Partnership in a like-kind exchange, plus
the amount of all cash received by the Partnership in that like-kind exchange,
(i) shall be treated as proceeds from the Harvest or Land Sale, as applicable,
and (ii) shall be applied against the applicable limitations in this Section 6.8
on the number of board feet of merchantable timber that
Second Amended and Restated Agreement of Limited Partnership/Page 41
<PAGE>
may be Harvested by the Partnership or the number of acres subject to Land Sales
by the Partnership, converted into board feet or acres, as appropriate, by
dividing the total amount of such value and cash by the average weighted market
value per board foot of the merchantable timber (if the transaction is a
Harvest) or the average market value per acre of the land, including the
merchantable timber on the land (if the transaction is a Land Sale), in the
transactions giving rise to the determination hereunder. At least 10 days before
the Partnership sells or exchanges any timber or forestlands under this Section
6.8(c) (and as a condition to the consummation of such sale or exchange), a
Responsible Officer of the Managing General Partner must certify in writing to
the Special General Partner that, based on the advice of counsel, the
transaction has been structured, at least in part, as a nontaxable like-kind
exchange under Section 1031 of the Code. Any like-kind exchange between the
Partnership and an Affiliate of the Partnership that results in a recognition of
gain upon a subsequent disposition of either the exchanged property or the
like-kind property pursuant to Section 1031(f) of the Code shall not be
considered to qualify under Section 1031, in whole or in part; provided,
however, that the subsequent disposition of the like-kind property on which the
Partnership recognizes gain pursuant to Section 1031(f) of the Code shall not be
considered a Harvest or a Land Sale for purposes of this Section 6.8.
(d) Harvests in the Ordinary Course of Business. As of the end of each
Harvest Year, the Managing General Partner may have caused the Partnership to
Harvest a total volume of merchantable timber during the period from the
Effective Date to the end of that Harvest Year (disregarding volumes Harvested
under Section 6.8(e)) equal to (i) 210,000,000 board feet multiplied by (ii) the
number of Harvest Years that have ended since the Effective Date. The
Partnership may use the proceeds of these Harvests, net of the reasonable costs
and expenses of the Harvests, for any Partnership purpose permitted by this
Agreement, except that not more than an amount of such net proceeds equal to the
required amortization (such required amortization not to exceed $50,000,000 in
any Harvest Year) in such Harvest Year may be applied in such Harvest Year to
pay such required amortization under the New Loan.
(e) Excess Harvests. In addition to the Harvests contemplated by other
provisions of this Section 6.8, as of the end of each Harvest Year, if the
Partnership has then Harvested all volumes of timber available to be Harvested
under Section 6.8(d), the Managing General Partner may have caused the
Partnership to Harvest a total volume of merchantable timber during the period
from the Effective Date to the end of that Harvest Year equal to (i) 40,000,000
board feet multiplied by (ii) the number of Harvest Years that have ended since
the Effective Date. All proceeds from Harvests under this Section 6.8(e) shall
be treated as "Excess Proceeds." Any Harvest properly classified at any time as
a Harvest under this Section 6.8(e) may not thereafter be reclassified as a
Harvest under Section 6.8(d), even if, in a subsequent Harvest Year, the
cumulative volume of all
Second Amended and Restated Agreement of Limited Partnership/Page 42
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Harvests by the Partnership, including the Harvest in question, would not exceed
the Harvest volume limitation under Section 6.8(d).
(f) Other Land Sales. In addition to Land Sales contemplated by other
provisions of this Section 6.8, as of the end of each Harvest Year, the Managing
General Partner may have caused the Partnership to conduct Land Sales equal to
(i) 15,000 acres multiplied by (ii) the number of Harvest Years that have ended
since the Effective Date. All proceeds of Land Sales under this Section 6.8(f),
net of reasonable expenses of sale, shall be treated as "Excess Proceeds."
(g) Roseburg Sales. In addition to Harvests and Land Sales
contemplated by other provisions of this Section 6.8, the Managing General
Partner may permit the Partnership to sell Partnership Assets to Roseburg (each
such sale being a "Roseburg Sale"), subject to the following provisions:
(i) the aggregate fair market value of all Partnership Assets sold in
Roseburg Sales may not exceed $100,000,000;
(ii) each Roseburg Sale must occur during the Section 1033 Sale
Windows;
(iii) at least 10 days before the proposed effective date of each
proposed Roseburg Sale, the Managing General Partner shall certify in
writing to the Special General Partner that such Roseburg Sale has been
structured (based upon the advice of counsel) so that at least 90% of the
Partnership Assets sold to Roseburg will qualify as replacement property
for purposes of Section 1033 of the Code;
(iv) each Roseburg Sale that is an installment sale shall (A) include
at least a 20% cash down payment at the time of the sale, (B) include a
promissory note on commercially reasonable terms for the balance of the
consideration, the payment of which shall at all times until such notes
have been paid in full be assured by the issuance by a bank reasonably
acceptable to the Special General Partner of a letter of credit or letters
of credit issued in favor of the Borrower and, if required, the Agent under
the New Credit Facility and (C) require that Roseburg apply all proceeds of
any subsequent harvest, land sale, or other disposition of the Partnership
Assets sold to Roseburg in the Roseburg Sale, net of the reasonable costs
and expenses of the harvest, land sale, or other disposition, toward
payment of outstanding interest and principal on such promissory note,
until it has been paid in full;
(v) the net cash proceeds of each Roseburg Sale, together with the
cash amounts received under any promissory note used in such Roseburg Sale,
shall be treated as Excess Proceeds; and
Second Amended and Restated Agreement of Limited Partnership/Page 43
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(vi) at the election of the Managing General Partner, a Roseburg Sale
made during either Section 1033 Sale Window may be effected by having the
Partnership contribute the Partnership Assets to be sold in such sale to a
newly formed corporation in exchange for all of such corporation's stock.
(h) Excess Proceeds. The Managing General Partner shall promptly
deposit all Excess Proceeds (as identified in the foregoing provisions of this
Section 6.8) in a separate trust account with a bank or trust company
satisfactory to all Partners, under instructions to be invested only in
Permitted Investments. The Managing General Partner may withdraw the funds in
the account, including accrued interest, solely (i) to acquire, at fair market
value, additional standing timber, forestlands, or both, for the Partnership;
(ii) to permanently pay down the principal of and accrued interest on the New
Loan (as defined in the Contribution Agreement); and (iii) to distribute to the
Limited Partner the Unpaid Priority Return in accordance with Section 5.1(a);
provided, however, that any distribution of Excess Proceeds in accordance with
this Section 6.8(h)(iii) shall, when so distributed, be deemed to constitute a
distribution of Available Cash constituting Available Operating Cash. All funds
that have not been withdrawn from the trust account for the purposes specified
in the preceding sentence shall be retained in such trust account until so
applied or until used in accordance with Section 10.10 to redeem the Preferred
Capital Portion of the Limited Partnership Interest.
(i) Procedural Matter. Several of the foregoing limitations are
intended to be applied at the end of applicable Harvest Years. If, however, the
Managing General Partner reasonably determines during the course of a Harvest
Year that any one or more such limitations will apply at the end of that Harvest
Year, the Managing General Partner shall, for the balance of that Harvest Year,
conduct the affairs of the Partnership as if the limitation were already in
effect. To the extent that all information necessary to apply the limitations is
not available at that time, the Managing General Partner shall use reasonable
assumptions in applying the limitations, subject to adjustment when the missing
information is available at the end of the Harvest Year.
6.9 Limited Management Rights of Special General Partner.
(a) Priority Shortfall Condition. Subject to Section 6.9(b), upon
occurrence of a Priority Shortfall Condition (which shall constitute conclusive
evidence that the Partnership is not generating the amounts of Available Cash
reasonably expected by the Partners when they executed this Agreement), IPFR (or
any other Person designated by IPFR) may, on 15 Business Days' written notice to
R-HCo, take control of the Partnership and, for so long, but only so long, as
the Priority Shortfall Condition continues, and except as provided in Section
6.9(c), exercise and enjoy all rights, powers, and privileges of the Managing
General Partner under this Agreement and the Act, including the right to manage,
control, and direct the business and affairs of the Partnership; the right to
make
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elections and decisions available to the Managing General Partner under this
Agreement and to a general partner under the Act; the right to receive all
compensation and reimbursement otherwise payable to the Managing General
Partner; and the other rights, powers, and privileges of the Managing General
Partner under this Article 6 and the other provisions of this Agreement. Subject
to Section 6.9(b) and 6.9(c), upon IPFR's taking control of the Partnership
pursuant to the preceding sentence, R-HCo shall relinquish all rights, powers,
and privileges so obtained by IPFR.
