<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 March 31, 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 April 30, 1996: 46,445,729
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IP TIMBERLANDS, Ltd.
INDEX
Page No.
--------
PART I. Financial Information
Item 1. Financial Statements 3
Consolidated Statement of Earnings - 4
Three Months Ended March 31, 1996 and 1995
Consolidated Balance Sheet - 5
March 31, 1996 and December 31, 1995
Consolidated Statement of Cash Flows - 6
Three Months Ended March 31, 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 13
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
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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 March 31, 1996, and the results of operations
for the quarter ended March 31, 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
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IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands - except per unit data)
(Unaudited)
Three Months Ended
March 31,
--------------------------
1996 1995
--------- ---------
Revenues
Stumpage sales
International Paper $ 43,787 $ 52,569
Unaffiliated parties 33,710 28,276
Forestland sales 1,870 59
Other income, net 1,741 1,363
--------- ---------
Total revenues 81,108 82,267
--------- ---------
Operating Costs and Expenses
Depletion
International Paper 2,464 3,230
Unaffiliated parties 3,682 2,765
Cost of forestlands sold 114 47
Amortization of roads 555 535
Forest operations 11,060 9,754
General and administrative 5,369 5,391
Property and severance taxes 3,786 3,793
--------- ---------
Total operating costs and expenses 27,030 25,515
--------- ---------
54,078 56,752
Gain on Sale of Partnership Interest 638,205
--------- ---------
Operating Earnings 692,283 56,752
Interest Income 5,850 7,005
Interest Expense (11,349)
General Partners' Interest in IPTO (484) (637)
--------- ---------
Net Partnership Earnings $ 686,300 $ 63,120
========= =========
Earnings per Class A Unit (Note 6) $ 5.66 $ 1.36
========= =========
The accompanying notes are an integral part of these financial statements.
4
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IP TIMBERLANDS, Ltd.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
March 31, December 31,
1996 1995
---------- ------------
Assets
Current Assets
Cash and temporary investments $ 8,876 $ 11,899
Notes receivable - International Paper 391,288 371,378
Due from International Paper 7,951 7,293
Accounts and notes receivable 9,854 23,558
---------- ----------
Total current assets 417,969 414,128
Notes Receivable 2,133 1,027
Forestlands 660,798 734,200
Roads, net of accumulated amortization of
$30,864 (1996) and $ 49,618 (1995) 22,886 38,026
---------- ----------
Total Assets $1,103,786 $1,187,381
========== ==========
Liabilities and Partners' Capital
Current Liabilities
Accounts payable and accrued liabilities $ 20,677 $ 372
Accrued interest 5,983
Accrued property and severance taxes 5,496 6,286
Customer advance payments 3,068 3,797
---------- ----------
Total current liabilities 29,241 16,438
Long-Term Debt 750,000
Lease Obligations 1,225 1,231
General Partners' Interest in IPTO 29,171 26,662
Partners' Capital
General partners 32,297 25,786
Limited partners 1,011,852 367,264
---------- ----------
Total Liabilities and Partners' Capital $1,103,786 $1,187,381
========== ==========
The accompanying notes are an integral part of these financial statements.
5
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IP TIMBERLANDS, Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------
1996 1995
--------- ---------
Operating Activities
Net Partnership earnings $ 686,300 $ 63,120
Noncash items
Depletion 6,146 5,995
Cost of forestlands sold 114 47
Amortization of roads 555 535
Gain on sale of partnership interest (638,205)
Other, net 2,506 337
Changes in current assets and liabilities
Accounts and notes receivable 12,598 2,361
Due from International Paper (658) (7,478)
Customer advance payments (729) 629
Accrued interest payable (5,983)
Other, net (782) 280
--------- ---------
Cash provided by operations 61,862 65,826
--------- ---------
Investment Activities
Investment in forestlands and roads (6,217) (6,700)
Loans to International Paper (72,449) (41,570)
Repayment of loans by International Paper 52,539 214,720
--------- ---------
Cash provided by (used for) investment activities (26,127) 166,450
--------- ---------
Financing Activities
Distributions to partners of IPT and IPTO (38,758) (233,093)
--------- ---------
Change in Cash and Temporary Investments (3,023) (817)
Cash and Temporary Investments
Beginning of the period 11,899 7,922
--------- ---------
End of the period $ 8,876 $ 7,105
========= =========
The accompanying notes are an integral part of these financial statements.
6
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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 March 31, 1996 and 1995 were $2.9 million and $2.3
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 March 31, 1996 and 1995 was $5.6 and $6.8 million,
respectively. The decrease in interest income in 1996 was due to lower
interest rates.
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 were $6.5
million at December 31, 1995.
4. Receivables
The major classifications of current receivables are shown below. No
allowance for doubtful accounts was considered necessary.
March 31, December 31,
1996 1995
--------- ------------
(In thousands)
Notes receivable - trade $ 9,305 $22,730
Accounts receivable - trade 414 275
Accrued interest and other receivables 135 553
------- -------
$ 9,854 $23,558
------- -------
Notes receivable-trade at December 31, 1995 included $18.5 million from a
fourth quarter bulk sale.
7
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5. Gain on Sale of Partnership Interest
On March 29, 1996, a subsidiary partnership of IPT completed the sale of a
98% general partnership interest to R-H Timber Co., LLC for consideration
which resulted in a total capitalization of the partnership of
approximately $905 million. As a result of this transaction, IPT recognized
a book gain of approximately $638 million. Approximately $203 million, or
$4.37 per unit, of that gain 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.
Included in the net assets of the partnership interest sold were
approximately $83 million of forestlands, $19 million of roads and $750
million of long-term debt. Approximately $17.8 million of expenses were
accrued in connection with the sale.
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 Ended
March 31,
---------------------
1996 1995
-------- --------
Allocation to Primary Account $258,709 $ 66,771
Allocation to Secondary Account 427,591 (3,651)
-------- --------
Net Partnership Earnings 686,300 63,120
-------- --------
95% of the Primary Account(1) 245,774 63,432
4% of the Secondary Account(1) 17,104 (146)
-------- --------
Earnings Allocated to Class A Limited Partners $262,878(2) $ 63,286
======== ========
Weighted Average Class A Units Outstanding 46,446 46,446
======== ========
Earnings Per Class A Unit $ 5.66(2) $ 1.36
======== ========
(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
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7. Partners' Capital
The following tables present an analysis of the activity in Partners'
Capital (in thousands):
Partners' Capital
-----------------------------------------
General Limited
Partners Partners Total
----------- ----------- -----------
Three Months Ended March 31, 1996
Balance - January 1, 1996 $ 25,786 $ 367,264 $ 393,050
Net earnings for the period 6,863 679,437 686,300
Partner distributions (352) (34,849) (35,201)
----------- ----------- -----------
Balance - March 31, 1996 $ 32,297 $ 1,011,852 $ 1,044,149
=========== =========== ===========
Three Months Ended March 31, 1995
Balance - January 1, 1995 $ 33,651 $ 1,145,938 $ 1,179,589
Net earnings for the period 631 62,489 63,120
Partner distributions (2,308) (228,454) (230,762)
----------- ----------- -----------
Balance - March 31, 1995 $ 31,974 $ 979,973 $ 1,011,947
=========== =========== ===========
The authorized and outstanding Class A and B Depositary Units at March 31, 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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Total Partnership revenues for the first quarter of 1996 were $81.1 million,
down slightly from $82.3 million in 1995. Revenues from stumpage sales were
$77.5 million in 1996 and $80.8 million for the comparable period of 1995. A
gain of $638.2 million in the 1996 first quarter from the sale of a subsidiary
partnership interest pushed net Partnership earnings to $686.3 million versus
$63.1 million in 1995. Partnership earnings for the quarter excluding the gain
were $48.1 million compared with $63.1 million in 1995. This decline in earnings
was due primarily to interest expense related to $750 million of debt borrowed
in November 1995.
Stumpage prices in the South were 14% below 1995 levels for the first quarter,
which when combined with a 5% increase in harvest volumes, led to 10% lower
stumpage sales revenues for the first quarter of 1996. High mill inventories in
the 1996 quarter led to lower demand for Partnership stumpage. Sawlog prices
declined sharply. In the West, harvest volumes were 17% higher than in first
quarter of 1995. The harvest in 1995 was lower than normal due to exceptionally
poor weather conditions and high customer inventories. Stumpage sales revenues
also increased due to the higher harvest as average prices were about the same
as in 1995. In the Northeast, a 12% decline in harvest volumes combined with an
11% decline in average prices resulted in a 22% drop in stumpage sales revenues.
The decline in volumes reflects poor harvesting conditions early in the quarter.
Price realizations were lower than in 1995 due to a lower proportion of higher
valued sawlogs.
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.
Amounts attributable to the Primary and Secondary Accounts for major categories
in the statement of earnings were (in thousands):
Three Months Ended
March 31,
-----------------------
1996 1995
------- -------
Stumpage Sales
Primary Account $77,497 $80,819
Secondary Account 26
------- -------
$77,497 $80,845
======= =======
Forestland Sales
Primary Account $ $ 5
Secondary Account 1,870 54
------- -------
$ 1,870 $ 59
======= =======
Operating Costs and Expenses
Primary Account $17,899 $19,270
Secondary Account 9,131 6,245
------- -------
$27,030 $25,515
======= =======
10
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Operating costs and expenses by category are shown in the consolidated statement
of earnings on page 4.
Volumes attributable to timber sales were (in thousand cunits):
Three Months Ended
March 31,
------------------
1996 1995
---- ----
Used by International Paper facilities 230 314
Resold by International Paper 157 156
Sold to unaffiliated parties 503 398
--- ---
890 868
=== ===
Liquidity and Capital Resources
IPT had cash and temporary investments of $8.9 million, an intercompany account
receivable from International Paper of $8.0 million and notes receivable from
International Paper of $391.2 million, giving the Partnership $408.1 million in
liquid assets at March 31, 1996. 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):
March 31, December 31,
1996 1995
-------- ------------
Cash, temporary investments
and current receivables from
International Paper
Primary Account $342,916 $310,083
Secondary Account 65,199 80,487
-------- --------
$408,115 $390,570
======== ========
Total per Class A Unit $ 7.07 $ 6.41
======== ========
In addition, current assets at March 31, 1996 and December 31, 1995, included
$.4 million and $.3 million of accounts receivable, respectively, and $9.3
million and $22.7 million of notes receivable, respectively, from parties other
than International Paper due within the next 12 months.
11
<PAGE>
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
--------- --------- ---------
Three Months Ended March 31, 1996
Cash provided by operations $ 66,222 $ (4,360) $ 61,862
Investment in forestlands and roads (223) (5,994) (6,217)
IPTO general partners' interest in above (660) 104 (556)
--------- --------- ---------
Cash flow after capital expenditures 65,339 (10,250) $ 55,089
Class A Unit allocation factor 95% 4% =========
--------- ---------
Class A Unit cash flow
after capital expenditures $ 62,072 $ (410) $ 61,662
========= ========= =========
Distributions declared for Class A Units $ 476,069 $ 476,069
========= =========
Three Months Ended March 31, 1995
Cash provided by operations $ 73,511 $ (7,685) $ 65,826
Investment in forestlands and roads (2,855) (3,845) (6,700)
IPTO general partners' interest in above (707) 115 (592)
--------- --------- ---------
Cash flow after capital expenditures 69,949 (11,415) $ 58,534
Class A Unit allocation factor 95% 4% =========
--------- ---------
Class A Unit cash flow
after capital expenditures $ 66,452 $ (457) $ 65,995
========= ========= =========
Distributions declared for Class A Units $ 219,224 $ 219,224
========= =========
In April 1996, IPT declared a special distribution of $9.75 per Class A Unit
payable on May 15, 1996. In addition, IPT declared a regular quarterly cash
distribution of $.50 per Class A Unit payable on May 15, 1996. In accordance
with New York Stock Exchange rules, the ex-dividend date for these distributions
was set at May 16, 1996. The decrease in the regular quarterly distribution 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.
On March 31, 1995, IPT paid a $4.00 per Class A Unit special distribution. The
payment of this distribution was the result of management's evaluation that
remaining cash balances and projected future cash flows would be adequate for
future asset acquisition and operating requirements.
Capital expenditures, including expenditures for reforestation of harvested
forestlands, acquisition of capitalized leases and road construction, are
expected to be approximately $50 million for 1996.
12
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Part II. Other Information
Item 5. Other Information
In January 1996, IPFR approved amendments to the IPT and the IPTO
Partnership Agreements. In general, the amendments clarified that IPT
can move its operating assets (those directly held by IPTO) to and
among other possible subsidiary partnerships or corporations, provided
that any such subsidiary that directly owns 50% or more of IPT's
assets will be subject to all the restrictions that IPTO is then
subject to. In addition, the amendments clarified that IPT cannot sell
50% or more of its assets to a third party without limited partner
approval. The amendments were accomplished through changes to certain
existing definitions and the addition of a few new definitions.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3 (1) Fourth Amended and Restated Agreement of Limited Partnership of
IP Timberlands, Ltd.
3 (2) Amended and Restated Agreement of Limited Partnership of IP
Timberlands Operating Company, Ltd.
27 Financial Data Schedule
(b) Current Reports on Form 8-K were filed on February 2, 1996, as
amended February 21, 1996 and March 29, 1996.
13
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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: May 14, 1996 By: /s/ James W. Guedry
----------------------------
James W. Guedry
Vice President and Secretary
Date: May 14, 1996 By: /s/ Frederick L. Bleier
----------------------------
Frederick L. Bleier
Treasurer and Controller
and Chief Financial and
Accounting Officer
14
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================================================================================
FOURTH
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP
OF
IP TIMBERLANDS, LTD.
================================================================================
<PAGE>
IP TIMBERLANDS, LTD.