(b) Voluntary Capital Contribution. After a Priority Shortfall
Condition has occurred, the Managing General Partner may, at its election, in
order to cure that Priority Shortfall Condition, contribute additional funds to
the Partnership as a Capital Contribution in an amount that equals, but does not
exceed, the sum of (i) the Priority Shortfall and (ii) the amount, if any, by
which (A) the Priority Return for each Fiscal Quarter ending after such Priority
Shortfall Condition arose and before such Capital Contribution is made exceeds
(B) any distributions made to the Limited Partner pursuant to this Agreement
since such Priority Shortfall Condition arose that have reduced the Unpaid
Priority Return of the Limited Partner. Any Capital Contribution made pursuant
to this Section 6.9(b) shall immediately be distributed to the Limited Partner
and shall be treated for purposes of this Agreement as a distribution in an
amount equal to the Priority Shortfall made pursuant to Section 5.1(a). If, in
connection with any Priority Shortfall Condition, a Capital Contribution and
distribution in an amount equal to the Priority Shortfall are made in accordance
with this Section 6.3(b), such Priority Shortfall Condition shall cease to
exist.
(c) Reserved Rights. Notwithstanding Section 6.9(a) or Section 6.9(g),
the Managing General Partner shall always retain, and the Special General
Partner may not take, receive, or enjoy any benefit from, the Managing General
Partner's Capital Account, allocations to the Managing General Partner pursuant
to Article 4, or distributions to the Managing General Partner pursuant to
Article 5.
(d) Priority Shortfall Condition. During the period from the Effective
Date to, but excluding, the date that the Limited Partner's Preferred Capital is
reduced to zero, a "Priority Shortfall Condition" exists immediately after any
Distribution Date (the "Testing Date") if (i) the Limited Partner had an Unpaid
Priority Return immediately after the immediately preceding Distribution Date
(the "Initial Unpaid Return") and (ii) such Initial Unpaid Return exceeds the
distribution paid on the Testing Date pursuant to Section 5.1(a) to the Limited
Partner (such excess being referred to as the "Priority Shortfall"). Subject to
Section 6.9(b), any Priority Shortfall Condition shall continue to exist until
the Unpaid Priority Return of the Limited Partner is reduced to zero.
(e) Election Rights. If a Priority Shortfall Condition exists, IPFR is
not obligated to exercise its rights under this Section 6.9, and the failure to
exercise such rights shall not limit
Second Amended and Restated Agreement of Limited Partnership/Page 45
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IPFR's right to exercise such remedies at any time and from time to time in the
future if the same Priority Shortfall Condition continues or if a new Priority
Shortfall Condition occurs.
(f) Duties of Managing General Partner. If IPFR exercises its rights
under this Section 6.9, R-HCo, on request by IPFR, shall (i) deliver to the
Special General Partner or its designee all books, records, and accounts
maintained on behalf of the Partnership; (ii) give IPFR or its designee, and
their respective agents, employees, and contractors, full possession, custody,
and control of all Partnership Assets; (iii) assist IPFR in exercising and
enjoying the rights, powers, and privileges available to it under this Section
6.8; and (iv) execute, acknowledge, and deliver all instruments, agreements,
certificates, and other documents necessary or appropriate to transfer to, or
recognize in, IPFR the rights, powers, and privileges available to it under this
Section 6.9 to manage, control, or direct the business or affairs of the
Partnership.
(g) Foreclosure Condition. Upon the occurrence of a Foreclosure
Condition (which shall constitute conclusive evidence that the Managing General
Partner and its successor is then unable to perform its duties hereunder), IPFR
(or any other Person designated by IPFR) may, on 15 Business Days' written
notice to R-HCo and the lender or lenders taking the actions that caused or
resulted in such Foreclosure Condition, take control of the Partnership for so
long, but only so long as the Foreclosure Condition continues and remains
uncured, and except as provided in Section 6.9(c), exercise and enjoy all
rights, powers, and privileges of the Managing General Partner under this
Agreement and the Act, including the right to manage, control, and direct the
business and affairs of the Partnership; the right to make elections and
decisions available to the Managing General Partner under this Agreement and to
a general partner under the Act; the right to receive all compensation and
reimbursement otherwise payable to the Managing General Partner; and the other
rights, powers, and privileges of the Managing General Partner under this
Article 6 and the other provisions of this Agreement. Subject to Section 6.9(c),
upon IPFR's taking control of the Partnership pursuant to the preceding
sentence, R-HCo shall relinquish all rights, powers, and privileges so obtained
by IPFR, but only for so long as the Foreclosure Condition continues and remains
uncured. A "Foreclosure Condition" shall be deemed to exist when, in response to
or upon the occurrence of any default, any event of default, or other occurrence
under the New Financing or any financing provided to R-HCo or either of its
members, the New Lender or the lenders under any such other financing foreclose
on all or any portion of the Managing General Partner Interest held as security
for such indebtedness, or, in lieu of foreclosure, R-HCo elects to assign all or
any portion of its Managing General Partner Interest to any such lender(s) or
their assigns, or R-HCo or either of its members agrees, in lieu of any demand
or acceleration under any such indebtedness, to assign all or any portion of its
Managing General Partner Interest to any such lender(s) or their assigns. For
purposes of this Section 6.9(g), a Foreclosure Condition shall be deemed to
continue to exist and shall remain uncured until any and all defaults under any
indebtedness referred to in the preceding
Second Amended and Restated Agreement of Limited Partnership/Page 46
<PAGE>
sentence are cured, there are outstanding under the New Financing or any such
other financing no rights of demand or acceleration that may then be exercised
and no event has occurred that (upon the giving of notice or lapse of time) will
permit any such rights of demand or acceleration to exist, and R-HCo holds all
right, title, and interest in and to the full Managing General Partner Interest,
subject only to any pledge by the Managing General Partner of its Interest
permitted by Section 10.2(d).
6.10 Indemnification.
(a) The Indemnity. To the fullest extent permitted by Applicable Law,
but subject to the limitations in this Agreement, the Partnership shall
indemnify each Indemnitee and hold each Indemnitee harmless from and against all
losses, claims, damages, liabilities (joint or several), expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements,
and other amounts arising from all claims, demands, actions, suits, and
proceedings, whether civil, criminal, or investigative, in which any Indemnitee
may be involved, or is threatened to be involved, as a party or otherwise, by
reason of its status as (i) a General Partner or a Withdrawing General Partner;
(ii) an officer, director, partner, or trustee of the Partnership, any General
Partner, or a Withdrawing General Partner; or (iii) a Person serving at the
request of the Partnership in another entity in a similar capacity; provided,
however, that in each case, the Indemnitee acted in good faith and in a manner
that the Indemnitee reasonably believed to be in, or (in the case of an
Indemnitee other than a General Partner) not opposed to, the best interests of
the Partnership and, with respect to any criminal proceeding, had no reasonable
cause to believe its conduct was unlawful; provided, further, that no
indemnification under this Section 6.10 shall be available to a Partner, in its
individual capacity and not on behalf of the Partnership, with respect to
obligations incurred pursuant to the Contribution Agreement (other than
obligations incurred by a General Partner on behalf of the Partnership). The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or plea of nolo contendere, or its equivalent, shall not create a
presumption that the Indemnitee acted in a manner contrary to that specified
above. Any indemnification pursuant to this Section 6.10 shall be made only out
of Partnership Assets, it being agreed that no General Partner shall be
personally liable for such indemnification, and that no General Partner shall
have any obligation to contribute or loan any monies or property to the
Partnership to enable it to effectuate such indemnification.
(b) Expenses. To the fullest extent permitted by Applicable Law,
expenses (including legal fees and expenses) incurred by an Indemnitee who is
indemnified under Section 6.10(a) in defending an indemnified claim, demand,
action, suit, or proceeding shall, from time to time, be advanced by the
Partnership before the final disposition of the claim, demand, action, suit, or
proceeding, upon receipt by the Partnership of an undertaking by or on behalf of
the
Second Amended and Restated Agreement of Limited Partnership/Page 47
<PAGE>
Indemnitee to repay such amount if it is determined that the Indemnitee is
not entitled to be indemnified under this Section 6.10.
(c) Cumulative Rights. The indemnification provided by this Section
6.10 shall be in addition to all other rights to which the Indemnitee may be
entitled under any agreement, by a vote of the holders of the Interests, as a
matter of law, or otherwise, both as to actions in the Indemnitee's capacity as
(i) a General Partner or Withdrawing General Partner, (ii) an officer, director,
or trustee of the Partnership, any General Partner, or any Withdrawing General
Partner, or (iii) a Person serving at the request of the Partnership in another
entity in a similar capacity, and as to actions in any other capacity, and shall
continue as to an Indemnitee who has ceased to serve in such capacity and shall
inure to the benefit of the heirs, successors, assigns, and administrators of
the Indemnitee.
(d) Insurance. To the fullest extent permitted by Applicable Law, the
Partnership may purchase and maintain (or reimburse the General Partners for the
cost of) insurance, on behalf of the General Partners and such other Persons as
the Managing General Partner shall determine, against any liability that may be
asserted against, or expense that may be incurred by, the General Partners or
such other Persons in connection with the Partnership's activities, regardless
of whether the Partnership would have the power to indemnify such other Person
against such liability under this Agreement.
(e) No Personal Liability for Limited Partner. In no event may an
Indemnitee subject the Limited Partner to personal liability by reason of the
indemnification provisions in this Agreement.
(f) Interest in Transaction. No Indemnitee shall be denied
indemnification in whole or in part under this Section 6.10 because that
Indemnitee had an interest in the transaction with respect to which the
indemnification applies, if the transaction was otherwise permitted by this
Agreement.
(g) No Third-Party Beneficiaries. The provisions of this Section 6.10
are for the benefit of the Indemnitees and their respective heirs, successors,
assigns, and administrators, and shall not be deemed to create any rights for
any other Persons.
(h) Effect of Amendments. No amendment, modification, or repeal of
this Section 6.10 or any provision of this Section 6.10 shall in any manner
terminate, reduce, or impair (i) the right of any past, present, or future
Indemnitee to be indemnified by the Partnership or (ii) the obligation of the
Partnership to indemnify that Indemnitee pursuant to, and in accordance with,
this Section 6.10, as in effect immediately before such amendment, modification,
or repeal with respect
Second Amended and Restated Agreement of Limited Partnership/Page 48
<PAGE>
to claims arising from or relating to matters occurring, in whole or in part,
before such amendment, modification, or repeal, regardless of when the claims
may arise or be asserted.
Article 7
Role of the Limited Partner
7.1 Rights or Powers. The Limited Partner shall not have any right or power
to participate in the management or control of the Partnership, the Partnership
Assets, or the Partnership's business, or to act for or bind the Partnership in
any way. Notwithstanding the foregoing, the Limited Partner shall have all the
rights and powers specifically set forth in this Agreement and, to the extent
not inconsistent with this Agreement, in the Act.
7.2 Certain Business Relationships. The Limited Partner, an Affiliate of
the Limited Partner, or an officer, director, shareholder or employee of the
Limited Partner or an Affiliate of the Limited Partner may also serve as an
employee or agent of the Partnership, the Managing General Partner, or the
Special General Partner without thereby being deemed to have participated in the
management or control of the Partnership, Partnership Assets, or the
Partnership's business. Such service shall not affect the limited liability of
the Limited Partner.
7.3 Voting Rights. The Limited Partner shall have the right to vote only on
the matters specifically reserved for its vote, as permitted by this Agreement
or required by the Act.
7.4 Procedure for Consent. Except as otherwise provided in this Agreement,
the Limited Partner may give or withhold its consent or approval, acting in its
sole and absolute discretion, for each matter for which such consent is
permitted or required by this Agreement or by the Act.
Article 8
[Intentionally omitted by agreement of Partners.]
Article 9
Books, Records, and Reports
9.1 Books and Records.
(a) Obligation to Maintain. The Managing General Partner shall
maintain at the Partnership's principal place of business separate books of
account for the Partnership, showing true and complete records of all costs and
expenses incurred, all charges made, all credits made and
Second Amended and Restated Agreement of Limited Partnership/Page 49
<PAGE>
received, and all income derived from the operation of the Partnership and the
ownership of the Partnership Assets.
(b) Fiscal Year and Accrual Method. The Partnership shall use the
Fiscal Year and the accrual method of accounting to keep its books, prepare its
annual reports, and report and pay Taxes.
(c) Audit and Information Rights. All books of account referred to in
Section 9.1, together with an executed copy of this Agreement and the Amended
Certificate, and any amendments thereto, shall at all times be maintained at the
principal office of the Partnership or such other place as the Managing General
Partner may designate in writing to the Partners, and upon reasonable notice to
the Managing General Partner, shall be open to the inspection and examination
of, and copying by, the other Partners or their representatives during
reasonable business hours. Upon the reasonable request of any Partner, the
Managing General Partner will cooperate with such Partner in obtaining such tax,
book, financial or other information regarding the Partnership as such Partner
requires for its records, any required tax, securities or other filing, any tax,
financial or other report to be provided to the partners of such Partner, or for
any other proper purpose. In addition, each Partner or its designated
representatives shall have reasonable access to such additional financial
information, documents, books, and records as are reasonably necessary to allow
the Partner or its representatives to determine the accuracy of any Valuation
Report prepared by the Managing General Partner or an Independent Appraiser
pursuant to Section 3.2, and the Managing General Partner shall provide
assistance to the Partner or its designee in making such determination
(including, without limitation, reasonable access during normal business hours
to the Managing General Partner's employees, the Independent Appraiser, the
Independent Accountant, and the Partnership's other accountants. If an
Independent Appraiser shall be required to determine the value of Partnership
Assets pursuant to Section 3.2, the Managing General Partner shall, as promptly
as practicable (and, in any event, within two Business Days of any request
therefor), provide to the Independent Appraiser copies of such information
concerning the Partnership Assets as the Independent Appraiser shall consider
reasonably necessary or appropriate for such purpose.
(d) Limitations. In exercising the rights available under this Section
9.1, each Partner shall comply with the reasonable safety, security, and
confidentiality procedures and guidelines of the Partnership, as in effect from
time to time; provided, however, that the confidentiality procedures may not
prohibit a Partner from disclosing information, as required by Applicable Law or
the rules of any stock exchange, or from disclosing information that, through no
fault of that Partner, is already in the public domain.
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<PAGE>
9.2 Reports.
(a) In General. The Managing General Partner is responsible for
preparing the financial reports of the Partnership, coordinating the financial
matters of the Partnership with the Independent Accountant and the Partnership's
other accountants, and furnishing full, complete, and regular financial reports
to the other Partners.
(b) Annual Reports. Within 120 days after the end of each Fiscal Year,
the Managing General Partner shall prepare (or cause to be prepared) and furnish
each Partner with:
(i) an audited balance sheet of the Partnership as of the end of the
Fiscal Year;
(ii) an audited income statement of the Partnership for the Fiscal
Year;
(iii) an audited statement of cash flows of the Partnership for the
Fiscal Year;
(iv) written certification by the Independent Accountant that these
financial statements have been prepared in accordance with GAAP, subject to
this Agreement, have been audited by such Independent Accountant in
accordance with generally accepted auditing standards, and present fairly,
in all material respects, the financial position of the Partnership; and
(v) written certification by a Responsible Officer of the Managing
General Partner familiar with the affairs of the Partnership that no
Liquidating Event, Optional Liquidation Event, or other event that with
notice or lapse of time or both would constitute a Liquidating Event or
Optional Liquidation Event, has occurred and is continuing or, if any such
event has occurred and is continuing, the action that the General Partner
has taken and proposes to take in response to the event.
(c) Quarterly Reports. Within 45 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year, the Managing General Partner
shall prepare (or cause to be prepared) and furnish each Partner with:
(i) a balance sheet of the Partnership as of the end of the Fiscal
Quarter;
(ii) an income statement of the Partnership for the Fiscal Quarter;
(iii) a statement of cash flows of the Partnership for the Fiscal
Quarter;
(iv) written certification by a Responsible Officer of the Managing
General Partner that the financial statements were prepared in accordance
with GAAP, subject to this Agreement; and
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<PAGE>
(v) written certification by a Responsible Officer of the Managing
General Partner familiar with the affairs of the Partnership that no
Liquidating Event, Optional Liquidation Event or other event that with
notice or lapse of time or both would constitute a Liquidating Event or
Optional Liquidation Event, has occurred and is continuing or, if any such
event has occurred and is continuing, the action that the General Partner
has taken or proposes to take in response to the event.