TABLE OF CONTENTS
ARTICLE I
ORGANIZATIONAL MATTERS
SECTION 1.1 Certain Defined Terms....................................2
SECTION 1.2 Formation and Continuation...............................2
SECTION 1.3 Name.....................................................2
SECTION 1.4 Principal Office; Registered Office; Registered Agent....3
SECTION 1.5 Power of Attorney........................................3
SECTION 1.6 Term.....................................................4
ARTICLE II
PURPOSE
SECTION 2.1 Purpose..................................................4
ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.1 Primary Account..........................................4
SECTION 3.2 Secondary Account........................................6
SECTION 3.3 Additional Issuance of Securities........................8
SECTION 3.4 No Preemptive Rights....................................12
SECTION 3.5 Capital Accounts........................................12
SECTION 3.6 Interest................................................16
SECTION 3.7 No Withdrawal...........................................16
SECTION 3.8 Loans from Partners.....................................16
ARTICLE IV
MAINTENANCE OF THE ACCOUNTING UNITS; DISTRIBUTIONS
SECTION 4.1 Sharing of Costs and Expenses of the Primary Account....17
SECTION 4.2 Sharing of Costs and Expenses of the Secondary Account..17
SECTION 4.3 Sharing of Revenues of the Primary Account..............18
SECTION 4.4 Sharing of Revenues of the Secondary Account............19
<PAGE>
SECTION 4.5 Allocation of Costs and Revenues........................19
SECTION 4.6 Classification of Certain Costs and Revenues............20
SECTION 4.7 Financing of Costs and Distributions....................21
SECTION 4.8 Affiliated Corporations and Partnerships................21
SECTION 4.9 Closing of the Primary Account..........................22
SECTION 4.10 Current Distributions...................................22
ARTICLE V
FEDERAL INCOME TAX ALLOCATIONS
SECTION 5.1 Capital Account Allocations.............................23
SECTION 5.2 Tax Allocations.........................................24
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 6.1 Management..............................................28
SECTION 6.2 Certificate of Limited Partnership......................28
SECTION 6.3 Reliance by Third Parties...............................28
SECTION 6.4 Purchase or Sale of Units...............................29
SECTION 6.5 Compensation and Reimbursement of the General Partners..29
SECTION 6.6 Outside Activities......................................30
SECTION 6.7 Partnership Funds.......................................31
SECTION 6.8 Indemnification of General Partner......................31
SECTION 6.9 Liability of General Partners...........................35
SECTION 6.10 Other Matters Concerning General Partners...............35
SECTION 6.11 Tax Basis and Value Determinations......................36
SECTION 6.12 Resolution of Conflicts of Interest.....................36
ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 7.1 Limitation of Liability.................................37
SECTION 7.2 Management of Business..................................37
SECTION 7.3 Outside Activities......................................37
SECTION 7.4 Return of Capital.......................................37
SECTION 7.5 Rights of Limited Partners and Assignees................37
ii
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting..................................38
SECTION 8.2 Fiscal Year.............................................39
SECTION 8.3 Reports.................................................39
ARTICLE IX
INCOME TAX MATTERS
SECTION 9.1 Preparation of Tax Returns..............................40
SECTION 9.2 Tax Elections...........................................40
SECTION 9.3 Tax Controversies.......................................40
SECTION 9.4 Organizational Expenses.................................41
SECTION 9.5 Taxation as a Partnership...............................41
SECTION 9.6 Withholding.............................................41
ARTICLE X
ISSUANCE OF CERTIFICATES
SECTION 10.1 Issuance of Certificates................................41
SECTION 10.2 Lost, Stolen or Destroyed Certificates..................42
SECTION 10.3 Registered Owner........................................42
ARTICLE XI
TRANSFER OF INTERESTS
SECTION 11.1 Transfer................................................43
SECTION 11.2 Transfer of Interests of General Partners...............43
SECTION 11.3 Transfer of Units.......................................44
SECTION 11.4 Transfer of Depositary Units............................44
SECTION 11.5 Citizenship Certifications; Non-citizen Assignees.......45
SECTION 11.6 Redemption of Interests.................................46
ARTICLE XII
ADMISSION OF INITIAL, SUBSTITUTED AND ADDITIONAL LIMITED PARTNERS
SECTION 12.1 Admission of Initial Limited Partners...................48
iii
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SECTION 12.2 Admission of Substituted Limited Partners...............48
SECTION 12.3 Admission of Additional Limited Partners................49
SECTION 12.4 Admission of Successor Managing General Partner.........49
SECTION 12.5 Admission of Successor Special General Partner..........50
SECTION 12.6 Amendment of Records....................................50
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNERS
SECTION 13.1 Withdrawal of the General Partners......................50
SECTION 13.2 Removal of the General Partners.........................52
SECTION 13.3 Interest of Departing Partner and Successor.............53
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
SECTION 14.1 Dissolution.............................................56
SECTION 14.2 Continuation of the Business and Reconstitution of the
Partnership.............................................56
SECTION 14.3 Liquidation.............................................57
SECTION 14.4 Distribution in Kind....................................58
SECTION 14.5 Return of Capital.......................................58
SECTION 14.6 Waiver of Partition.....................................59
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 15.1 Amendments to be Adopted Solely by the Managing General
Partner.................................................59
SECTION 15.2 Amendment Procedures....................................60
SECTION 15.3 Amendment Requirements..................................60
SECTION 15.4 Meetings................................................61
SECTION 15.5 Notice of a Meeting.....................................62
SECTION 15.6 Record Date.............................................62
SECTION 15.7 Adjournment.............................................62
SECTION 15.8 Waiver of Notice; Consent to Meeting; Approval of
Minutes.................................................63
SECTION 15.9 Quorum..................................................63
SECTION 15.10 Conduct of Meeting.....................................63
SECTION 15.11 Action Without a Meeting...............................64
SECTION 15.12 Voting and Other Rights................................64
iv
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ARTICLE XVI
MERGER
SECTION 16.1 Authority...............................................65
SECTION 16.2 Procedure for Merger or Consolidation...................65
SECTION 16.3 Approval by Limited Partners of Merger or Consolidation.66
SECTION 16.4 Certificate of Merger...................................67
SECTION 16.5 Effect of Merger........................................67
ARTICLE XVII
PROHIBITIONS AND LIMITATIONS
SECTION 17.1 General Prohibitions....................................67
ARTICLE XVIII
SPECIAL PROVISIONS
SECTION 18.1 Right of IP to Purchase Units...........................68
SECTION 18.2 Right of IP to Withdraw 90,000 Acres; Title to
the Timberlands.........................................70
SECTION 18.3 Agreement of IP to Retain Ownership of IPFR.............70
SECTION 18.4 Right of IP to Retain or Purchase Mineral Interests.....71
SECTION 18.5 Trademark of IP.........................................72
ARTICLE XIX
GENERAL PROVISIONS
SECTION 19.1 Definitions.............................................72
SECTION 19.2 Addresses and Notices...................................88
SECTION 19.3 Titles and Captions.....................................89
SECTION 19.4 Pronouns and Plurals....................................89
SECTION 19.5 Further Action..........................................89
SECTION 19.6 Binding Effect..........................................89
SECTION 19.7 Integration.............................................89
SECTION 19.8 Creditors...............................................89
SECTION 19.9 Waiver..................................................89
SECTION 19.10 Counterparts...........................................90
SECTION 19.11 Applicable Law.........................................90
SECTION 19.12 Invalidity of Provisions...............................90
v
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SECTION 19.13 Opinions Regarding Taxation as a Partnership...........90
SIGNATURE...................................................................90
ANNEX I.....................................................................92
ANNEX II....................................................................94
vi
<PAGE>
FOURTH
AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
IP TIMBERLANDS, LTD.
THIS FOURTH AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is
entered into by and among IP FOREST RESOURCES COMPANY, a Delaware corporation,
and INTERNATIONAL PAPER COMPANY, a New York corporation, the Limited Partners on
the effective date of this Agreement and the persons who become Partners of the
Partnership as hereinafter provided.
WHEREAS, the Partnership was organized as a Texas limited partnership
pursuant to the provisions of the Texas Uniform Limited Partnership Act (Article
6132a, Vernon's Texas Statutes) (the "Uniform Act") upon the filing with the
Secretary of State of the State of Texas on December 28, 1984 of a Certificate
of Limited Partnership for the Partnership and pursuant to an original Agreement
of Limited Partnership; and
WHEREAS, the original Agreement of Limited Partnership was amended and
restated as of September 25, 1985 (the "First Amended Agreement") and as of
October 28, 1985 (the "Second Amended Agreement"); and
WHEREAS, pursuant to the provisions of the Second Amended Agreement and
Sections 13.02(a)(3) and 13.02(c) of the Texas Revised Limited Partnership Act,
Article 6132a-1 of the Revised Civil Statutes of the State of Texas (the
"Revised Act"), the Partners by written consent of a Majority Interest in lieu
of a meeting, have (i) directed that the Partnership elect to adopt, and be
governed by and subject to, the provisions of the Revised Act, (ii) adopted
certain other amendments to the Second Amended Agreement and (iii) restated such
Agreement in its entirety to reflect such election and amendments, which
Agreement shall become effective upon the filing by the Partnership of an
appropriate Amended and Restated Certificate of Limited Partnership with the
Secretary of State of the State of Texas that conforms to the requirements of
the Revised Act.
NOW, THEREFORE, it is hereby agreed by the parties hereto, intending to
be legally bound, as follows:
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THIS AGREEMENT MAY BE SUBJECT TO THE PROVISIONS OF THE
TEXAS GENERAL ARBITRATION ACT
ARTICLE I
ORGANIZATIONAL MATTERS
SECTION 1.1 Certain Defined Terms.
Reference is made to Section 18.1 for the meaning assigned to certain
defined terms used throughout this Agreement.
SECTION 1.2 Formation and Continuation.
The Partners hereby adopt the Revised Act and continue the Partnership
as a limited partnership pursuant to the provisions of the Revised Act,
effective upon the filing with the Secretary of State of the State of Texas by
the Managing General Partner on behalf of the Partnership of an Amended and
Restated Certificate of Limited Partnership for the Partnership (the "Election
Certificate") which specifically states that the Partnership elects to adopt,
and be governed by and subject to, the Revised Act. For purposes of this
Agreement, the "Texas Act" shall mean, prior to the filing of the Election
Certificate with the Secretary of State of the State of Texas, the Uniform Act
and after such filing of the Election Certificate, the Revised Act, as it may be
amended from time to time, and any successor to the Revised Act. The Partnership
shall continue without interruption as constituted immediately prior to the
effectiveness of this amended and restated Agreement, and no dissolution or
termination followed by a reconstitution of the Partnership is effected by this
amendment and restatement. Except as expressly provided herein to the contrary,
the rights and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Texas Act. The
Partnership Interest of any Partner shall be personal property for all purposes.
SECTION 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, 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 "Limited Partnership" (or an abbreviation thereof) shall be
included in the name where necessary for purposes of complying with the laws of
any jurisdiction that so requires.
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SECTION 1.4 Principal Office; Registered Office; Registered Agent.
(a) The principal office of the Partnership shall be 2 Manhattanville
Road, Purchase, New York 10577, or such other place as the Managing General
Partner may from time to time designate. The Partnership may maintain such
offices at such other place or places 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.
SECTION 1.5 Power of Attorney.
(a) 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 (including, without limitation, a certificate of
cancellation); (D) instruments relating to the admission or substitution
of any Partner pursuant to Article XII; and (E) all agreements and other
instruments (including, without limitation, a certificate of merger)
relating to merger or consolidation of the Partnership pursuant to
Article XVI; and
(ii) enter into the Deposit Agreement, deposit all Certificates
of any Class owned by such Partner in the Deposit Account established by
the Depositary pursuant to the Deposit Agreement, and amend the Deposit
Agreement in any manner deemed appropriate by the Managing General
Partner.
Nothing herein contained shall be construed as authorizing the Managing General
Partner to amend this Agreement except in accordance with Article XV.
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(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and its 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 fifteen 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.
SECTION 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 XIV.
ARTICLE II
PURPOSE
SECTION 2.1 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; acting as the sole limited partner of the
Operating Partnership; and anything incidental to the forgoing.
ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.1 Primary Account.
The Partners have made or shall make the following Capital Contributions
to the Partnership for attribution to the Primary Account:
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(a) Managing General Partner.
(i) On the Commencement Date, the Managing 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 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),(c)(i) and (c)(ii) hereof.
(ii) Following the Commencement Date, whenever a 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 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 or Section 3.3, as the case may be.
(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), (c)(i) and (c)(ii) hereof.
(ii) Following the Commencement Date, whenever a Limited Partner
makes a Capital Contribution to the Partnership pursuant to Section 3.3,
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 being attributed to the Primary Account pursuant to
this paragraph (b)(ii), paragraph (a)(ii) hereof or Section 3.3, as the
case may be.
(c) Initial Class A Limited Partners. The Initial Class A Limited
Partners were issued Class A Units by the Partnership in exchange for the
Capital Contributions provided for herein, as follows:
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(i) On the Commencement Date, IP contributed the Original Timber
Interest to the Partnership pursuant to the Conveyance Agreement in
exchange for Class A Units and Class B Units and the Agreed Value of the
Original Primary Account Property with respect thereto was attributed to
the Primary Account. In exchange for the Class A Portion of the Net
Agreed Value of such Original Primary Account Property, IP received that
number of Class A Units designated in the Conveyance Agreement and, in
exchange for the Class B Portion of the Net Agreed Value of such
Original Primary Account Property, IP received that number of Class B
Units designated in the Conveyance Agreement. At the time of such
Capital Contribution, the Partnership assumed (or took the Original
Timber Interests subject to) all liabilities and other indebtedness to
be assumed by the Partnership in accordance with the Conveyance
Agreement. For purposes of crediting Capital Accounts pursuant to
Section 3.5(a), the Class A Capital Account of IP was credited with the
Class A Portion of the Net Agreed Value of the Original Primary Account
Property for which the Class A Units were issued pursuant thereto and
the Class B Capital Account of IP was credited with the Class B Portion
of the Net Agreed Value of the Original Primary Account Property for
which the Class B Units were issued pursuant hereto.
(ii) On the Commencement Date, each Underwriter contributed to
the Partnership cash in the amount of the Initial Class A Unit Price
multiplied by the number of Class A Units purchased by each such
Underwriter pursuant to the Underwriting Agreement at the Commencement
Date. Any such cash contributed by an Underwriter was attributed by the
Managing General Partner (A) to the Primary Account, in the amount
arrived at by multiplying the Primary Account Value times the Primary
Account Percentage Interest of such Underwriter (in its capacity as a
Class A Limited Partner), and (B) to the Secondary Account, in the
amount arrived at by multiplying the Secondary Account Value times the
Secondary Account Percentage Interest of such Underwriter (in its
capacity as a Class A Limited Partner).