(d) Retirement/Liquidation Date Reports. On the date on which any
distribution is made under Section 10.10 or Section 10.12 in retirement of all
or part of a Partner's Interest and on the date on which a final distribution is
made to the Partners under Section 11.3, the Managing General Partner shall
prepare (or cause to be prepared) and furnish each Partner with:
(i) an audited statement of the Partners' Capital Accounts, as adjusted
immediately before such retirement or distribution in accordance with
Section 3.7(d)(ii), and, where appropriate, Section 10.10 or Section 10.12;
(ii) written certification by the Independent Accountant that the
audited statement of the Partners' Capital Accounts was prepared in
accordance with GAAP, subject to this Agreement;
(iii) written certificate of a Responsible Officer of the Managing
General Partner familiar with the financial affairs of the Partnership that,
immediately before and after giving effect to such retirement, no
Liquidating Event, Optional Liquidation Event, or other event that with
notice or lapse of time or both would constitute a Liquidating Event or
Optional Liquidation Event, has occurred and is continuing; and
(iv) written certification of a Responsible Officer of the Managing
General Partner familiar with the financial affairs of the Partnership
that, as of the date of such distribution, no event has occurred and is
continuing that would cause any material change to the information
contained in the financial statements and certifications provided under
this Section 9.2(d).
9.3 Tax Information. Subject to the following sentence and to Section 9.4,
the Managing General Partner shall deliver all necessary tax information to each
Partner as soon as practicable after the end of each Fiscal Year of the
Partnership, but not later than five months after the end of each Fiscal Year.
Subject to the review and comment of the Managing General Partner, the Special
General Partner shall prepare and timely file, or cause to be prepared and
timely filed, at the expense of the Partnership, a federal information tax
return in compliance with Section 6031 of the Code and the Treasury Regulations
promulgated thereunder, as in effect at the time of such filing.
Second Amended and Restated Agreement of Limited Partnership/Page 52
<PAGE>
9.4 Tax Matters Partner.
(a) Designation. The Special General Partner shall, at the expense of
the Partner-ship (provided, however, that the retention of accountants, counsel,
and other consultants to assist the Special General Partner shall have been
approved by the Managing General Partner), act as the tax matters partner of the
Partnership, as provided in the Treasury Regulations pursuant to Section 6231 of
the Code. Each Partner hereby approves of such designation and agrees to
execute, certify, acknowledge, deliver, swear to, file, and record at the
appropriate public offices such documents as may be deemed necessary or
appropriate to evidence such approval.
(b) Duties of Tax Matters Partner. To the extent and in the manner
provided by applicable Code sections and Treasury Regulations thereunder, the
Special General Partner (i) shall furnish the name, address, profits interest,
and taxpayer identification number of each Partner to the Internal Revenue
Service and (ii) shall inform each Partner of administrative or judicial
proceedings for the adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes.
(c) Limitations on Tax Matters Partner. Without the consent of the
other Partners, the Special General Partner shall not enter into an agreement
with the Internal Revenue Service or any other taxing authority to extend the
limitation period for assessment of any federal, state, or local income,
franchise, or unincorporated business tax of any Partner or owner thereof or
settle with the Internal Revenue Service or any other taxing authority to
disallow deductions or increase income with respect to such taxes.
Article 10
Transfers of Interests; Withdrawals of Partners
10.1 Limitations on Transfers. Except as otherwise permitted by this
Article 10, no Partner shall Transfer or permit a Transfer of all or any portion
of its Interest.
10.2 Permitted Transfers.
(a) Consented Transfers. Each General Partner may at any time Transfer
all or any portion of its Interest with the consent of the other Partners, which
consent is within the sole discretion of each such Partner. Any Transfer
effected in accordance with this Section 10.2(a) is referred to in this
Agreement as a "Permitted Transfer."
(b) Other Permitted Transfers. Subject to the conditions and
restrictions in Section 10.3, the Limited Partner may at any time Transfer all
or any portion of its Interest to (i) any
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other Partner or (ii) any other Person approved by all other Partners. Any
Transfer effected in accordance with this Section 10.2(b) is also referred to in
this Agreement as a "Permitted Transfer."
(c) Other Permitted Transfers by Limited Partner. Notwithstanding
anything to the contrary in this Section 10.2, at any time following the earlier
to occur of (i) the second anniversary of the Effective Date and (ii) the
occurrence of an Optional Liquidation Event, the Limited Partner may transfer
its Interest to any Person without satisfying the conditions in Section 10.3.
Any Transfer effected in accordance with this Section 10.2(c) is also referred
to in this Agreement as a "Permitted Transfer."
(d) Pledge of Managing General Partner Interest. Without the consent
of any other Partner and without satisfying the conditions in Section 10.3,
R-HCo may pledge its Interest as Managing General Partner to secure the
Partnership's obligations under the New Financing or indebtedness incurred in
connection with the redemption of the Preferred Capital Portion of the Limited
Partner Interest effected in accordance with Section 10.10. Any such pledge and
any foreclosure of such Interest by the New Lenders thereunder shall also
constitute a "Permitted Transfer." As a condition to foreclosing upon the
Managing General Partner Interest, however, the foreclosing party must first
satisfy the condition in Section 10.3(b), provided that the foreclosing party
may furnish the opinion referred to in Section 10.3(b).
10.3 Conditions to Permitted Transfers. Except for a Permitted Transfer
under Section 10.2(c), a Transfer shall not be treated as a Permitted Transfer
under Section 10.2 unless and until the following conditions are satisfied:
(a) The transferor and transferee shall execute and deliver to the
Partnership such documents and instruments of conveyance as may be
necessary or appropriate in the opinion of counsel to the Partnership to
effect such Transfer and to confirm the agreement of the transferee to be
bound by this Article 10.
(b) The Transfer will not cause the Partnership to terminate for
United States federal income tax purposes pursuant to Section 708 of the
Code, and the transferor shall furnish to the Partnership an opinion of
counsel, which counsel and opinion shall be reasonably satisfactory to the
Partnership, to such effect.
(c) The transferor and transferee shall furnish the Partnership with
the transferee's United States taxpayer identification number (if it has
one), a certificate (on Internal Revenue Service Form 1001 or its
equivalent) stating that the transferee is not subject to withholding on
income derived from the Partnership with respect to its Interest or backup
withholding, sufficient information to determine the transferee's initial
tax basis in the Interest Transferred, and any other information reasonably
necessary to permit the
Second Amended and Restated Agreement of Limited Partnership/Page 54
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Partnership to file all required tax returns and other legally required
information statements or returns. Without limiting the generality of the
foregoing, the Partnership shall not be required to make any distribution
otherwise provided for in this Agreement with respect to any Interests
Transferred until it has received such information.
(d) Such Transfer shall be exempt from all applicable registration
requirements under any state, federal, or foreign securities laws and
otherwise, and such Transfer shall not violate any Applicable Law
regulating the Transfer of securities, and except in the case of a Transfer
of an Interest to another Partner, the transferee shall provide an opinion
of counsel, which opinion of counsel shall be reasonably satisfactory to
the Partnership, to such effect.
(e) Except for Transfers pursuant to clause 10.2(b)(i), Section
10.2(c), or Section 10.2(d), each Partner shall have consented to such
Transfer; provided, however, that such consent may not be unreasonably
withheld.
10.4 Prohibited Transfers.
(a) Certain Purported Transfers. Any purported Transfer of an Interest
that is not a Permitted Transfer shall be null and void ab initio and of no
effect whatsoever; provided, however, that, if the Partnership is required to
recognize a Transfer that is not a Permitted Transfer (or if the Partnership, in
its sole discretion, elects to recognize a Transfer that is not a Permitted
Transfer), the Person acquiring the Interest Transferred shall not be entitled
to admission to the Partnership as a Substituted Partner pursuant to Section
10.6. The Partner making such purported Transfer shall indemnify and hold the
Partnership and the other Partners harmless from and against any federal, state,
or local income taxes or transfer taxes, including transfer gain taxes, arising
as a result of, or caused directly or indirectly by, such purported Transfer. As
a result, such Person shall be entitled only to the transferor's rights to
allocations and distributions as provided by this Agreement with respect to the
Transferred Interest, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of the Partnership) to
satisfy any debts, obligations, or liabilities for damages that the transferor
or transferee of such Interest may have to the Partnership.
(b) Indemnity. In the case of a Transfer or attempted Transfer of an
Interest that is not a Permitted Transfer, the parties engaging or attempting to
engage in such Transfer shall indemnify and hold harmless the Partnership and
the other Partners from all loss, cost, liability, charge, damage, and expense
that any such indemnified Persons may incur (including incremental Tax liability
and legal fees and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce the indemnity granted by this Section 10.4.
Second Amended and Restated Agreement of Limited Partnership/Page 55
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10.5 Rights of Unadmitted Assignees.
(a) Allocations and Distributions. A Person who acquires one or more
Interests in a Permitted Transfer, but who is not admitted as a Substituted
Partner pursuant to Section 10.6, shall be entitled only to allocations and
distributions with respect to such Interest in accordance with this Agreement,
but shall have no right to any information about, or accounting of, the affairs
of the Partnership, shall not be entitled to inspect the books or records of the
Partnership, and shall not have any rights of a General Partner or a Limited
Partner under the Act or this Agreement.
(b) Restrictions on Authority. A transferee who acquires an Interest
from a General Partner by means of a Transfer that is permitted under this
Article 10, but who is not admitted as a substituted General Partner pursuant to
Section 10.6, shall have no authority to act for or bind the Partnership, to
inspect the Partnership's books, or otherwise to be treated as a substituted
General Partner. Following any such Transfer by the Managing General Partner,
the Managing General Partner shall not cease to be a general partner of the
Partnership and shall continue to be a General Partner until the transferee is
so admitted as the substituted Managing General Partner of the Partnership.
10.6 Admission as Substituted Partners. Subject to the other provisions of
this Article 10, a transferee of an Interest may be admitted to the Partnership
as a substituted Partner (a "Substituted Partner") only upon satisfaction of the
conditions in this Section 10.6:
(a) If such transferee acquired its Interest from the Limited Partner,
the Managing General Partner shall have consented to such admission, which
consent may be given or withheld in the sole and absolute discretion of the
Managing General Partner;
(b) If such transferee acquired its Interest from a General Partner,
each other Partner shall have consented to such admission, which consent
may be given or withheld in the sole and absolute discretion of each such
Partner;
(c) The Interest with respect to which the transferee is to be
admitted shall have been acquired by means of a Permitted Transfer;
(d) The transferee shall become a party to this Agreement as a Partner
and shall execute such documents and instruments as the Managing General
Partner may reasonably request (including amendments to the Amended
Certificate) as may be necessary or appropriate to confirm such transferee
as a Partner in the Partnership and such transferee's agreement to be bound
by the terms and conditions of this Agreement; and
(e) If the transferee of an Interest from a General Partner is
admitted hereunder, such transferee shall be deemed to have been admitted
to the Partnership as a General Partner
Second Amended and Restated Agreement of Limited Partnership/Page 56
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immediately prior to the Transfer, and (subject to Applicable Law) such
transferee shall continue the business of the Partnership without
dissolution.
10.7 Distributions with Respect to Transferred Interests. If any Interest
is sold, assigned, or otherwise Transferred in compliance with this Article 10,
all distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such distributions, the Partnership shall
recognize such Transfer not later than the end of the calendar month that is not
less than 10 days after the date the Partnership is given notice of such
Transfer; provided, however, that if the Partnership is given notice of a
Transfer at least 14 days prior to the Transfer, the Partnership shall recognize
such Transfer as of the date of such Transfer; and provided further, that if the
Partnership does not receive a notice stating the date such Interest was
Transferred and such other information as the Managing General Partner may
reasonably require within 30 days after the end of the accounting period during
which the Transfer occurs, all distributions shall be made to the Person who,
according to the books and records of the Partnership, owned the Interest on the
last day of the accounting period during which the Transfer occurs. Neither the
Partnership nor the Managing General Partner shall incur any liability for
making distributions in accordance with this Section 10.7, whether or not the
Managing General Partner or the Partnership has knowledge of any Transfer of
ownership of any Interest.
10.8 Bankruptcy of the Limited Partner. In the event of the Bankruptcy of
the Limited Partner, the trustee or receiver of the Limited Partner's estate
shall have all the rights of the Limited Partner for the purpose of settling or
managing the estate and such power as such Partner possessed to assign all or
any part of the Interests and to join with the assignee thereof in satisfying
conditions precedent to such assignee's becoming a Substituted Partner.
10.9 Acceptance of Prior Acts. Except to the extent provided in the
Contribution Agree-ment, any Person who becomes a Partner, by becoming a
Partner, accepts, ratifies, and agrees to be bound by all actions duly taken
pursuant to the terms and provisions of this Agreement by the Partnership and
the Partners prior to the date such Person became a Partner and, without
limiting the generality of the foregoing, specifically ratifies and approves all
agreements and other instruments as may have been executed and delivered on
behalf of the Partnership prior to such date and which are in force and effect
on such date.
10.10 Partnership's Redemption Option.
(a) Right to Redeem. At any time during the period commencing on the
date that is 24 months after the Effective Date and ending on the date of any
Liquidating Event, the Partnership shall, at the election of the Managing
General Partner made by furnishing three Business Days' prior written notice
thereof to the Limited Partner, have the right to redeem the Preferred
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Capital Portion of the Limited Partner Interest, in whole or in part, all on the
terms hereinafter set forth.
(b) Redemption of Preferred Capital Portion of Limited Partner
Interest. If the Managing General Partner has given notice to the Limited
Partner of redemption of the Preferred Capital Portion of the Limited Partner
Interest (a "Redemption Notice") in accordance with Section 10.10(a) and no
Liquidation Notice has been given prior to the date specified for such purchase
in the Redemption Notice, the redemption pursuant to this Section 10.10 shall
occur on (or with the consent of the Limited Partner, prior to or after) the
date that is three Business Days after the delivery of such Redemption Notice.
On the date such redemption is effected pursuant to this Section 10.10 (the
"Redemption Date"), the Partnership shall transfer to an account designated by
the Limited Partner in immediately available funds an amount equal to all or any
portion of the Preferred Capital Portion of the Limited Partner Interest, as
elected by the Managing General Partner.
(c) Fair Market Value. In each redemption pursuant to this Section
10.10, the fair market value of each Partnership Asset shall be determined, as
of the Redemption Date, in accordance with Section 3.2, and the Book Value of
each Partnership Asset and the Capital Account of each Partner shall be adjusted
in accordance with Section 3.7(d) as of the Redemption Date.
10.11 Withdrawal and Complete Redemption of Partners.
(a) General Rule. No Partner may withdraw from the Partnership except
in accordance with this Article 10 and Article 11.
(b) Limited Rights of Withdrawal. No Partner shall be permitted to
withdraw as a Partner of the Partnership unless, (a) in the case of the Managing
General Partner, a new Managing General Partner has been selected and has been
approved by the Limited Partner, acting with respect to this Section 10.11(b) in
its sole discretion, (b) every other Partner, each acting in its sole
discretion, approves such withdrawal, and (c) the withdrawing General Partner
has restored any deficit balance in its Capital Account. The Limited Partner
shall have the right to require that any new General Partner provide a
third-party guaranty of the new General Partner's obligations and liabilities
under the Partnership Agreement on terms and conditions satisfactory to such
Limited Partner.
(c) Right of Withdrawal by Special General Partner. At any time during
the period that commences on the sixth anniversary of the Effective Date and
ends on a Liquidating Event, the Special General Partner shall have the right,
exercisable in its sole discretion, to withdraw as Special General Partner of
the Partnership in accordance with this Section 10.11(c), Section 10.11(e), and
Section 10.12. If the Special General Partner elects to withdraw from the
Partnership,
Second Amended and Restated Agreement of Limited Partnership/Page 58
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such Partner (a "Withdrawing Partner") shall deliver a notice of its election to
withdraw to the Managing General Partner (a "Withdrawal Notice"), which notice
shall specify a date not less than 10 Business Days nor more than 20 Business
Days from the date of delivery of the Withdrawal Notice to the Managing General
Partner upon which the Withdrawing Partner desires to effect its withdrawal from
the Partnership (the "Withdrawal Date").
(d) Withdrawal by the Limited Partner. The Limited Partner may not
withdraw as the Limited Partner of the Partnership; provided, however, that the
redemption of the Preferred Capital Portion of the Limited Partner Interest
shall not constitute a breach or violation of this provision; and provided
further, that at any time after the withdrawal by IPFR as the Special General
Partner, IPT shall have the right, exercisable in it sole discretion, to
withdraw as the Limited Partner, provided that prior to such withdrawal, the
entire Preferred Capital Portion of the Limited Partner Interest has been
redeemed in accordance with Section 10.10 (if such redemption has not
theretofore occurred, the withdrawal of the Special General Partner shall not
provide IPT with the right to withdraw from the Partnership until such
redemption has occurred). If the Limited Partner elects to withdraw from the
Partnership under this Section 10.3(d), the Limited Partner (a "Withdrawing
Partner") shall deliver a notice of its election to withdraw to the Managing
General Partner (a "Withdrawal Notice"), which notice shall specify a date not
less than 10 Business Days nor more than 20 Business Days from the date of
delivery of the Withdrawal Notice to the General Partner upon which the
Withdrawing Partner desires to effect withdrawal from the Partnership (the
"Withdrawal Date").