The Class A Units issued to the Initial Class A Limited Partners
pursuant to paragraphs (c)(i) and (c)(ii) hereof were issued on the Commencement
Date.
SECTION 3.2 Secondary Account.
The Partners have made or 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 Managing 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 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
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to the Secondary Account pursuant to this paragraph (a)(i) and
paragraphs (b)(i) and (c) hereof.
(ii) Following the Commencement Date, whenever a 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 or Section 3.3, as the case may be.
(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 a Limited Partner
makes a Capital Contribution to the Partnership pursuant to Section 3.3,
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 or Section 3.3, as the
case may be.
(c) Initial Class B Limited Partner. On the Commencement Date, IP
contributed the Original Timber Interests to the Partnership pursuant to the
Conveyance Agreement in exchange for Class A Units and Class B Units and the
Agreed Value of the Original Secondary Account Property with respect thereto was
attributed to the Secondary Account. In exchange for the Class A Portion of the
Net Agreed Value of such Original Secondary Account Property, IP received that
number of Class A Units designated in the Conveyance Agreement and, in exchange
for the Class B Portion of the Net Agreed Value of such Original Secondary
Account Property, IP received that number of Class B Units designated in the
Conveyance Agreement. At the time of such Capital Contribution, the Partnership
assumed (or took the Original Timber Interests subject to) all liabilities and
other indebtedness to be assumed by the Partnership in accordance with the
Conveyance Agreement. For purposes of crediting Capital Accounts pursuant to
Section 3.5(a), the Class A Capital Account of IP was credited with the Class A
Portion of the Net Agreed Value of the Original Secondary Account Property for
which the Class A Units were issued pursuant hereto and the Class B Capital
Account
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of IP was credited with the Class B Portion of the Net Agreed Value of the
Original Secondary Account Property for which the Class B Units were issued
pursuant hereto.
The Class B Units issued to IP, in its capacity as the Initial Class B
Limited Partner, pursuant to this paragraph (c) were issued on the Commencement
Date. No Class B Units were issued to the Underwriters on the Commencement Date.
SECTION 3.3 Additional Issuance of Securities.
The Partnership may issue additional securities in accordance with the
following provisions of this Section 3.3:
(a) The terms "issue" or "issuance" of Units for purposes of this
Agreement shall mean the acts of (i) accepting Capital Contributions from
subscribers for Units, if appropriate, (ii) the admission of such subscribers as
Limited Partners, (iii) the amendment of the records of the Partnership in the
manner contemplated by Article XII hereof, (iv) the creation of additional
limited partnership interests resulting therefrom and (v) the issuance of
Certificates evidencing such Units.
(b) In order to raise additional capital to acquire Timber Interests or
other assets, to redeem or retire Partnership debt, to comply with any provision
of the Operating Partnership Agreement or for any other Partnership purpose, the
Managing General Partner is authorized to cause the Partnership to issue, in
addition to the Class A Units and Class B Units issued pursuant to Sections
3.1(c) and 3.2(c), Class A Units, Class B Units or other Units, including,
without limitation, combined or reclassified Units, or classes or series
thereof, at any time or from time to time, to Partners or to other Persons and
to admit them to the Partnership as Additional Partners, all without the consent
or approval of the Limited Partners or any percentage or class thereof (other
than such consent or approval as may be required by the last sentence of Section
3.3(e)). The Managing General Partner shall have sole discretion, subject to the
guidelines set forth herein and the requirements of the Texas Act, in
determining the consideration and terms and conditions with respect to any
future issuance of Class A Units, Class B Units or other Units, or classes or
series thereof including, without limitation, combined or reclassified Units. In
addition, the Managing General Partner is authorized to cause the issuance of
any other type of security (including, without limitation, unsecured and secured
debt obligations of the Partnership, debt obligations of the Partnership
convertible into any class or series of Units that may be issued by the
Partnership, options, rights, warrants or appreciation rights to purchase any
such class or series of Units, or any combination of any of the foregoing) from
time to time to Partners or other Persons on terms and conditions established in
the sole discretion of the Managing General Partner.
Notwithstanding any provision of this Agreement to the contrary,
additional Units to be issued by the Partnership pursuant to this section shall
be issuable from time to time in one or more classes, or one or more series of
any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to existing classes and series of Units, all as
shall be fixed by the Managing General Partner
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in the exercise of its sole and complete discretion, including, without
limitation, (i) the allocation of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Units; (ii) the right of
each such class or series of Units to share in the Partnership distributions;
(iii) the rights of each such class or series of Units upon dissolution and
liquidation of the Partnership; (iv) whether such class or series of additional
units is redeemable by the Partnership and, if so, the price at which, and the
terms and conditions on which, such class or series of additional Units may be
redeemed by the Partnership; (v) whether such class or series of additional
Units is issued with the privilege of conversion and, if so, the rate at, and
the terms and conditions upon, which such class or series of Units may be
converted into any other class or series of additional Units; (vi) the terms and
conditions upon which each such class or series of Units will be issued,
deposited with the Depositary, evidenced by the Depositary Receipts and assigned
or transferred; and (vii) the right of each such class or series of Units to
vote on Partnership matters, including matters relating to the relative rights,
preferences and privileges of each such class or series.
In connection with the issuance of any class or series of Units or other
security, the Managing General Partner, without the consent at the time of any
Limited Partner (each Limited Partner, by requesting and being granted admission
to the Partnership, being deemed to have consented to such amendment), may amend
any provision of this Agreement and execute, swear to, acknowledge, deliver,
file and record an amended or restated Certificate of Limited Partnership and
whatever other documents may be required in connection therewith, as may be
necessary or desirable to reflect the issuance of such class or series of Units
or other security and the relative rights and preferences of such class of Units
as to the matters set forth in the paragraph above.
(c) The Managing General Partner is authorized to cause the issuance of
Class A Units, Class B Units or other Units (including, without limitation,
combined or reclassified Units) or securities (including, without limitation,
unsecured and secured debt obligations of the Partnership, debt obligations of
the Partnership convertible into any class or series of Units that may be issued
by the Partnership, or options, rights, warrants or appreciation rights relating
to any class or series of Units, or any combination of any of the foregoing)
pursuant to any Unitholder or employee benefit plan maintained or sponsored by
the Managing General Partner, the Partnership, the Operating Partnership or any
Affiliate.
(d) The Managing General Partner shall do all things necessary to comply
with the Texas Act and is authorized and directed to do all things it deems to
be necessary or advisable in connection with any future issuance of Class A
Units, Class B Units, or other Units (including, without limitation, combined or
reclassified Units) or securities, including compliance with any statute, rule,
regulation or guideline of any Federal, state or other governmental agency or
any stock exchange on which the Depositary Units or other such securities are
listed for trading.
(e) Subject to the guidelines set forth herein, a General Partner or any
Affiliate of a General Partner may, but is not obligated to, make Capital
Contributions to the Partnership in the form of cash or other property in
exchange for Units, provided that (i) the sum of (A) that amount obtained by
multiplying the Class A Units issued in exchange for any such Capital
Contribution
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times the Unit Price of a Class A Unit, (B) that amount obtained by multiplying
the Class B Units issued in exchange for any such Capital Contribution times the
Unit Price of a Class B Unit and (C) in the event that additional Units of
another class or series (including, without limitation, combined or reclassified
Units) are issued pursuant to this Section 3.3, that amount obtained by
multiplying the Units of such class or series issued in exchange for any such
Capital Contribution times the Unit Price of each such Unit shall not exceed
(ii) the Net Agreed Value of the Contributed Property or the amount of
contributed cash, as the case may be. Any issuance of Class A Units, Class B
Units or other Units, including, without limitation, combined or reclassified
Units, to a General Partner or any Affiliate of a General Partner on terms that
do no satisfy the standards set forth in this Section 3.3(e) shall be made only
if such issuance is approved by the affirmative vote or consent of more than 50%
of the Percentage Interests of the Limited Partners holding the Class of Units
being issued; provided, however, that in the case of the issuance of additional
Units of a Class not outstanding prior to such issuance on terms that do not
satisfy the standards set forth in subsection (C) above, such issuance may be
made only if it is approved by the affirmative vote or consent of more than 50%
of the Percentage Interests of the Limited Partners holding each Class of Units
then outstanding, the Limited Partners holding each such Class of Units being
entitled to vote as a separate class.
(f) (i) (A) During the Initial Term, in acquiring Timber Interests from
any Person through an issuance of Units pursuant to paragraphs (b) or (e)
hereof, the Managing General Partner shall cause the Partnership to issue (A)
Class A Units in exchange for 95.96% of the Primary Account Portion of the Net
Agreed Value of such Timber Interests and (B) Class B Units in exchange for
4.04% of the Primary Account Portion of the Net Agreed Value of such Timber
Interests. The Managing General Partner shall cause the Partnership to issue (A)
Class A Units in exchange for 4.04% of the Secondary Account Portion of the Net
Agreed Value of such Timber Interests and (B) Class B Units in exchange for
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 any Contributing Partner shall be
credited with that portion of the Net Agreed Value of the Timber Interests for
which Class A Units were issued pursuant hereto and the Class B Capital Account
of such Partner shall be credited with that portion of the Net Agreed Value of
the Timber Interests for which Class B Units were issued pursuant hereto.
(B) Following the Initial Term, in acquiring Timber
Interests from any Person through an issuance of Units pursuant
to paragraph (b) or (e) hereof, the Managing General Partner
shall cause the Partnership to issue (A) Class A Units in
exchange for 4.04% of the Net Agreed Value of such Timber
Interests and (B) Class B Units in exchange for 95.96% of the Net
Agreed Value of such Timber Interests; unless the Class A Units
and the Class B Units shall have been combined or reclassified
pursuant to paragraph (g) hereof, in which case the Partnership
shall issue such combined or reclassified Units. For purposes of
crediting Capital Accounts pursuant to Section 3.5(a), the Class
A Capital Account of any Contributing Partner shall be credited
with that portion of the Net Agreed Value of the Timber Interests
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for which Class A Units were issued pursuant hereto and the Class
B Capital Account of such Partner will be credited with that
portion of the Net Agreed Value of the Timber Interests for which
Class B Units were issued pursuant thereto; unless the Class A
Capital Accounts and the Class B Capital Accounts have been
combined into a single Capital Account pursuant to Section
3.5(e)(ii), in which case, such single Capital Account maintained
for such Contributing Partner shall be credited with the Net
Agreed Value of the Timber Interests for which such Class A
Units, Class B Units or other combined or reclassified Units were
issued pursuant thereto.
(C) During the Initial Term, the Primary Account
Portion of the Agreed Value of any Timber Interests acquired with
Units pursuant to paragraphs (b) or (e) hereof 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.
(D) Following the Initial Term, the Agreed Value of
any Timber Interests acquired with Class A Units and Class B
Units (or any combined or reclassified Units) pursuant to
paragraphs (b) or (e) hereof will be attributed in full to the
Secondary Account.
(ii) (A) During the Initial Term whenever the Managing General
Partner intends to cause the Partnership to issue additional Units for
Capital Contributions of cash, pursuant to paragraphs (b) or (e) hereof,
the Managing General Partner must determine (1) that portion of such
cash to be used to pay costs charged to, repay borrowings attributable
to and make distributions with respect to the Primary Account and (2)
that portion of such cash to be used to pay costs charged to, repay
borrowings attributable to and make distributions with respect to the
Secondary Account. To the extent cash is so attributed to the Primary
Account, the Managing General Partner shall cause the Partnership to
issue Class A Units in exchange for 95.96% of such attributed cash and
Class B Units in exchange for 4.04% of such attributed cash. Any such
cash so attributed to the Primary Account will be credited in full to
the Primary Account. To the extent cash is so attributed to the
Secondary Account, the Managing General Partner shall cause the
Partnership to issue Class A Units in exchange for 4.04% of such
attributed cash and Class B Units in exchange for 95.96% of such
attributed cash. Any such cash so attributed to the Secondary Account
will be credited in full to the Secondary Account.
(B) Following the Initial Term, whenever the
Managing General Partner intends to cause the Partnership to
issue additional Units for Capital Contributions of cash pursuant
to paragraphs (b) or (e) hereof, Class A Units will be issued in
exchange for 4.04% of the total cash to be contributed and Class
B Units will be issued in exchange for 95.96% of the total cash
to be contributed; unless the Class A Units and the Class B Units
shall have been combined or reclassified pursuant to paragraph
(g) hereof, in which case the Partnership shall issue such
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combined or reclassified Units. All such cash contributed for
Class A Units and Class B Units (or any combined or reclassified
Units) will be attributed in full to the Secondary Account.
(g) The Managing General Partner shall have the power, without any
further consent or approval by any Partners, to amend the Certificate of Limited
Partnership (i) to divide the outstanding Class A Units into a greater number of
Class A Units or to combine the outstanding Class A Units into a smaller number
of Class A Units, (ii) to divide the outstanding Class B Units into a greater
number of Class B Units or to combine the outstanding Class B Units into a
smaller number of Class B Units, and/or (iii) following the Initial Term, to
combine or reclassify the Class A Units and the Class B Units into a single
class of Units so that the Class A Units represent 4.04% of the new Class of
Units and the Class B Units represent 95.96% of such new Class of Units. A
corresponding change in the outstanding Depositary Units may also be made, if
deemed appropriate by the Managing General Partner in its sole discretion.
SECTION 3.4 No Preemptive Rights.
No Partner shall have any preemptive, preferential or other right with
respect to (i) additional Capital Contributions; (ii) issuance or sale of Class
A Units, Class B Units or any other Units; (iii) 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 or any other Units;
(iv) 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 (v)
issuance or sale of any other securities that may be issued or sold by the
Partnership.
SECTION 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 each
Class A Limited Partner a separate Class A Capital Account with respect to the
Class A Units held by such Partner. Each Class A Capital Account shall be
increased by (i) the cash amount or that portion of the Net
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Agreed Value of all Capital Contributions made in exchange for the issuance of
the Class A Units held by such Partner 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 Units held by 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 with respect to the Class A Units held by
such Partner 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 Units held by such Partner pursuant to Section 5.1.
Subject to paragraph (e) hereof, the Partnership shall maintain for each
Class B Limited Partner a separate Class B Capital Account with respect to the
Class B Units held by such Partner. Each 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 the Class B Units
held by such Partner 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 Units held by 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 with respect to the Class B Units held by such Partner 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 Units held by such
Partner pursuant to Section 5.1.