(e) Redemption of Special General Partner Interest and Limited Partner
Interest. At any time during the period commencing on the second anniversary of
the Effective Date and ending on a Liquidating Event, the Partnership shall have
the right to redeem, in whole but not in part, the entire Interests of the both
the Special General Partner and the Limited Partner. If the Partnership elects
to redeem such Interests, the Partnership shall deliver to each such Partner (a
"Retiring Partner") a notice of its election to redeem the entire Interest of
such Partner (a "Retirement Notice"), which notice shall specify a date not less
than 10 Business Days nor more than 20 Business Days from the date of delivery
of the Retirement Notice to the Retiring Partner upon which the Partnership
desires to effect such redemption of their Interests (the "Retirement Date").
Any election made by the Managing General Partner pursuant to this Section
10.10(e) shall constitute an election to redeem the Interests of both the
Special General Partner and the Limited Partner, provided that as of the
Retirement Date both such Persons are Partners.
(f) Timing of Withdrawal. A Withdrawing Partner shall be permitted to
withdraw from the Partnership on the Withdrawal Date, provided that (a) no
Optional Liquidation Event has occurred that remains uncured, (b) the Managing
General Partner has prepared and delivered to each
Second Amended and Restated Agreement of Limited Partnership/Page 59
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of the other Partners a statement in accordance with Section 10.12(c), and (c) a
Valuation Report has been prepared and delivered to each Partner in accordance
with Sections 3.2 and 10.12(a).
10.12 Distribution to Withdrawing Partner.
(a) Valuation Report. Immediately upon (i) the Managing General
Partner's receipt of a Withdrawal Notice or (ii) the delivery by the Managing
General Partner of a Retirement Notice, a Valuation Report shall be prepared in
accordance with Section 3.2.
(b) Fair Market Value. If a Partner elects to withdraw in accordance
with Section 10.11 or the Managing General Partner elects to effect a redemption
in accordance with Section 10.11(e), (i) the fair market value of each
Partnership Asset shall be determined, as of the Withdrawal Date or the
Retirement Date, in accordance with Section 3.2, and the Book Value of each
Partnership Asset and the Capital Account of each Partner shall be adjusted in
accordance with Section 3.7(d) as of the Withdrawal Date, and (ii) Net Income
and Net Losses and other items of income, gain, loss, and deduction for the
period beginning on the first day of the first Allocation Year shall be
allocated among the Partners pursuant to Article 4. No further allocations shall
be made to the Withdrawing Partner after the Withdrawal Date or to the Retiring
Partner(s) after the Retirement Date.
(c) Capital Account Balance. The Managing General Partner (or, if the
Managing General Partner is the Withdrawing Partner, then the Special General
Partner) shall determine the Capital Account balance of the Withdrawing Partner
or Retiring Partner, as the case may be (adjusted as provided in Section 3.7(d))
and shall notify the Partners of the Capital Account balance so determined for
the Withdrawing Partner or the Retiring Partner, as the case may be.
(d) Distribution. On the date specified for (i) withdrawal in the
Withdrawing Partner's Withdrawal Notice or on such later date as all conditions
for withdrawal with respect to such Partner set forth in Section 10.11 and this
Section 10.12 have been satisfied or (ii) redemption in the Redemption Notice or
on such later date as all conditions for withdrawal with respect to such
Retiring Partners set forth in Section 10.11 and this Section 10.12 have been
satisfied, the Partnership shall make to such Withdrawing Partner a
distribution, or shall redeem the Retiring Partners' Interests for an amount in
cash, equal to the positive balance (if any) of such Partner's Capital Account,
and upon such distribution or redemption payment, the Withdrawing Partner or
Retiring Partner shall cease to be a Partner of the Partnership or, if no amount
is so required to be distributed to such Withdrawing Partner or contributed to
the Partnership by such Withdrawing Partner, the Withdrawing Partner shall cease
to be a Partner of the Partnership on the Withdrawal Date (or as soon thereafter
as such determination is made).
Second Amended and Restated Agreement of Limited Partnership/Page 60
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Article 11
Dissolution of Partnership; Liquidation and Distribution of Assets
11.1 Dissolution and Liquidation.
(a) The Partnership shall dissolve and liquidate upon the first to
occur of any of the following (each, a "Liquidating Event"):
(i) The sale or other disposition of all or substantially all
Partnership Assets and receipt of the final payment of any installment
obligation received as a result of any such sale or disposition;
(ii) The written consent of all Partners to dissolve, wind up, and
liquidate the Partnership;
(iii) Any event that makes it unlawful for the Partnership's business
to be continued;
(iv) The issuance of a decree by any court of competent jurisdiction
that the Partnership be dissolved and liquidated;
(v) The Bankruptcy of a General Partner or of the Partnership;
(vi) The delivery by the Limited Partner to the Managing General
Partner of a Liquidation Notice pursuant to Section 11.2(a); and
(vii) The withdrawal or removal of a General Partner, the assignment
by a General Partner of its entire Interest in the Partnership, or any
other event that causes a General Partner to cease to be a general partner
under the Act (other than a redemption of the Special General Partner
Interest effected in accordance with Section 10.11(e)); provided, however,
that any such event shall not constitute a Liquidating Event if the
Partnership is continued pursuant to this Section 11.1.
Upon the occurrence of any of the foregoing events, the Managing General Partner
shall provide notice of such event to the Partners pursuant to Section 6.4(c).
(b) Notwithstanding any provision of the Act or the Texas Revised
Partnership Act, the Partnership shall not dissolve prior to the occurrence of a
Liquidating Event. Upon the occurrence of any event set forth in Section
11.1(a)(vii) (so long as no other Liquidating Event has occurred), the
Partnership shall not be dissolved or required to be wound up if (x) at the time
of such event there is at least one remaining General Partner, and that General
Partner carries on the business
Second Amended and Restated Agreement of Limited Partnership/Page 61
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of the Partnership (any such remaining General Partner being hereby authorized
to carry on the business of the Partnership), or, (y) within 90 days after such
event, all remaining Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of such event, of
one or more additional General Partners. If it is determined by a court of
competent jurisdiction that the Partnership has dissolved prior to the
occurrence of a Liquidating Event, or if upon the occurrence of an event
specified in Section 11.1(a)(vii), the Partners fail to appoint a substitute
General Partner effective as of such event and to agree to continue the business
of the Partnership as provided in this Section 11.1, then, within an additional
90 days, all remaining Partners may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as a general partner a Person elected by all
remaining Partners. Unless such an election is made within 180 days after the
event causing dissolution, the Partnership shall wind up its affairs in
accordance with Section 11.3. If such election is made within 180 days after the
event causing dissolution, then:
(i) The reconstituted limited partnership shall continue until the
occurrence of a Liquidating Event, as provided in this Section 11.1;
(ii) If the successor general partner is not a former General Partner,
then the Interest of the former General Partner shall be treated
thenceforth as the Interest of an unadmitted assignee of a Partner; and
(iii) All necessary steps shall be taken to cancel this Agreement and
the Amended Certificate and to enter into a new partnership agreement and
certificate of limited partnership, and the successor general partner may
for this purpose exercise the powers of attorney granted to the Managing
General Partner pursuant to Article 13 and shall cause such certificate of
limited partnership for the reconstituted partnership to be filed in the
office of the Secretary of State of the State of Texas in accordance with
the Act; provided, however, that the right of the Partners to select a
successor general partner and to reconstitute and continue the business of
the Partnership shall not exist and may not be exercised unless the
Partnership has received an opinion of counsel that the exercise of the
right would not result in the loss of limited liability of the Limited
Partner, and neither the Partnership nor the reconstituted Partnership
would cease to be treated as a partnership for United States federal income
tax purposes upon the exercise of such right to continue.
(c) In the event of the dissolution and liquidation of the
Partnership, its business activities shall be wound up, any amounts due from the
Partners shall be collected, the Partnership's debts and liabilities shall be
paid, and its remaining assets, if any, shall be distributed as set forth in
Section 11.3 below. Dissolution shall be effective on the date of the occurrence
of an event set forth
Second Amended and Restated Agreement of Limited Partnership/Page 62
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in Section 11.1(a), but the Partnership shall not terminate until all
Partnership Assets have been liquidated and the proceeds distributed in
accordance with this Article 11, and the Amended Certificate has been canceled
pursuant to the Act. Notwithstanding the dissolution of the Partnership, prior
to the termination of the Partnership as aforesaid, the business of the
Partnership and the affairs of the Partners as such, shall continue to be
governed by this Agreement.