(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 such items 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),
6.11 or 18.2, 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 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 amount 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 total 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 Percentage 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 14.3 and 14.4 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 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 3.5.
(d) (i) Upon an issuance of additional Units for cash or Contributed
Property pursuant to Section 3.3, the appropriate Capital Accounts of all
Partners (and the Carrying Values of all Partnership properties) shall,
immediately prior to such issuance, be adjusted (consistent with the provisions
hereof and Section 704(b) of the Code) 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 upon an
actual sale of such properties, immediately prior to such issuance, and had been
allocated to the Partners, at such time, pursuant to Section 5.1).
During the Initial Term, in determining such Unrealized Gain or
Unrealized Loss, the fair market value of the Partnership properties, as of any
date of determination, shall be determined by (A) first, determining the Primary
Account Value and Secondary Account Value, as of such date of determination, (B)
second, adding to the Primary Account Value and the Secondary Account Value,
whichever the case may be, the amount of any outstanding Partnership
indebtedness attributed, as of such date of determination, by the Managing
General Partner to any property attributed to either such Accounting Unit, and
(C) third, allocating the value attributed to an Accounting Unit under clause
(B) hereof among the properties attributed to such Accounting Unit based on
whatever reasonable method the Managing General Partner shall, in its sole
discretion, determine. After the Initial Term, in determining such Unrealized
Gain or Unrealized Loss attributable to properties attributed to the Secondary
Account, the fair market value of such Partnership properties, as of any date of
determination, shall be determined based upon the Issue Price at which such
additional Class A Units, Class B Units or other Units including, without
limitation, combined or reclassified Units, are issued.
(ii) Immediately prior to the distribution of any Partnership
property in liquidation of the Partnership pursuant to Sections 14.3 and
14.4, the appropriate Capital Accounts of all Partners (and the Carrying
Values of all Partnership properties) shall be adjusted (consistent with
the provisions hereof and of Section 704(b) of the Code) 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 upon an actual sale of such properties,
immediately prior to such distribution, and had been allocated to the
Partners, at such time, pursuant to Section 5.1). In determining such
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Unrealized Gain or Unrealized Loss, the fair market value of Partnership
properties shall be determined in the manner provided in Section 14.4.
(e) (i) Immediately prior to the distribution of any Partnership
property in liquidation of the Partnership pursuant to Sections 14.3 and 14.4,
once all adjustments to the Capital Accounts provided for herein have been made,
the Capital Accounts of any Limited Partner owning more than one class of Units
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 Partnership is not liquidated during the
Initial Term, once the final distribution with respect to the Primary
Account has been made to the Partners pursuant to Section
4.10(a)(ii)(A), the Managing General Partner may, in its sole
discretion, combine the Class A Capital Account, the Class B Capital
Account, and any other Capital Account of any Limited Partner owning
more than one class of Units into a single Capital Account and,
thereafter, maintain a single Capital Account with respect to each
Limited Partner in accordance with the above principles. In the event
the Managing General Partner elects to combine or reclassify the Class A
Units and Class B Units into a single class of Units pursuant to Section
3.3(g), the Class A Capital Account and Class B Capital Account of any
Limited Partner owning both Class A Units and Class B Units shall be
combined into a single Capital Account.
SECTION 3.6 Interest.
No interest shall be paid by the Partnership on Capital Contributions or
on balances in Partners' Capital Accounts.
SECTION 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 XIII and XIV.
SECTION 3.8 Loans from Partners.
Loans by a Partner to the Partnership shall not be considered Capital
Contributions.
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ARTICLE IV
MAINTENANCE OF THE ACCOUNTING UNITS; DISTRIBUTIONS
SECTION 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 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; and
(e) No Partnership costs or expenses attributable to minerals or mineral
interests acquired or owned by the Partnership pursuant to Section 18.4 will 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.
SECTION 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 Partners in accordance with their respective Secondary Account Percentage
Interests:
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(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 attributable 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; and
(e) All Partnership costs and expenses attributable to minerals or
mineral interests acquired or owned by the Partnership pursuant to Section 18.4
will 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.
SECTION 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 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);
(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); and
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(d) No Partnership revenues attributable to minerals or mineral
interests acquired or owned by the Partnership pursuant to Section 18.4 will be
attributed to the Primary Account.
No partnership revenues will be attributed to the Primary Account following the
expiration of the Initial Term.
SECTION 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 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);
and
(d) All Partnership revenues attributable to minerals or mineral
interests acquired or owned by the Partnership pursuant to Section 18.4 will be
attributed to the Secondary Account.
All Partnership revenues will be attributed to the Secondary Account following
the expiration of the Initial Term.
SECTION 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 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).
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SECTION 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 revenues. 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 Interest 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 and expenses of the Partnership to the
Primary Account equal to 15% of the annual revenues credited to the Primary
Account on an annual basis 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.
(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.
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SECTION 4.7 Financing of Costs and Distributions.
(a) During the Initial Term, the Managing General Partner may, in its
sole discretion, utilize the Capital Contributions or revenues attributed or
credited to an Accounting Unit to finance (i) costs and expenses charged to such
Accounting Unit or (ii) distributions to be made to Partners with respect to
such Accounting Unit. In addition, the Managing General Partner may incur
borrowings (in accordance with Section 6.1) on behalf of the Partnership to
finance such costs and expenses charged to, or distributions made with respect
to, such Accounting Unit. If any borrowings are so incurred to pay costs or to
make distributions to 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. 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 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.
SECTION 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 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
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directly by the Partnership and had such attribution been made in accordance
with the provisions of Article III and this Article IV.
SECTION 4.9 Closing of the Primary Account.
(a) Immediately prior to the distribution of any Partnership property
during the Initial Term in liquidation of the Partnership pursuant to Sections
14.3 and 14.4, 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 to the
Primary Account to fund any such repayment of distribution). Immediately
thereafter, the Primary Account shall be closed.
SECTION 4.10 Current Distributions.
(a) Unless otherwise provided herein, the Managing General Partner may
make such cash distributions 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. In its sole
discretion, the Managing General Partner may also distribute to the Partners
other Partnership property, additional Units or other securities of the
Partnership or other entities. Such distributions shall be made in accordance
with the following general principles:
(i) From time to time during the Initial Term, and not less often
than at the end of each calendar quarter, 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 Record Holders
(registered with the Depositary on the Record Date set for purposes of
such distribution) and to the General Partners in accordance with (A) as
to distributions with respect to the Primary Account, the Partners'
respective Primary Account Percentage Interests as of such Record Date
and (B) as to distributions with respect to the Secondary Account, the
Partners' respective Secondary Account Percentage Interests as of such
Record Date.
(ii) Following the expiration of the Initial Term:
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(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
Record Holders (registered with the Depositary on the Record Date
set for such final distribution) and to the General Partners in
accordance with their respective Primary Account Percentage
Interests as of such Record Date.
(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 Record Holders (registered with the Depositary on the Record
Date set for any such distribution) and to the General Partners
in accordance with their respective Secondary Account Percentage
Interests as of such Record Date.
(b) Notwithstanding the terms of paragraph (a) above, the Managing
General Partner shall not cause the Partnership to make any distributions to
Record Holders from the Secondary Account at any time during which there is any
indebtedness of the Operating Partnership owed to any of its general partners.
(c) Any amounts paid pursuant to Section 6.5 shall not be deemed to be
distributions for purposes of this Agreement.
(d) The Managing General Partner may, at its election as provided in
Section 9.6, withhold a portion of any distribution made to a Partner as it
determines is necessary to comply with the withholding requirements of the Code.
ARTICLE V
FEDERAL INCOME TAX ALLOCATIONS
SECTION 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) 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 Class A Limited Partners and the Class B Limited Partner in accordance with
their respective Primary Account Percentage Interests.
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(b) 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 Class A Limited Partners and the Class B Limited Partner in
accordance with their respective Primary Account Percentage Interests.
Notwithstanding the immediately preceding sentence, all items of deduction or
loss attributable to the Charitable Contribution shall be allocated to the Class
B Limited Partners.
(c) 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 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(c) is intended to constitute a "qualified income offset" within the meaning
of Treasury Regulation Section 1.704- 1(b)(2)(ii)(d).
(d) 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(d), "minimum
gain" shall be determined in accordance with Treasury Regulation Section 1.704-
1(b)(4)(iv). This Section 5.1(d) is intended to constitute a "minimum gain
chargeback" within the meaning of Treasury Regulation Section
1.704-1(b)(4)(iv)(e).
SECTION 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) 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 Class A Limited
Partners and the Class B Limited Partner in accordance with their
respective Primary Account Percentage Interests.
(ii) 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 Class A Limited
Partners and the Class B Limited Partner in accordance with their
respective Secondary Account Percentage Interests.
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(b) For the purpose of eliminating Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation and cost recovery deductions shall be allocated for federal income
tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted
basis at the time of contribution. (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, 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 Sections 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
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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.
(d) 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
the sale of such Standing Timber or such 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 Secondary Account Factor based upon
such assumptions and made in such manner as it deems reasonable and appropriate.
(e) 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.
(f) 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.
(g) To the extent of any Recapture Income resulting form 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.
(h) 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 Partnership Interest shall, for Federal Income
tax purposes, be determined on a monthly or other reasonable basis
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and allocated to the owner of such Partnership Interest at the close 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. In making such allocation, the Managing General Partner shall be
entitled to rely on the records of the Partnership and the Depositary, any
information contained in the Transfer Application submitted by a transferee of a
Partnership Interest and any other information solicited by the Managing General
Partner from such transferee, and may adopt such conventions as the Managing
General Partner deems reasonable for determining the date of change in ownership
and for making such allocation, if necessary. The Managing General Partner may
revise, alter or otherwise modify such method of allocation as it determines
necessary, to the extent permitted by Section 706 of the Code and regulations or
rulings promulgated thereunder.
(i) If the Percentage Interest of a Limited Partner or Assignee is
changed during a year for any reason other than the transfer of a Depositary
Unit or undeposited Unit 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 (h)
hereof.
(j) 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).
(k) 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(c).
(l) If any Partner's Capital Account has a deficit balance as described
in Section 5.1(d), 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(d).
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ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 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 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, the right to enter into and perform
contracts of all kinds, to lend or borrow money, to assume, guarantee or
otherwise contract for indebtedness and other liabilities, to issue evidences of
indebtedness and secure the same by mortgage, deed of trust or other lien or
encumbrance, to bring and defend actions at law or in equity, and to buy, own,
manage, sell, lease or otherwise acquire or dispose of Partnership assets
(subject to the prior approval of a Majority Interest when required under
Section 17.1), to pay all expenses incurred by or on behalf of the Partnership,
to cause the Partnership to enter into partnerships, joint ventures or other
similar arrangements), and in connection with the Partnership's participation as
a limited partner in the Operating Partnership (including, without limitation,
the contribution to the Operating Partnership of the Partnership's assets and
properties and the loan of Partnership funds to the Operating Partnership or any
Affiliate thereof, provided that such loans are made in connection with the
conduct of the business of the Partnership).
SECTION 6.2 Certificate of Limited Partnership.
The Managing General Partner has filed a Certificate of Limited
Partnership with the Secretary of State of the State of Texas as required by the
Texas Act and 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 shall thereafter 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.
SECTION 6.3 Reliance by Third Parties.
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
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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 representations of the Managing General
Partner as to its authority to enter into such financing or sale arrangements
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. Each Limited
Partner and Assignee hereby waives any and all defenses or 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.
SECTION 6.4 Purchase or Sale of Units.
The Managing General Partner may, on behalf of the Partnership, purchase
or otherwise acquire Units or Depositary Units and, following any such purchase
or acquisition, may sell or otherwise dispose of such Units or Depositary Units.
As long as such Units or Depositary Units are held by the Partnership or the
Operating Partnership, such Units or Depositary Units shall not be considered
outstanding for any purpose. A General Partner may also purchase or otherwise
acquire Units or Depositary Units for its own account and, subject to the
provisions of Sections 11.2 and 11.3, may sell or otherwise dispose of such
Units or Depositary Units.
SECTION 6.5 Compensation and Reimbursement of the General Partners.
(a) The General Partners shall not be compensated for their services as
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 Operating Partnership, the Initial Offering and the
qualification to do business of the Partnership, the Operating Partnership and
the General Partners.
(c) Each of the General Partners shall be reimbursed on a monthly basis
for all direct expenses it incurs or makes on behalf of the Partnership
(including amounts paid to any Person to perform services for or on behalf of
the Partnership) and for that portion of each 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 6.8. 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.
(d) The Managing General Partner may propose and adopt without the
approval of the Partners fringe benefit plans, including plans involving the
issuance of Units, for the benefit of employees of the Managing General Partner,
the Special General Partner, the Partnership, the Operating Partnership or any
Affiliate.
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SECTION 6.6 Outside Activities.
(a) The Managing General Partner shall not acquire any assets (other
than Depositary Units or Units) or enter into or conduct any business or
activity except (i) in connection with the performance by it of the terms of
this Agreement or the Operating Partnership Agreement or incidental to its
status as a Partner in this Partnership or the Operating Partnership or
incidental to acquisition, ownership or disposition of Depositary Units or 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 Operating Partnership, for their own account and for the account
of others, and may own interests in the same, contiguous or adjacent properties
as those in which the Partnership or the Operating Partnership owns an interest,
without having or incurring any obligation to offer any interest in such
properties, businesses or activities to the Partnership, the Operating
Partnership or any Partner, and, except as specified in paragraph (a) above, no
other provision of this Agreement shall be deemed to prohibit either of the
General Partners or any such Person from conducting such other businesses and
activities. Neither the Partnership, the Operating Partnership 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. The
General Partners and any other Persons affiliated with either of the General
Partners may acquire Units or Depositary Units, in addition to those acquired by
any of such Persons on the Commencement Date, and shall be entitled to exercise
all rights of an Assignee or Limited Partner, as applicable, relating to such
Units or Depositary Units.
(c) Each of the Partners hereby approves, ratifies and confirms the
execution, delivery and performance of the Deposit Agreement, Conveyance
Agreement and the Operating Partnership Agreement and agrees that the Managing
General Partner is authorized to execute, deliver and perform the other
agreements, acts, transactions, and matters described in the Registration
Statement 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 Operating Partnership Agreement. 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.
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SECTION 6.7 Partnership Funds.
The funds of the Partnership shall be deposited in such account or
accounts as are designated by the Managing General Partner, including accounts
maintained by or in the name of the Operating Partnership, and shall not be
commingled with the funds of either General Partner or any Affiliate thereof.
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
Operating Partnership in which funds of the Operating Partnership and other
Persons are also deposited, provided that at all time books of account are
maintained which show the amount of the 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 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.
SECTION 6.8 Indemnification of General Partner.
(a) For purposes of this Section 6.8:
(i) "Expenses" means reasonable expenses, including court costs
and attorney's 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 any other 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
6.8(a)(ii).
(iv) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or
proceeding, and any inquiry or investigation that could lead to such an
action, suit or proceeding.
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(b) Indemnification. The Partnership shall indemnify every Indemnitee
against all judgments, penalties (including excise or 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 6.8(a)(ii), if it is determined
in accordance with Section 6.8(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 the Limited Partners, the indemnification
under this Section 6.8(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 6.8(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 6.8(b) and in
addition to the indemnification provided for in Section 6.8(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
6.8(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 6.8(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 a Majority Interest of the Limited
Partners (excluding any Percentage Interests owned by the General Partners). The
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
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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 6.8(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 6.8(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 6.8 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 6.8. 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
provision of this Section 6.8, 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 6.8, 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 Partnership.
(h) Other Indemnification and Insurance. The indemnification provided by
this Section 6.8 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 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
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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 6.8 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 6.8 shall
be subject to all valid and applicable laws, including without limitation,
Article 11 of the Texas Act, and, in the event this Section 6.8 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 6.8 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 6.8:
(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 6.8 in becoming and serving
in the applicable capacity specified in Section 6.8(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 6.8
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 6.8 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 6.8 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
(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 6.8 shall
be made only out of the assets of the Partnership.
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(ii) To the fullest extent permitted by law, an Indemnitee shall
not be denied indemnification in whole or in part under this Section 6.8
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.
(iii) The provisions of this Section 6.8 are for the benefit of
the Indemnitees and shall not be deemed to create any rights for the
benefit of any other Persons.
SECTION 6.9 Liability of General Partners.
(a) The General Partners shall be liable to the Partnership and the
Limited Partners and Assignees for willful or intentional misconduct, but
neither General Partner nor any of their respective partners, shareholders,
directors or officers shall be liable to any of them or to Persons who have
acquired interests in the Units, whether as Limited Partners, Assignees or
otherwise, 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 6.9 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 6.9
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.
SECTION 6.10 Other Matters Concerning General Partners.
(a) A General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) A General Partner 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 a General
Partner hereunder in good faith in accordance with such opinion or advice.
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SECTION 6.11 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 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 is retained by IP pursuant to Section 1.1 of the Conveyance
Agreement, 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.
SECTION 6.12 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 any 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 any Limited Partner
or Assignee, 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 breach of any standard of care or duty imposed herein
or therein or under the Texas Act of any other applicable law, rule or
regulation.
(b) The Limited Partners hereby authorize the Managing General Partner,
on behalf of the Partnership as the sole limited partner of the Operating
Partnership, to consent to similar actions by the managing general partner of
the Operating Partnership, to waive the standard of care and duty imposed on the
managing general partner of the Operating Partnership by the Operating
Partnership Agreement or the Texas Act or any other applicable law, rule or
regulation, and to agree that the same shall be modified and/or waived to the
extent necessary to permit the managing general partner of the Operating
Partnership so to act.
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ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 7.1 Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except
as provided by the Texas Act.
SECTION 7.2 Management of Business.
No Limited Partner (other than a General Partner or its employees or
agents in their capacities as such) shall take part in the operation, management
or control (within the meaning of the Texas Act) of the Partnership's business,
transact any business in the Partnership's name or have the power to sign
documents for or otherwise bind the Partnership. 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 or any Assignee under this Agreement.
SECTION 7.3 Outside Activities.
Except as provided in Section 6.6, any Limited Partner shall be entitled
to and may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities in direct competition with the Partnership or Operating Partnership.
Neither the Partnership nor any of the Partners shall have any rights by virtue
of this Agreement in any business ventures of any other Limited Partner.
SECTION 7.4 Return of Capital.
No Limited Partner shall be entitled to the withdrawal or return of his
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. No Limited Partner shall have priority over any other Limited Partner
either as to the return of Capital Contributions or as to profits, losses or
distributions.
SECTION 7.5 Rights of Limited Partners and Assignees.
In addition to other rights provided by this Agreement or by applicable
law, and except as limited by subsection (c) of this Section, the Limited
Partners and Assignees shall have the following rights relating to the
Partnership:
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(a) Each Limited Partner or Assignee, on written request stating any
proper purpose, shall have the right to inspect and copy at any reasonable time
any of the Partnership records required to be maintained by the Managing General
Partner pursuant to Section 8.1 and any other information regarding the
business, affairs, and financial condition of the Partnership as the Managing
General Partner determines, in its sole discretion, is just and reasonable, but
such inspection and copying shall be at the Limited Partner's own expense.
(b) On the written request by any Limited Partner or Assignee to the
Managing General Partner at the Partnership's principal office, the Partnership
shall provide to the requesting person without charge true copies of: (i) the
Agreement and Certificate of Limited Partnership and all amendments or
restatements thereof; and (ii) any of the tax returns specified in Section
8.1(b).
(c) The Managing General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the Managing General Partner
deems reasonable, any information which the Managing General Partner reasonably
believes to be in the nature of trade secrets or other information disclosure of
which the Managing General Partner in good faith believes could damage the
Partnership or its business or which the Partnership is required by agreements
with third parties to keep confidential.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting.
The Managing General Partner shall keep or cause to be kept the
following records at the principal office of the Partnership or make them
available at that office within five days after the date of receipt of a written
request therefor pursuant to Section 7.5(a):
(a) a current list that states (i) the name and mailing address of each
Partner, separately identifying in alphabetical order the General Partners and
the Limited Partners; (ii) the last known street address of the business or
residence of each General Partner; (iii) the percentage or other interest in the
Partnership owned by each Partner; and (iv) the names of the Partners who are
members of each specified class or group established pursuant to this Agreement;
(b) copies of the Partnership's federal, state, and local information or
income tax returns for each of the Partnership's six most recent tax years;
(c) a copy of this Agreement and the Certificate of Limited Partnership,
all amendments or restatements, executed copies of any powers of attorney under
which this Agreement, the Certificate of Limited Partnership, and all amendments
or restatements to this Agreement and the Certificate have been executed, and
copies of any document that creates, in the manner provided by this Agreement,
classes or groups of partners;
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(d) a written statement of: (i) the amount of cash contribution and a
description and statement of the Agreed Value of any other contribution made by
each Partner, and the amount of the cash contribution and a description and
statement of the Agreed Value of any other contribution that the Partner has
agreed to make in the future as an additional contribution; and (ii) the date on
which each Partnership became a Partner; and
(e) correct and complete books and records of account of the
Partnership.
Any records maintained by the Partnership in the regular course of its
business, including the record of the holders of Units or Depositary Units,
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 are convertible
into clearly legible written form within a reasonable period of time. The books
of the Partnership shall be maintained, for financial reporting purposes, on the
accrual basis or on a cash basis, as the Managing General Partner shall
determine in its sole discretion, and, if maintained on a cash basis, adjusted
periodically to an accrual basis in accordance with generally accepted
accounting principles. The names, the business, residence, or mailing addresses,
and the capital contributions to the Partnership of the Partners shall be as
shown on the books and records of the Partnership, and the Managing General
Partner may designate the books and records of the Depositary to be the books
and records of the Partnership to the extent that the Managing General Partner
determines in its sole discretion is appropriate.
SECTION 8.2 Fiscal Year.
The fiscal year of the Partnership shall be the calendar year.
SECTION 8.3 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 cause to be mailed
to each Record Holder of a Depositary Unit as of the last day of that fiscal
year reports 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 Managing General Partner.
(b) 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 cause to be mailed to each Record
Holder of a Depositary Unit as of the last day of that calendar quarter a
quarterly report for the calendar quarter containing such financial and other
information as may be required by applicable law, regulation or stock exchange
rule, or as the Managing General Partner deems appropriate.
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ARTICLE IX
INCOME TAX MATTERS
SECTION 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 Special General Partner, the Limited Partners and Assignees
within 90 days after the close of the taxable year the tax information
reasonably required for Federal, state and local income tax reporting purposes.
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 discretion. The taxable year of the Partnership shall be the calendar
year.
SECTION 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 limited liability of the Partnership in the
Operating Partnership or of the Limited Partners in the Partnership or cause the
Partnership to be treated 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).
SECTION 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. Each Partner agrees 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.
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SECTION 9.4 Organizational Expenses.
The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a 60-month period as provided in Section 709 of the
Code.
SECTION 9.5 Taxation as a Partnership.
No election shall be made by the Partnership, either of the General
Partners or any Limited Partner, to be excluded from the application of any of
the provisions under Subchapter K, Chapter 1 of Subtitle A of the Code or from
any similar provisions of any state tax laws.
SECTION 9.6 Withholding.
Notwithstanding any other provision of this Agreement, the Managing
General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other Federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including by reason of
Section 1446 of the Code), the amount withheld shall be treated as a
distribution of cash in the amount of such withholding to such Partners or
Assignees.
ARTICLE X
ISSUANCE OF CERTIFICATES
SECTION 10.1 Issuance of Certificates.
Upon the issuance of Class A Units, the Managing General Partner shall
cause the Partnership to issue one or more Certificates substantially in the
form of the Certificate attached hereto as Annex I in the name of each Class A
Limited Partner certifying that the Limited Partner named therein is a Class A
Limited Partner in the Partnership as provided in the Partnership's books and
records, stating the number of Class A Units into which his Partnership Interest
is divided, and including as a part thereof a form of assignment sufficient to
convey the partnership interests of a limited partner to an assignee under the
Texas Act. Upon the issuance of Class B Units, the Managing General Partner
shall cause the Partnership to issue one or more Certificates substantially in
the form of the Certificate attached hereto as Annex II in the name of each
Class B Limited Partner certifying that the Limited Partner named therein is a
Class B Limited Partner in the Partnership as provided in the Partnership's
books and records, stating the number of Class B Units into which his
Partnership Interest is divided, and including as a part thereof a form of
assignment sufficient to convey the partnership interests of a limited partner
to an assignee under the Texas Act. Upon the issuance of any other Class of
Units, the Managing General Partner shall cause the Partnership to issue one or
more Certificates in the name of each Limited Partner with respect to
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such Units certifying that the Limited Partner named therein is a Limited
Partner of the appropriate Class, stating the number of such Class of Units in
which the Partnership Interest is divided, and including as a part thereof a
form of assignment sufficient to convey the partnership interests of a limited
partner to an assignee under the Texas Act. Upon the transfer of a Unit in
accordance with the terms of this Agreement, the Managing General Partner shall
cause the Partnership to issue replacement Certificates, according to such
procedures as the Managing General Partner may establish.
SECTION 10.2 Lost, Stolen or Destroyed Certificates.
The Partnership shall issue a new Certificate or Certificates in place
of any Certificate previously issued if the registered owner of the Certificate:
(a) makes proof by affidavit, in form and substance satisfactory to the
Managing General Partner, that a previously issued Certificate has been lost,
destroyed or stolen;
(b) requests the issuance of a new Certificate before the Partnership
has notice that the Certificate has been acquired by a purchaser for value in
good faith and without notice of an adverse claim;
(c) if requested by the Managing General Partner, delivers to the
Partnership a bond, in form and substance satisfactory to the Managing General
Partner, with such surety or sureties and with fixed or open penalty, as the
Managing General Partner may direct, in its discretion, to indemnify the
Partnership and the Depositary against any claim that may be made on account of
the alleged loss, destruction or theft of the Certificate; and
(d) satisfies any other reasonable requirements imposed by the Managing
General Partner.
If a Partner fails to notify the Partnership within a reasonable time
after he has notice of the loss, destruction or theft of a Certificate, and a
transfer of Units evidenced by the Certificate is registered before receiving
such notification, the Partner shall be precluded from making any claim against
the Partnership or any Transfer Agent for such transfer or for a new
Certificate.
SECTION 10.3 Registered Owner.
The Partnership shall be entitled to treat the Record Holder as the
Limited Partner or Assignee in fact of the Units represented thereby and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Units on the part of any other Person, whether or not it shall
have actual or other notice thereof, except as otherwise provided by law or any
applicable rule, regulation, guideline or requirement of any stock exchange on
which the Depositary Units of that Class are listed for trading. Without
limiting the foregoing, when a Person (such as a broker, dealer, bank, trust
company or clearing corporation, or an agent of any of the foregoing) is acting
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as a nominee, agent or in some other representative capacity for another Person
in acquiring or holding Units, as between the Partnership on the one hand and
such representative Person on the other hand, such representative Person (a)
shall be the Limited Partner or Assignee (as the case may be) of record and
beneficially, (b) must execute and deliver a Transfer Application and (c) shall
be bound by this Agreement and shall have the obligations of a Limited Partner
or Assignee (as the case may be) hereunder and as provided herein.
ARTICLE XI
TRANSFER OF INTERESTS
SECTION 11.1 Transfer.
(a) The term "transfer," when used in this Article with respect to a
Partnership Interest or Unit, shall be deemed to refer to an appropriate
transaction by which the holder of a Unit assigns the Partnership Interest
evidenced thereby to another Person as Assignee, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition.
(b) No Partnership Interest or Unit 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 or Unit
not made in accordance with this Article shall be null and void.
SECTION 11.2 Transfer of Interests of General Partners.
(a) The Managing General Partner may not transfer all or any part of its
Partnership Interest as the Managing General Partner unless (i) a Majority
Interest of the Limited Partners consents to such transfer and (ii) the
Partnership receives an Opinion of Independent Counsel that such transfer would
not result in the loss of limited liability of the Partnership as a partner of
the Operating Partnership to be treated as an association taxable as a
corporation for Federal income tax purposes (unless the Partnership or the
Operating Partnership is already treated in all material respects as an
association taxable as a corporation for Federal income tax purposes). Approval
of such transfer by a Majority Interest will also constitute the affirmative
vote of a Majority Interest to terminate the Managing General Partner's status
as a general partner of the Partnership immediately following the admission to
the Partnership of the successor Managing General Partner pursuant to Section
12.4.