11.2 Optional Liquidation Events; Passage of Time.
(a) Optional Liquidation Events. If any of the following events
("Optional Liquidation Events") shall occur and be continuing, the Managing
General Partner immediately shall notify each Partner in writing as to the
occurrence and the nature of the Optional Liquidation Event in accordance with
Section 6.4(c) and any actions that are or will be taken to remedy the
circumstances giving rise to the Optional Liquidation Event (the "Optional
Liquidation Notice"):
(i) The Partnership having acquired or otherwise having come into
possession of or holding any assets that are not Permitted Assets without
the consent of the Limited Partner; or
(ii) The failure of a Partner to comply with any material term of this
Agreement or the Contribution Agreement.
If any Partner (other than the defaulting Partner under clause (ii)) fails to
receive a certificate to the effect that the circumstances giving rise to the
Optional Liquidation Event have been cured (the "Cure Certificate") that is
satisfactory to it within three Business Days after the Optional Liquidation
Notice, that Partner may elect to cause an Optional Liquidation Event to result
in a Liquidating Event by delivering to the Managing General Partner a notice of
liquidation (the "Liquidation Notice"), effective to cause the Optional
Liquidation Event to become a Liquidating Event upon the fifth Business Day
following such delivery.
(b) Rescission Notice. A Partner may rescind a Liquidation Notice
given by that Partner pursuant to Section 11.2(a) by giving notice of rescission
(a "Rescission Notice") to the Managing General Partner before the Liquidation
Notice becomes effective to cause an Optional Liquidation Event to become a
Liquidating Event.
(c) Redemption Pursuant to Section 10.10. If the Partnership redeems
the Preferred Capital Portion of the Limited Partner Interest pursuant to
Section 10.10 before an Optional Liquidation Event has become a Liquidating
Event, there shall be no liquidation of the Partnership in accordance with this
Section 11.2.
11.3 Distributions upon Liquidation. Upon the occurrence of a Liquidating
Event, the Managing General Partner or, if the Managing General Partner has
withdrawn in breach of this
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Agreement or been dissolved or removed, a liquidator or liquidating committee
selected by the Limited Partner shall be the "Liquidator." The Liquidator shall,
as provided in this Agreement, proceed to the liquidation of the Partnership,
and the proceeds of such liquidation shall be applied and distributed in the
following order of priority:
(a) first, to the payment of expenses of the liquidation;
(b) second, to the payment of debts and liabilities of the
Partnership, in order of priority as provided by law, other than debts or
liabilities owed to Partners;
(c) third, to the setting up of any reserves that the Liquidator
determines are reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership;
(d) fourth, to the payment of debts and liabilities of the Partnership
owed to Partners; and
(e) thereafter, to the Partners, in accordance with their respective
positive Capital Account balances.
11.4 Sale of Partnership Assets. As expeditiously as possible, but in no
event later than 90 days following the occurrence of the Liquidating Event (and
no later than 90 days after the last day on which the Partnership may be
reconstituted pursuant to Section 11.1 after the occurrence of a Liquidating
Event set forth in Section 11.1(a)(vii)), the Liquidator shall pay all
Partnership liabilities, establish the reserves, and make the distributions
provided for in Section 11.3. If the Partnership is not wound up within the
period prescribed by the preceding sentence, then after paying the liabilities
and obligations of the Partnership as specified in Section 11.3 or making
reasonable provision for payment thereof, the Liquidator shall distribute cash
to all Partners (other than the Managing General Partner) in amounts equal to
the positive final balances, if any, standing in their Capital Accounts. Except
as agreed by the Managing General Partner, no Partner other than the Managing
General Partner shall have the right to demand or receive property other than
cash upon liquidation, and the Liquidator shall, in any event, have the power to
sell Partnership Assets for cash as necessary to pay Partnership liabilities and
to establish appropriate reserves and the liquidation of the Capital Account
balances of the Partners.
11.5 Cancellation of Certificate. Upon the completion of the distribution
of Partnership Assets as provided in Section 11.3, or at such other time as may
be required by law, a certificate of cancellation signed by the Liquidator shall
be filed with the Secretary of State of the State of Texas. The Liquidator shall
take such other actions as may be necessary or appropriate to terminate the
Partnership.
Second Amended and Restated Agreement of Limited Partnership/Page 64
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11.6 Allocations Upon Liquidation. During the period commencing on the day
that the Liquidating Event occurs and ending on the date on which all
Partnership Assets have been distributed to the Partners pursuant to Section
11.3, the Partners shall continue to share Net Income, Net Losses, and other
items of Partnership income, gain, loss, or deduction in the manner provided in
Article 4.
Article 12
Amendments and Meetings
12.1 Amendments. An amendment to this Agreement shall be adopted and be
effective as an amendment to this Agreement if it receives the affirmative vote
of all Partners, is expressed in writing, and is executed by all Partners.
12.2 Meetings of the Partners.
(a) Meetings of the Partners may be called by the Managing General
Partner and shall be called by the Managing General Partner upon the written
request of any other Partner. The call shall state the location of the meeting
(which shall be in the continental United States) and the nature of the business
proposed to be transacted at the meeting. Notice of each meeting shall be given
by the Managing General Partner to all other Partners not less than seven
Business Days nor more than 30 days before the date of the meeting. At the
meeting, Partners may vote in person, by proxy, or by telephone. Any vote or
consent of Partners that is permitted or required under the Agreement may be
given at a meeting of Partners or may be given under the procedure in Section
12.3. Except as otherwise provided in this Agreement, all matters subject to a
vote of the Partners must be decided by the unanimous vote of the Partners.
(b) Any Partner requesting a meeting may fix, in advance, a date as
the record date for determining which Partners are entitled to vote on, or vote
at, any meeting of the Partners or any adjournment of that meeting. The
determination date shall not be more than 30 days or less than 10 Business Days
before the meeting.
(c) The Limited Partner may authorize another Person to act for it by
proxy on all matters in which the Limited Partner is entitled to participate,
including waiving notice of a meeting, voting at a meeting, or otherwise
participating at a meeting. Each proxy must be signed by the Limited Partner or
its attorney-in-fact. Unless otherwise provided in the proxy, each proxy shall
expire 180 days after the date of the proxy. Each proxy shall also be revocable
at the pleasure of the Limited Partner.
Second Amended and Restated Agreement of Limited Partnership/Page 65
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(d) Each meeting of Partners shall be conducted by the Managing
General Partner or another Person appointed by the Managing General Partner.
Each meeting shall be conducted under such rules for the conduct of the meeting
as the Managing General Partner or its appointee reasonably deems appropriate.
12.3 Unanimous Consent. In lieu of following the procedures in Section 12.1
or Section 12.2, the Partnership may take any action by unanimous consent of the
Partners. The consent must be in writing and must be signed by each Partner or
that Partner's attorney-in-fact.
Article 13
Power of Attorney
13.1 Appointment. By execution of this Agreement, each Partner irrevocably
appoints the Managing General Partner, each successor Managing General Partner,
and the Liquidator, severally, with full power of substitution and
resubstitution, as its true and lawful attorney-in-fact and agent, with full
power and authority to act in its name, place, and stead and for its use and
benefit in signing, executing, certifying, acknowledging, swearing to, filing,
publishing, and recording:
(a) all certificates of limited partnership, amended name
certificates, and other documents (including counterparts of this
Agreement) required to be filed under the laws of Texas or any other
jurisdiction in which the Partnership is doing or intends to do business;
(b) all amendments to this Agreement and the other documents described
in clause (a) above to reflect:
(i) all amendments adopted by the Partners in accordance with
this Agreement;
(ii) the admission of a Substituted Partner; and
(iii) the Transfer by a Partner of its Interest in the
Partnership; and
(c) all certificates of cancellation and other instruments necessary
or appropriate to effect the dissolution and termination of the Partnership
under this Agreement.
13.2 Nature of Special Power. The power of attorney granted by this Article
13:
(a) is a special power of attorney coupled with an interest and is
irrevocable;
Second Amended and Restated Agreement of Limited Partnership/Page 66
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(b) may be exercised by any such attorney-in-fact by listing the
Partners executing any agreement, certificate, instrument, or other
document with the single signature of any such attorney-in-fact acting as
attorney-in-fact for such Partners;
(c) shall survive, and not be affected by, the subsequent Bankruptcy,
insolvency, dissolution, or cessation of existence of a Partner; and
(d) shall survive the delivery of an assignment by a Partner of all or
part of its Interest in the Partnership (except that, if a Partner assigns
its entire Interest in the Partnership and the assignee, with the consent
of the Managing General Partner, is admitted as a Substituted Partner, the
power of attorney shall survive the delivery of that assignment for the
sole purpose of enabling the attorney-in-fact to effect the substitution)
and shall extend to each Partner's successors and assigns.