(b) The Special General Partner may not transfer all or any part of its
Partnership Interest as the Special General Partner unless (i) the Managing
General Partner consents in writing to such transfer and (ii) the Partnership
receives an Opinion of Independent Counsel that such transfer would not result
in the loss of limited liability of the Partnership as a partner of the
Operating Partnership or of any Limited Partner in this Partnership or cause the
Partnership or the Operating Partnership to be treated as an association taxable
as a corporation for Federal income tax purposes (unless the
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Partnership or the Operating Partnership is already treated in all material
respects as an association taxable as a corporation due to changes in Federal
income tax laws).
(c) Neither subsections (a) or (b) of this Section 11.2 nor any other
provision of this Agreement shall be construed to prevent (and all Partners
hereby expressly consent to) the transfer by a General Partner upon its merger
or consolidation into any other corporation or the transfer by it of all or
substantially all of its assets to another corporation, and the assumption of
the rights and duties of a General Partner by the transferee corporation,
provided such corporation certifies that it is an Eligible Citizen, and
furnishes to the Partnership an Opinion of Independent Counsel that such merger,
consolidation, transfer or assumption will not result in a loss of limited
liability of any Limited Partner or of the Partnership in its capacity as the
limited partner in the Operating Partnership or result in the Partnership or the
Operating Partnership being treated as an association taxable as a corporation
for Federal income tax purposes (unless the Partnership or the Operating
Partnership is already treated in all material respects as an association
taxable as a corporation due to changes in Federal income tax laws).
SECTION 11.3 Transfer of Units.
Any Units, including Units held by a General Partner, may be transferred
following the deposit of such Units in the Deposit Account established for Units
of the Class to be so transferred, subject to the terms of the Deposit
Agreement. Units that have never been deposited in the Deposit Account or that
have been withdrawn from the Deposit Account and not redeposited are not
transferable except by operation of law.
SECTION 11.4 Transfer of Depositary Units.
(a) Except as provided in Section 11.3, the Partnership shall not
recognize transfers of Units or interests therein except by a transfer of
Depositary Receipts representing Depositary Units. Depositary Units may be
transferred only in the manner provided in the Deposit Agreement. No transfer of
Depositary Receipts evidencing Depositary Units will be recorded or otherwise
recognized by the Partnership unless and until the transferee has delivered a
properly executed Transfer Application to the Depositary.
(b) A transferee who has completed and delivered a Transfer Application
shall be deemed (i) to have agreed to comply with and be bound by this Agreement
and to execute any document that the Managing General Partner may reasonably
require to be executed in connection with the transfer and admission as a
Substituted Limited Partner pursuant to Article XI and (ii) to have appointed
the Managing General Partner attorney-in-fact on the terms and conditions set
forth in Section 1.5. Until admitted as a Substituted Limited Partner pursuant
to Article XII, the Record Holder of a Depositary Receipt shall be an Assignee
in respect of such Depositary Units.
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(c) Each distribution in respect of Units evidenced by Depositary
Receipts shall be paid by the Partnership, directly or through the Depositary or
through any other Person or agent, only to the Record Holders thereof as of the
Record Date set for the distribution. Such payment shall constitute full payment
and satisfaction of the Partnership's liability in respect of such payment,
regardless of any claim of any Person who may have an interest in such payment
of an assignment or otherwise.
SECTION 11.5 Citizenship Certifications; Non-citizen Assignees.
(a) In the event that, because of the nationality (or any other status)
of a Limited Partner or Assignee, the Partnership or the Operating Partnership
is or becomes subject to Federal, state or local laws or regulations the effect
of which would, in the reasonable determination of the Managing General Partner,
cause cancellation or forfeiture of any property in which IPT or IPTO has an
interest, the Managing General Partner may request any such Limited Partner or
Assignee to furnish to the Managing General Partner or, with respect to
Depositary Units, to the Depositary within 30 days after receipt of such request
an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other status (or, if the Limited Partner or Assignee
is a nominee holding for the account of another Person, the nationality,
citizenship or other status of such Person) as the Managing General Partner may
request. If a Limited Partner or Assignee fails to furnish such Citizenship
Certification or other information as may be requested, or if upon receipt of
such Citizenship Certification or other information the Managing General Partner
determines, with the advice of counsel, that a Limited Partner or an Assignee is
not an Eligible Citizen, the Units owned by such Limited Partner or Assignee
shall be subject to redemption in accordance with the provision of Section 11.6.
In addition to becoming subject to redemption, the Managing General Partner may
require that the status of any such Limited Partner or Assignee be changed to
that of Non-citizen Assignee, and, thereupon, the Managing General Partner shall
be substituted for such Non-citizen Assignee as the Limited Partner in respect
of his Units or Depositary Units.
(b) The Managing General Partner shall, in exercising voting rights in
respect of Units or Depositary Units held by it on behalf of Non-citizen
Assignees, distribute the votes in the same ratios as the votes of Limited
Partners in respect of Units other than those of Non-citizen Assignees are cast,
either for, against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 14.4 but
shall be entitled to the cash equivalent thereof, and the Managing General
Partner shall provide cash in exchange for an assignment of the Non-citizen
Assignee's share of the distribution in kind. Such payment and assignment shall
be treated for Partnership purposes as a purchase by the Managing General
Partner from the Non-citizen Assignee of his Partnership Interest (representing
his share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the Managing
General Partner, request admission as a Substituted Limited Partner with respect
to any Partnership Interest of such Non-citizen
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Assignee not redeemed pursuant to Section 11.6, and upon his admission pursuant
to Section 12.2, the Managing General Partner shall cease to be deemed to be the
Limited Partner in respect of the Non-citizen Assignee's Units.
SECTION 11.6 Redemption of Interests.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 11.5(a), or if upon receipt of such Citizenship
Certification or other information the Managing General Partner determines, with
the advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee in question
has furnished a Citizenship Certification to the Managing General Partner that
establishes to the satisfaction of the Managing General Partner that such
Limited Partner or Assignee is an Eligible Citizen or transferred his Units or
his Depositary Units to a Person who furnishes a Citizenship Certification to
the Managing General Partner prior to the date fixed for redemption as provided
below, redeem the Partnership Interest of such Limited Partner or Assignee, as
follows:
(i) The Managing General Partner shall, not later than the 30th
day before the date fixed for redemption, give notice of redemption to
the Limited Partner or Assignee, at his last address designated on the
records of the Partnership or Depositary, by registered or certified
mail, postage prepaid. The notice shall be deemed to have been given
when so mailed. The notice shall specify the Redeemable Units, the date
fixed for redemption, the place of payment, that payment of the
redemption price will be made upon surrender of the Depositary Receipt
or the Certificate evidencing the Redeemable Units and that on and after
the date fixed for redemption no further allocations or distributions to
which the Limited Partner or Assignee would otherwise be entitled in
respect of the Redeemable Units will accrue or be made.
(ii) The aggregate redemption price for Redeemable Units shall be
an amount equal to the Unit Price (the date of determination of which
shall be the date fixed for redemption) of Units of each Class to be so
redeemed multiplied by the number of Units of each such Class included
among the Redeemable Units. The redemption price shall be paid, in the
sole discretion of the Managing General Partner, in cash or by delivery
of a promissory note of the Partnership in the principal amount of the
redemption price, bearing interest at the rate of 10% annually, and
payable in three equal annual installments of principal, together with
accrued interest, commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Depositary Receipt or the Certificate evidencing the Redeemable Units,
duly endorsed in blank or accompanied by an assignment duly executed in
blank, the Limited Partner or Assignee or his duly authorized
representative shall be entitled to receive the payment therefor.
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(iv) After the redemption date, Redeemable Units shall no longer
constitute issued and outstanding Units.
(b) The provisions of this Section 11.6 shall be applicable also to
Units and Depositary Units held by a Limited Partner or Assignee as nominee of a
person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 11.6 shall prevent the recipient of a notice
of redemption from transferring his Units or Depositary Units before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the Managing General Partner shall
withdraw the notice of redemption, provided that the transferee of such Units or
Depositary Units certifies in the Transfer Application that he is an Eligible
Citizen. If the transferee fails to make such certification, such redemption
shall be effected from the transferee on the original redemption date.
(d) If the Partnership or the Managing General Partner determines that
because of the nationality (or other status) of a General Partner, whether or
not in its capacity as such, the Partnership is or becomes subject to Federal,
state or local regulations the effect of which would, in the reasonable
determination of the Managing General Partner, cause cancellation or forfeiture
of any property in which the Partnership or the Operating Partnership has an
interest, the Partnership may, unless such General Partner has furnished a
Citizenship Certification to the Managing General Partner or transferred his
Partnership Interest or Units to a Person who furnishes a Citizenship
Certification to the Managing General Partner prior to the date fixed for
redemption, redeem the Partnership Interest or Interests of such General Partner
as provided in subsection (a) of this Section 11.6. If such redemption includes
a redemption of a General Partner's Percentage Interest, the redemption price
thereof shall be equal to the aggregate sum of the Unit Price (the date of
determination of which shall be the date fixed for redemption) of each Class of
Units then outstanding, in each such case multiplied by the number of Units of
such Class into which that General Partner's Percentage Interest would then be
convertible under the terms of Section 13.3(b) if such General Partner were to
withdraw or be removed as General Partner (the date of determination shall be
the date fixed for redemption). The redemption price shall be paid by delivery
of a promissory note of the Partnership in the principal amount of the
redemption price, bearing interest at the rate of 10% annually, and payable in
three equal installments of principal, together with accrued interest,
commencing one year after the redemption date.
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ARTICLE XII
ADMISSION OF INITIAL, SUBSTITUTED AND ADDITIONAL
LIMITED PARTNERS
SECTION 12.1 Admission of Initial Limited Partners.
On the Commencement Date, the Managing General Partner admitted to the
Partnership the Initial Limited Partners. Each Initial Limited Partner executed
a counterpart of this Agreement (either individually or by his attorney or
agent) and thereby agreed to be bound by the terms hereof as a Limited Partner.
SECTION 12.2 Admission of Substituted Limited Partners.
(a) A Limited Partner (including the Managing General Partner if it has
been substituted as a Limited Partner for a Non-citizen Assignee) or Assignee
shall have the power to give the transferee of such Person's Units the right to
become a Substituted Limited Partner subject to the conditions of and in the
manner permitted by the terms of this Agreement. By transfer of a Depositary
Unit, the transferor is deemed to have given the transferee the right to become
a Substituted Limited Partner subject to the conditions of and in the manner
permitted under this Agreement. Each transferee of a Depositary Unit (including
any Person, such as a broker, dealer, bank, trust company, clearing corporation,
other nominee holder or an agent of any of the foregoing, acquiring such
Depositary Unit for the account of another Person) shall apply to become a
Substituted Limited Partner with respect to Depositary Units transferred to such
Person by executing and delivering a Transfer Application at the time of such
transfer. Such transferee shall not have the right to become a Substituted
Limited Partner unless the Managing General Partner consents thereto, which
consent may be given or withheld in the Managing General Partner's sole
discretion. If such consent is withheld, such transferee shall be an Assignee. A
Record Holder of a Depositary Unit shall be an Assignee at and from the close of
business on the business day on which a properly executed Transfer Application
is received by a Transfer Agent until the date on which such Record Holder is
admitted to the Partnership as a Substituted Limited Partner. The admission of
an Assignee as a Substituted Limited Partner shall be effective at and from the
close of business on the last day of the calendar month in which a properly
executed Transfer Application is received by a Transfer Agent and the Managing
General Partner consents to such admission.
(b) Under the terms of the Deposit Agreement, the Depositary shall be
obligated to prepare, as of the close of business on the last business day of
each month, a list or other appropriate evidence setting forth the transfers of
each Class of Depositary Units registered by all Transfer Agents since the last
business day of the preceding month (hereinafter called the "transfer record")
and, as promptly as practicable after the last business day of each month, to
make the transfer record available to the Managing General Partner. The Managing
General Partner shall determine whether to consent to the admission of new
Assignees prior to or during the second month after the month in which the
transfer was made so that each Assignee who is a Record Holder of a Depositary
Unit
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on the last business day of the month, and who the Managing General Partner has
determined shall be admitted as a Substituted Limited Partner, is admitted as a
Substituted Limited Partner in respect of the underlying Units of each Class
with respect to the transfer was so made, not later than the last business day
of the second month after the month in which the transfer was registered.
(c) The admission of an Assignee as a Substituted Limited Partner shall
be effective without the consent of any of the Partners other than the Managing
General Partner.
(d) An Assignee who is admitted as a Substituted Limited Partner shall
have the rights and powers and be subject to the restrictions and liabilities of
a Limited Partner under this Agreement and the Texas Act; provided, however,
that a Substituted Limited Partner shall not be liable for the obligations of
its assignor to the Partnership pursuant to an enforceable promise by such
assignor to make a contribution to, or otherwise pay cash or transfer property
to, the Partnership, but the assignor shall remain liable for its obligation
notwithstanding the assignment of the Units to the Assignee (unless (i) the
assignor's obligations are expressly assumed by the Assignee at the time of
assignment, or (ii) the Units so assigned are of a Class other than Class A
Units or Class B Units and the terms of such Units, as designated by the
Managing General Partner at the time of issuance pursuant to Section 3.3(b),
specifically provide that the Assignee shall assume such obligations upon
transfer of such Units).
SECTION 12.3 Admission of Additional Limited Partners.
A Person (other than an Initial Limited Partner) who makes a Capital
Contribution to the Partnership shall be admitted to the Partnership as an
Additional Limited Partner 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, including, without limitation, the power
of attorney granted in Section 1.5, and (b) such other document or instruments
as may be required in order to effect his admission as a Limited Partner.
SECTION 12.4 Admission of Successor Managing General Partner.
A successor Managing General Partner selected pursuant to Section
13.1(b), 13.2, or 14.2(a)(ii) or the transferee of the entire Partnership
Interest of the Managing General Partner pursuant to Section 11.2(a) shall be
admitted to the Partnership as the Managing General Partner, effective
immediately prior to the withdrawal of the Managing General Partner pursuant to
Section 13.1(a). In each case, the admission shall be subject to the successor
Managing General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required in order to effect the admission.
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SECTION 12.5 Admission of Successor Special General Partner.
A successor Special General Partner selected pursuant to Section
13.1(c), 13.2 or 14.2(a)(ii) or the transferee of the entire Partnership
Interest of the Special General Partner pursuant to Section 11.2(b) shall be
admitted to the Partnership as the Special General Partner upon furnishing to
the Managing General Partner (a) acceptance in form satisfactory to the Managing
General Partner of all terms of this Agreement, including, without limitation,
the power of attorney granted in Section 1.5 and (b) such other documents as the
Managing General Partner shall require, effective immediately prior to the
withdrawal of the Special General Partner pursuant to Section 13.1(a). In each
case, the admission shall be subject to the successor Special General Partner
pursuant to Section 13.1(a). In each case, the admission shall be subject to the
successor Special General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required in order to effect the admission.
SECTION 12.6 Amendment of Records.
For the admission to the Partnership of any Partner, the Managing
General Partner shall take such steps as may be required by Texas law to amend
the records of the Partnership and, if necessary, the Certificate of Limited
Partnership and may for this purpose exercise the power of attorney granted
pursuant to Section 1.5. The Managing General Partner shall keep, or cause to be
kept by the Depositary or Transfer Agent or both, a current list of the Limited
Partners.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNERS
SECTION 13.1 Withdrawal of the General Partners.
(a) The Managing General Partner or Special General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "Event of
Withdrawal"):
(i) the General Partner voluntarily withdraws from the
Partnership by giving written notice to the other Partners;
(ii) the General Partner transfers all of its rights as General
Partner pursuant to Section 11.2;
(iii) the General Partner is removed pursuant to Section 13.2;
(iv) the General Partner
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(A) makes a general assignment for the benefit of
creditors;
(B) files a voluntary bankruptcy petition;
(C) files a petition or answer seeking for itself a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or similar relief under any law;
(D) files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed
against the General Partner in a proceeding of the type described
in paragraphs (A)-(C) of this subsection; or
(E) seeks, consents to, or acquiesces in the appointment
of a trustee, receiver, or liquidator of the General Partner or
of all or any substantial part of its properties;
(v) a final and nonappealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner under
any Federal or state bankruptcy or insolvency laws as now or hereafter
in effect; or
(vi) a certificate of dissolution or its equivalent is filed for
the General Partner, or 90 days expire after the date of notice to the
General Partner of revocation of its charter without a reinstatement of
its charter, under the laws of its state of incorporation.
If an Event of Withdrawal specified in paragraph (iv), (v) or (vi) occurs, the
withdrawing General Partner shall give written notice to the Limited Partners
within 30 days of such occurrence. The Partners hereby agree that only the
Events of Withdrawal described in this Section 13.1 shall result in withdrawal
of either Partner from the Partnership.
(b) Withdrawal of the Managing General Partner from the Partnership upon
the occurrence of an Event of Withdrawal will not constitute a breach of this
Agreement under the following circumstances: (i) at any time after December 31,
1999, the Managing General Partner voluntarily withdraws by giving at least 90
days advance written notice to the Limited Partners, such withdrawal to take
effect on the date specified in such notice; (ii) at any time the Managing
General Partner ceases to be a General Partner pursuant to Section 13.1(a)(ii);
or (iii) at any time the Managing General Partner withdraws by reason of removal
as provided in Section 13.1(a)(iii).
The withdrawal of the Managing General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the Special General Partner and of the managing and special
general partners from the Operating Partnership. If the Managing General Partner
gives a notice of withdrawal pursuant to Section 13.1(a)(i), a Majority Interest
of the Limited Partners may, prior to the effective date of such withdrawal,
elect successor Managing and Special General Partners. The Persons so elected
shall automatically become the
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successor managing and special general partners of the Operating Partnership, as
provided in the Operating Partnership Agreement. If no successor Managing
General Partner is elected prior to the effective date of withdrawal, the
Partnership shall be dissolved pursuant to Section 14.1.
(c) Withdrawal of the Special General Partner from the Partnership upon
the occurrence of an Event of Withdrawal will not constitute a breach of this
Agreement under the following circumstances: (i) at any time the Special General
Partner gives 90 days advance written notice to the Managing General Partner,
and the Partnership receives an Opinion of Independent Counsel that the Special
General Partner's withdrawal from the Partnership (following the selection of
the successor Special General Partner) would not cause the Partnership or the
Operating Partnership to be treated as an association taxable as a corporation
for Federal income tax purposes; (ii) at any time the Special General Partner
ceases to be a General Partner pursuant to Section 13.1(a)(ii); or (iii) at any
time the Special General Partner withdraws by reason of removal as provided in
Section 13.1(a)(iii).
Upon withdrawal of the Special General Partner by reason of an
Event of Withdrawal described in Section 13.1(a)(i), (ii), (iv), (v) or (vi),
the Managing General Partner shall as promptly as practicable select a successor
Special General Partner, reconstitute the Partnership and continue its business
pursuant to Section 14.2(a)(i). If the Special General Partner withdraws from
the Partnership upon the occurrence of any Event of Withdrawal, it shall
automatically withdraw as special general partner of the Operating Partnership,
and its successor as Special General Partner shall automatically be admitted as
special general partner of the Operating Partnership. Subject to Section
13.1(d), if the Opinion of Independent Counsel described in Section 11.2(b) or
Section 13.1(c)(i) is not received by the Partnership prior to the occurrence of
an Event of Withdrawal described in Section 13.1(a)(ii) or Section 13.1(a)(i),
respectively, then the Partnership shall be dissolved pursuant to Section 14.1.
(d) Notwithstanding the foregoing provisions of Section 13.1(c), a
successor Special General Partner or a successor special general partner of the
Operating Partnership need not be selected if (i) the Partnership has received
an Opinion of Independent Counsel that the failure to select a successor would
not result in the Partnership or the Operating Partnership being treated as an
association taxable as a corporation for Federal income tax purposes or (ii) the
Partnership or the Operating Partnership is already treated in all material
respects as an association taxable as a corporation due to changes in Federal
income tax laws. If under this Section 13.1(d) 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 13.3.
SECTION 13.2 Removal of the General Partners.
The Managing General Partner may be removed only in accordance with the
following:
(i) before January 1, 2000, only upon the affirmative votes of
Limited Partners owning at least 95% of the Percentage Interests of each
Class of Units then outstanding; and
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(ii) after the Initial Term, only upon the affirmative votes of
Limited Partners owning at least 66 2/3% of the combined Percentage
Interests.
Any such action by the Limited Partners for removal of the Managing General
Partner must also provide for the election of a new Managing General Partner.
Such removal shall be effective immediately following the admission of the
successor Managing General Partner pursuant to Article XII. The removal of the
managing General Partner shall also automatically constitute the removal of the
Special General Partner and of the managing and special general partners of the
Operating Partnership, as provided in the Operating Partnership Agreement. The
Persons elected as successor Managing General Partner and Special General
Partner shall automatically become the successor managing and special general
partners of the Operating Partnership. The right of the Limited Partners to
remove the Managing General Partner shall not exist or be exercised unless the
Partnership has received an Opinion of Independent Counsel that the removal of
the Managing General Partner and the selection of a successor Managing General
Partner will not result in (i) the loss of limited liability of the Partnership
in the Operating Partnership or any Limited Partner in this Partnership or (ii)
the treatment of the Partnership or the Operating Partnership as an association
taxable as a corporation for Federal income tax purposes.
SECTION 13.3 Interest of Departing Partner and Successor.
(a) The Departing Partner shall, at the option of its successor
exercisable prior to the effective date of the departure of the Departing
Partner, promptly receive from its successor in exchange for its Partnership
Interest as a General Partner, an amount in cash equal to the fair market value
of the Departing Partner's Partnership Interest as a General Partner herein,
determined as of the effective date of its departure. If the successor to the
Departing Partner exercises its option to acquire the Partnership Interest of
the departing Partner as a General Partner, it must also acquire at such time
the partnership interest of such Departing Partner as general partner in the
Operating Partnership, for an amount in cash equal to the fair market value of
such interest, determined as of the effective date of its departure. 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 a General Partner and Partnership income, gain,
loss, deduction and credit will be prorated and allocated as set forth in
Section 5.2(h).
For purposes of this Section, the fair market value of the Departing
Partner's Partnership Interests as a General Partner herein and the partnership
interest of such Departing Partner as the general partner of the Operating
Partnership shall be determined by reference to the Unit Price of Depositary
Units representing Units of each Class into which the Partnership Interest will
be converted pursuant to Section 13.3(b) if such option is not exercised, as of
the date of exercise of the option to acquire such interest, if the Depositary
Units are then listed for trading on a National Securities Exchange or quoted on
NASDAQ and (ii) if the Depositary Units are not so traded or quoted, by
agreement between the Departing Partner and its successor or, failing agreement
within 30 days after the effective date of such Departing Partner's departure,
by a firm of independent appraisers selected by the Departing Partner and its
successor, the determination of which shall be
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conclusive as to the matter. If such parties cannot agree as to such firm within
45 days after the effective date of such departure, then such firm shall be
designated by the two firms selected by the departing Partner and its successor.
(b) If the successor to the Departing Partner does not exercise the
option described in Section 13.3(a), the Partnership Interest of the Departing
Partner as a General Partner of the Partnership and the partnership interest of
such Departing Partner as a general partner of the Operating Partnership shall
be treated as follows:
(i) If the Partnership Interest not acquired is that of the
Managing General Partner, such Departing Partner shall become a Limited
Partner and its Partnership Interest as Managing General Partner of the
Partnership 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 of each Class into
which the Partnership Interest of such Departing Partner shall be
converted shall be determined separately with respect to each separate
Class of Limited Partners and, with respect to each such Class, shall be
equal to the number of Units held by Limited Partners in such Class
outstanding immediately prior to the effective date of its departure
multiplied by a fraction, the numerator of which is such Departing
Partner's Percentage Interest (immediately before such departure), and
the denominator of which is the aggregate Percentage Interests
(immediately before such departure), of all Limited Partners and
Assignees (immediately before such departure) included in such Class.
(ii) If the Partnership Interest not acquired is that of the
Special General Partner, such Departing Partner shall become a Limited
Partner and its Partnership Interest as Special 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 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 Limited Partners and, with respect to each
such Class, shall be determined in accordance with the formula set forth
in subparagraph (i) above with respect to the conversion of the
Partnership Interest of the Managing General Partner.
(iii) If the Partnership Interest not acquired is that of a
departing general partner as a general partner of the Operating
Partnership, the limited partnership interest into which such interest
is converted pursuant to the Operating Partnership Agreement shall be
contributed by such Departing Partner to the capital of the Partnership,
such Departing Partner shall become a Limited Partner of the Partnership
and the Partnership shall issue to such Departing Partner Units of the
Class or Classes then outstanding. The number of Units of each Class to
be so issued shall be determined separately with respect to each Class
of Limited Partners and, with respect to each such Class, shall be equal
to the number of Units of such Class outstanding immediately prior to
the effective date of its departure (but after
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giving effect to the conversion, if any, described in subparagraph (ii)
above) multiplied by a fraction, the numerator of which is such
Departing Partner's percentage interest under the Operating Partnership
Agreement (immediately before such departure), and the denominator of
which is the aggregate percentage interest (immediately before such
departure) of all limited partners of the Operating Partnership
(immediately before such departure) under the Operating Partnership
Agreement.
This Agreement will be amended to reflect any event described in
subparagraph (i), (ii) or (iii) above.
At any time after the departure of a Departing Partner, upon the request
of such Departing Partner, the Partnership shall file with the Securities and
Exchange Commission as promptly as practicable after receiving such request, and
use its best efforts to cause to become effective, a registration statement
under the Securities Act of 1933 registering the offering and sale of Units
owned by the Departing Partner at the time of his departure, including any Units
that were received by the Departing Partner pursuant to this Section 13.3(b) and
included in such request, provided that the Partnership shall be required to
file no more than three such registration statements at the request of any one
Departing Partner. In connection with any registration pursuant to the preceding
sentence, the Partnership shall promptly prepare and file such documents as may
be necessary to register or qualify the interest or the Units subject to such
registration under the securities laws of such states as the Departing Partner
shall reasonably request and do any and all other acts and things which may
reasonably be necessary or advisable to enable such Departing Partner to
consummate a public sale of such interest or Units in such states. The first
registration effected at the request of a Departing Partner under this paragraph
shall be effected at the expense of the Partnership, except for underwriting
discounts and commissions, and any subsequent registrations at the request of
such Department Partner shall be at the expense of such Departing Partner. Any
registration statement filed pursuant hereto shall be continued in effect for a
period of not more than six months following its effective date. If offered in a
firm commitment underwriting, the Partnership will provide indemnification to
the underwriters in form and substance reasonably satisfactory to such
underwriters.
(c) If the successor to the Departing Partner does not exercise the
option described in paragraph (a) above, the successor shall at the effective
date of its admission to the Partnership contribute to the capital of the
Partnership cash in an amount or property having a Net Agreed Value such that
its Capital Account, after giving effect to such contribution, shall be equal to
that percentage of the Capital Accounts of all Partners that is equal to its
Percentage Interest as Managing General Partner, in the case of a successor
Managing General Partner, or its Percentage Interest as Special General Partner,
in the case of a successor Special General Partner. In such event, such
successor shall be entitled to such Percentage Interest, as the case may be, of
all Partnership allocation and distributions.
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ARTICLE XIV
DISSOLUTION AND LIQUIDATION
SECTION 14.1 Dissolution.
The partnership shall be dissolved upon the occurrence of any one or
more of the following events (each such event referred to as an "Event of
Dissolution"):
(a) the expiration of its term as provided in Section 1.6;
(b) an Event of Withdrawal of a General Partner as provided in Section
13.1(a);
(c) an election to dissolve the Partnership by the Managing General
Partner which is approved by the affirmative vote of a Majority Interest of the
Limited Partners (and all Limited Partners hereby expressly consent that such
approval may be effected upon written consent of such Majority Interest); or
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Texas Act.
SECTION 14.2 Continuation of the Business and Reconstitution of the Partnership.