Article 14
Notices
14.1 Writing. Each notice, payment, demand or communication required or
permitted to be given by this Agreement shall be in writing.
14.2 Delivery and Receipt. Each notice shall be deemed to have been
delivered and received for all purposes (a) when physically delivered to the
Person or to an officer of the Person to whom it is directed or (b) on actual
receipt by the addressee, if sent by registered or certified mail.
14.3 Postage. The Person sending the notice shall pay all postage and other
costs of delivery.
14.4 Addresses. The addresses of the Partnership and the Partners for
purposes of notice are:
(a) If to the Partnership, the address in Section 1.3; and
(b) If a Partner, the appropriate address in Section 1.2.
14.5 Change of Address. On 30 days' notice to the Partnership and the other
Partners, a Partner may change its address for purposes of notice to any other
address in the continental United States.
Second Amended and Restated Agreement of Limited Partnership/Page 67
<PAGE>
Article 15
Other Provisions
15.1 Binding Effect. Except as otherwise provided in this Agreement, every
covenant, term, and provision of this Agreement shall bind and inure to the
benefit of each Partner and that Partner's respective successors, transferees,
and assigns.
15.2 Construction and Enforcement. In construing and enforcing this
Agreement, the following rules shall be followed:
(a) Control of Drafting. Each provision of this Agreement shall be
construed simply according to its fair meaning and not strictly for or
against any Partner. No consideration shall be given to the fact or
presumption that any Partner had a greater or lesser hand in drafting this
Agreement.
(b) Captions. Except for the boldfaced defined terms used in Article
2, in construing and enforcing this Agreement, no consideration shall be
given to the captions of the articles, sections, subsections, and clauses
of this Agreement, which are inserted for con-venience in organizing and
locating the provisions of this Agreement, not as an aid in its
construction.
(c) Plural and Singular Forms. Plural words shall be understood to
include their singular forms, and vice versa.
(d) Including. The word "include" and its syntactical forms mean
"include, but are not limited to," and corresponding syntactical forms. The
principle of ejusdem generis shall not be used to limit the scope of the
category of things illustrated by the items mentioned in a clause
introduced by the word "including."
(e) Examples. This Agreement uses examples as illustrations, but the
examples should not be used to limit the scope of the matter they
illustrate.
(f) Definitions. A defined term has its defined meaning throughout this
Agreement, regardless of where in this Agreement the term is defined.
(g) Internal Cross-References. Except as otherwise provided in this
Agreement, a reference to an Article, Section, or clause means an article,
section, or clause of this Agreement and may be understood to mean, for
example, "Section 5.1 of this Agreement" or "Section 5.1 hereof." The term
"Section" is used variously to identify entire Sections (as
Second Amended and Restated Agreement of Limited Partnership/Page 68
<PAGE>
in "Section 6.8"), subsections (as in "Section 6.8(a)"), and clauses (as in
"Section 6.8(h)(iii)").
15.3 Severability. Unless doing so would cause a Partner to lose the
benefit of its economic bargain under this Agreement, any illegal or invalid
provision of this Agreement shall be deemed to have been severed from this
Agreement, and the illegality or invalidity of that provision shall not affect
the validity or legality of the remainder of the Agreement.
15.4 Incorporation by Reference. No exhibit, schedule, or appendix to this
Agreement shall be deemed to have been incorporated in this Agreement by
reference unless this Agreement expressly so provides.
15.5 Further Action. Each Partner, on reasonable request of the Managing
General Partner, shall perform all further acts and execute, acknowledge, and
deliver all documents that may be reasonably necessary, appropriate, or
desirable to carry out the intent of this Agreement.
15.6 Time. Time is of the essence in this Agreement.
15.7 Governing Law. The laws of the State of Texas shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners, excluding the laws of
Texas that require reference to the laws of another jurisdiction.
15.8 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all Partners had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
15.9 Specific Performance. Each Partner agrees that the other Partners
would be irreparably damaged if any material provision of this Agreement is not
performed in accordance with its specific terms and that monetary damages would
not provide an adequate remedy in such event. Accordingly, in addition to any
other remedy to which the nonbreaching Partners may be entitled, at law or in
equity, the nonbreaching Partners shall be entitled to injunctive relief to
prevent breaches of this Agreement and specifically to enforce their rights
under this Agreement.
(Signatures follow on a separate page.)
Second Amended and Restated Agreement of Limited Partnership/Page 69
<PAGE>
IN WITNESS WHEREOF, the Partners have executed this Second Amended and
Restated Agreement of Limited Partnership, West Coast Forest Resources Limited
Partnership, as of the Effective Date.
MANAGING GENERAL PARTNER
R-H TIMBER CO., LLC
By Mid-Valley Resources, Inc.,
Member
By
-------------------------------
Ronald C. Parker, President
By Roseburg Resources Co., Member
By
-------------------------------
Allyn C. Ford, President
SPECIAL GENERAL PARTNER
IP FOREST RESOURCES COMPANY
By
-------------------------------
Leonard H. Ronnie, Jr.
Duly Authorized Agent
Limited Partner
IP TIMBERLANDS, LTD.
By IP Forest Resources Company,
General Partner
By
-------------------------------
Leonard H. Ronnie, Jr
Duly Authorized Agent
Second Amended and Restated Agreement of Limited Partnership/Page 70
<PAGE>
Exhibit A
AGREED FAIR MARKET VALUE OF PARTNERSHIP ASSETS
WCFR Balance Sheet immediately before
R-H Co. and IPFR Capital Contributions
Assets:
------
Retained
Current Assets $ 2,277,000
NSO Assets
Kellogg $ 845,000
Haines $ 770,000
Lebanon $ 985,000
McIntosh Assets $ 1,100,000
Western Region
Forestlands (incl. IPW Assets)
Oregon $ 624,063,727
Washington $ 277,609,273
Remaining cash from repayment of
IP Notes and sale of Horse Barn $ 4,176,306
--------------
Total $ 911,826,306
==============
Liabilities and Capital:
-----------------------
Retained
Current Liabilities $ 2,277,000
Bank Loans $ 755,600,833
Advance
Contribution Interest $ 229,508
Additional
Property Notes $ 13,000,000
Capital Accounts:
IPT $ 139,311,775
IPFR $ 1,407,190
--------------
Total $ 911,826,306
==============
Second Amended and Restated Agreement of Limited Partnership/Exhibit A
<PAGE>
Exhibit B
Form of Timberland Management Contract
Second Amended and Restated Agreement of Limited Partnership/Exhibit B
<PAGE>
Exhibit C
Common Capital and Preferred Capital of the Limited Partner
Limited Partner's Capital:
Common Capital $ 3,061,224
Preferred Capital $ 136,250,551
-------------
Total $ 139,311,775
Second Amended and Restated Agreement of Limited Partnership/Exhibit C
<PAGE>
Exhibit D
WCFR Balance Sheet immediately after
R-H Co. and IPFR Capital Contributions
Assets:
------
Retained Current Assets $ 2,277,000
Excess New Loan Proceeds $ 85,000
NSO Assets
Kellogg $ 845,000
Haines $ 770,000
Lebanon $ 985,000
McIntosh Assets $ 1,100,000
Western Region
Forestlands (incl. IPW Assets)
Oregon $ 624,063,727
Washington $ 277,609,273
Capitalized Loan Costs $ 7,215,000
--------------
Total $ 914,950,000
==============
Liabilities and Capital:
-----------------------
Retained Current Liabilities $ 2,277,000
New Loan $ 457,300,000
Additional
Property Notes $ 13,000,000
Capital Accounts:
R-H Co. $ 300,000,000
IPFR $ 3,061,224
IPT
Preferred $ 136,250,552
Common $ 3,061,224
--------------
Total $ 914,950,000
==============
Second Amended and Restated Agreement of Limited Partnership/Exhibit D
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Earnings and the Consolidated Balance Sheet of IP
Timberlands, Ltd. and is qualified in its entirety by reference to such
financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,021
<SECURITIES> 0
<RECEIVABLES> 113,749
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 124,770
<PP&E> 685,704
<DEPRECIATION> 0
<TOTAL-ASSETS> 810,946
<CURRENT-LIABILITIES> 181,513
<BONDS> 0
0
0
<COMMON> 599,417
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 810,946
<SALES> 132,110
<TOTAL-REVENUES> 137,907
<CGS> 0
<TOTAL-COSTS> 51,064
<OTHER-EXPENSES> 1,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (202)
<INCOME-PRETAX> 742,693
<INCOME-TAX> 0
<INCOME-CONTINUING> 742,693
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 742,693
<EPS-PRIMARY> 6.64
<EPS-DILUTED> 6.64
</TABLE>