(a) Upon the occurrence of an Event of Dissolution described in
subsection (a), (b) or (c) of Section 14.1, the Partnership may be reconstituted
and its business continued without being wound up if (i) there remains at least
one General Partner, such General Partner carries on the business of the
Partnership, and the Partnership receives an Opinion of Independent Counsel that
continuation of the business of the Partnership by such General Partner will not
result in the loss of limited liability of the Partnership as a partner of the
Operating Partnership or of any Limited Partner in this Partnership or cause the
Partnership or the Operating Partnership to be treated as an association taxable
as a corporation for Federal income tax purposes (unless the Partnership or the
Operating Partnership is already treated in all material respects as an
association taxable as a corporation due to changes in Federal income tax laws);
or (ii) within 90 days after the occurrence of such Event of Dissolution, all
remaining Partners agree in writing to continue the business of the Partnership
and, if necessary, to the appointment, effective as of the date of withdrawal,
of a successor General Partner. Unless the business of the Partnership is
continued pursuant to (i) or (ii) above, the Partnership shall conduct only
activities necessary to wind up its affairs.
(b) If the business of the Partnership continues pursuant to Section
14.2(a), then
(i) the reconstituted Partnership shall continue until the end
of the term for which it is formed or reconstituted unless earlier
dissolved in accordance with this Article;
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(ii) the interest of the former General Partner shall be treated
thenceforth as the interest of a Limited Partner and converted into
Units in the manner provided in Section 13.3(b) (unless dissolution
results from withdrawal due to a transfer of interests in the
Partnership pursuant to Section 11.2 or withdrawal occurring after, or
removal effective upon or after, selection of a successor pursuant to
Sections 13.1 or 13.2, in which event the former General Partner shall
be subject to the option of its successor provided for in Section
13.3(a)); and
(iii) all necessary steps shall be taken to amend this Agreement,
if necessary, and the Certificate of Limited Partnership, and the
Managing General Partner (or its successor) may for this purpose
exercise the powers of attorney granted pursuant to Section 1.5.
SECTION 14.3 Liquidation.
Upon dissolution of the Partnership, unless an election to reconstitute
the Partnership and continue its business is made pursuant to Section 14.2, the
Managing General Partner shall be the Liquidator unless (i) the Managing General
Partner has wrongfully dissolved the Partnership or withdrawn pursuant to any
Event of Withdrawal, in which case a liquidator or liquidating committee
selected by a Majority Interest shall be the Liquidator, or (ii) a court of
competent jurisdiction has appointed a person to carry out the liquidation, in
which case such person 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 vote of a Majority Interest. The
Liquidator shall agree not to resign at any time without 15 days prior written
notice and (if other than the Managing General Partner or a court-appointed
Liquidator) may be removed at any time, with or without cause, by notice of
removal approved by a Majority Interest. Upon dissolution, removal or
resignation by 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 a Majority Interest or by a
court of competent jurisdiction, as the case may be. In the event a Majority
Interest is required to, but does not, select a liquidator or liquidating
committee or successor liquidator or liquidating committee, if applicable, at a
meeting called and held or pursuant to written consents solicited in accordance
with the procedures set forth in Article XV of this Agreement, the Liquidator or
successor Liquidator shall be selected, and its compensation approved, by a
majority of the Partnership Interests attributable to those Partners present in
person or by proxy at a meeting called and held in accordance with the
procedures set forth in Article XV, except that a quorum shall not be required
and such Partners shall vote together as a single class. 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 XIV, the Liquidator appointed in
the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, (i) those powers granted
to the Liquidator under the Texas Act and (ii) all of the powers conferred upon
the Managing General Partner under the terms of this Agreement (but subject to
all of the applicable
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limitations, contractual and otherwise, upon the exercise of such powers, other
than the limitation on sale set forth in section 17.1) 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, or establishment of reserves with respect to,
creditors of the Partnership, including Partners who are creditors other than
solely as a result of accrued but unpaid distributions, 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.
SECTION 14.4 Distribution in Kind.
Notwithstanding the provisions of Section 14.3 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, in lieu of cash, as tenants in common and in
accordance with the provisions of Sections 14.3(c) and 14.3(d), 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.
SECTION 14.5 Return of Capital.
Neither of the General Partners shall 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.
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SECTION 14.6 Waiver of Partition.
Each Partner hereby waives any rights to partition of the Partnership
property.
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS;
RECORD DATE
SECTION 15.1 Amendments to be Adopted Solely by the Managing General Partner.
The Managing General Partner (pursuant to the Managing General Partner's
powers of attorney from the Limited Partners) may amend any provision of this
Agreement without the consent of any Limited Partner or Assignee, and may
execute, swear to, acknowledge, deliver, file and record whatever documents may
be required in connection therewith, to reflect:
(a) a change in the name of the Partnership or the location of the
principal place of business of the Partnership, the registered agent or the
registered office of the Partnership;
(b) admission, substitution or termination of Partners in accordance
with this Agreement;
(c) a reduction in all or a portion of any Limited Partner's Capital
Contribution, or any increase thereof, adopted in accordance with Section 15.2
hereof;
(d) a change that is 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 necessary or advisable in the
opinion of the Managing General Partner to ensure that the Partnership will not
be treated as an association taxable as a corporation for Federal income tax
purposes;
(e) a change to divide the outstanding Class A Units into a greater
number of Class A Units or to combine the outstanding Class A Units into a
smaller number of Class A Units;
(f) a change to divide the outstanding Class B Units into a greater
number of Class B Units or to combine the outstanding Class B Units into a
smaller number of Class B Units;
(g) an amendment that in the sole discretion of the Managing General
Partner is necessary or desirable in connection with the authorization for
issuance or issuance of any class or series of Units pursuant to Section 3.3(b)
or 3.3(e), or a change to combine or reclassify the Class A Units and Class B
Units as provided in Section 3.3(g).
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(h) a change (i) that does not adversely affect the Limited Partners in
any material respect, or (ii) that is necessary or desirable to satisfy any
requirements, conditions or guidelines contained in any opinion, directive,
order, ruling or regulation of any Federal or state agency or contained in any
Federal or state statute (including, without limitation, the Texas Act), or that
is necessary or desirable to implement the provisions of Section 5.2(c) or to
facilitate the trading of any Class of the Depositary Units or comply with any
rule, regulation, guideline or requirement of any securities exchange on which
any Class of the Depositary Units 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 Partnership and the Limited Partners or (iii) that is required or
contemplated by this Agreement;
(i) an amendment that is necessary, in the opinion of counsel to the
Partnership, to prevent the Partnership or the Managing General Partner or
Special General Partner or their respective directors or officers from in any
manner being subjected to the provisions of the Investment Company Act of 1940,
as amended, the Investment Advisers Act of 1940, as amended, or "plan asset"
regulations adopted under the Employee Retirement Income Security Act of 1974,
as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
(j) an amendment to reflect the occurrence of any event described in
Section 13.3(b)(i), (ii) or (iii);
(k) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 16.3; or
(l) any other amendments similar to the foregoing.
SECTION 15.2 Amendment Procedures.
Except as provided in Sections 15.1 and 15.3, all amendments to this
Agreement shall be made in accordance with the following requirements: (a)
amendments of this Agreement may be proposed only by the Managing General
Partner; (b) if an amendment is proposed, the Managing General Partner shall
seek the written consent of the requisite Percentage Interests of the Limited
Partners or call a meeting of the Limited Partners to consider and vote on such
proposed amendment; and (c) a proposed amendment shall be effective upon its
approval by a Majority Interest unless a greater percentage is required by law
or this Agreement. The Managing General Partner shall notify all Partners upon
final adoption of any proposed amendment (other than an amendment effected
without the vote or consent of the Limited Partners in accordance with Section
15.1).
SECTION 15.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 15.1 and 15.2, (i) the
approval of the Special General Partner shall be required for any amendment, if
such amendment would change the Special General Partner's Percentage Interest or
increase the Special General Partner's duties or
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liabilities or the Partnership has received an Opinion of Independent Counsel
that such amendment would have a materially adverse consequence to the Special
General Partner, and (ii) the approval of the Managing General Partner and (A)
if the determination is made during the Initial Term, the approval of Limited
Partners whose aggregate Percentage Interests constitute at least 98% of the
aggregate Percentage Interests of each Class, or (B) if the determination is
made after the Initial Term, the approval of Limited Partners whose aggregate
Percentage Interests constitute at least 98% of the aggregate Percentage
Interests of the Limited Partners, shall be required for (1) any amendment
unless the Partnership has received an Opinion of Independent Counsel that such
amendment would not result in the loss of limited liability of any Limited
Partner or result in the Partnership being treated 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) or (2) any amendment to Section 18.1,
except as permitted in Section 15.1(h)(i).
(b) Notwithstanding the provisions of Sections 15.1, 15.2 and 15.3(a),
no provision of this Agreement which establishes a percentage of the Limited
Partners of any Class required to take any action shall be amended, altered,
changed, repealed or rescinded in any respect which would have the effect of
reducing the voting requirement, unless such is approved by written consent or
the affirmative vote of Limited Partners whose aggregate Percentage Interests
constitute not less than the voting requirement sought to be reduced. During the
Initial Term, this Section 15.3(b) shall be amended only with the approval by
written consent or the affirmative vote of Limited Partners whose aggregate
Percentage Interests constitute at least 98% of the aggregate Percentage
Interests of the Limited Partners in each Class. After the Initial Term, this
Section 15.3(b) shall only be amended with the approval by written consent or
affirmative vote of Limited Partners whose aggregate Percentage Interests
constitute at least 98% of the aggregate Percentage Interests. The voting
requirements contained in this Section 15.3(a) and (b) shall be in addition to
voting requirements imposed by law or other provisions contained herein.
SECTION 15.4 Meetings.
During the Initial Term, meetings of any Class of Limited Partners may
be called by the Managing General Partner or by Limited Partners whose aggregate
Percentage Interests constitute at least 20% of the aggregate Percentage
Interests of the Class of Limited Partners for which the meeting is called.
After the Initial Term, meetings of the Limited Partners may be called by the
Managing General Partner or by Limited Partners whose aggregate Percentage
Interests constitute at least 20% of the aggregate Percentage Interests of the
Limited Partners. Any Partner calling a meeting shall specify the number of
Units as to which the Partner is exercising the right to call a meeting and only
those specified Units shall be counted for the purpose of determining whether
the required 20% standard established above has been met. Limited Partners shall
call a meeting by delivering to the Managing General Partner one or more calls
in writing stating that the signing Limited Partners wish to call a meeting and
indicating the general or specific purposes for which the meeting is to be
called. Within 60 days after receipt of such a call from Limited Partners or
within such greater time as may be reasonably necessary for the Partnership to
comply with any statutes,
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rules, regulations, listing agreements or similar requirements governing the
holding of a meeting or the solicitation of proxies for use at such a meeting,
the Managing General Partner shall send a notice of the meeting to the
appropriate Class of Limited Partners either directly or indirectly through the
Depositary. A meeting shall be held at a time and place determined by the
Managing General Partner on a date not more than 60 days after the mailing of
notice of the meeting. Limited Partners may vote either in person or by proxy at
any meeting. No matters that would constitute taking part in control of the
Partnership by the Limited Partners shall be voted upon by the Limited Partners.
SECTION 15.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 15.4 shall be given
either personally, in writing or by mail or other means of written communication
addressed to the Limited Partner at the address of the Limited Partner appearing
on the books of the Depositary or the partnership. The notice shall be deemed to
have been given at the time when delivered personally or deposited in the mail
or sent by other means of written communication. An affidavit or certificate of
mailing of any notice or report in accordance with the provisions of this
Article XV executed by the Managing General Partner, Depositary, Transfer Agent,
registrar of Depositary Units or mailing organization shall be prima facie
evidence of the giving of notice. If any notice addressed to the Limited Partner
at the address of the Limited Partner appearing on the books of the Depositary
or the Partnership is returned by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver it, said
notice and any subsequent notices or reports shall be deemed to have been duly
given without further mailing if they are available for the Limited Partner at
the principal executive office of the Partnership for a period of one year from
the date of the giving of the notice to all other Limited Partners.
SECTION 15.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of
or to vote at a meeting of any Class of Limited Partners or to give consents
without a meeting as provided in Section 15.11, the Managing General Partner may
set a Record Date, which date shall not be less than 10 days nor more than 60
days before the date of the meeting (unless such requirement conflicts with any
rule, regulation, guideline or requirement of any securities exchange on which
the Depositary Units of the Class for which the meeting is called are listed for
trading, in which case the rule, regulation, guideline or requirement of such
securities exchange shall govern).
SECTION 15.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or
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if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XV.
SECTION 15.8 Waiver of Notice; Consent to Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, provided that if a quorum is present either in
person or by proxy, and further provided that if, either before or after the
meeting, each of the Limited Partners entitled to vote, not present in person or
by proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. All waivers, consents and
approvals shall be filed with the partnership records or made a part of the
minutes of the meeting. Attendance of a Limited Partner at a meeting shall
constitute a waiver of notice of the meeting, except when the Limited Partner
objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened; and except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the objection is expressly made at the meeting.
SECTION 15.9 Quorum.
During the Initial Term, Limited Partners who are represented in person
or by proxy and whose Class Percentage Interests constitute a majority of the
Percentage Interests of such Class shall constitute a quorum at a meeting of
that Class of Limited Partners. After the Initial Term, a Majority Interest
represented in person or by proxy shall constitute a quorum at a meeting of
Limited Partners. Except as otherwise specified in this Agreement, the vote of
Limited Partners whose Percentage Interests represent a majority of the
Percentage Interests entitled to vote and present in person or by proxy at a
meeting of such Limited Partners duly called and held in accordance with this
Agreement and at which a quorum is present shall constitute the act of such
Limited Partners. The Limited Partners present at a meeting duly called or held
and at which a quorum is present may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Limited Partners to leave
less than a quorum, provided that any action taken is approved by the requisite
Percentage Interests, if any of the Limited Partners specified in this
Agreement. In the absence of a quorum, any meeting of Limited Partners may be
adjourned from time to time by the affirmative vote of Limited Partners whose
Percentage Interests represent a majority of the Percentage Interests of the
Limited Partners in the Class for which such meeting is being held, represented
either in person or by proxy, but no other business may be transacted, except as
provided in Section 15.4
SECTION 15.10 Conduct of Meeting.
The Managing General Partner shall have full power and authority
concerning the manner of conducting any meeting of Limited Partners or the
solicitation of consents in writing, including, without limitation, the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 15.4, the conduct of voting, the
validity and effect of any
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proxies, and the determination of any controversies, votes or challenges arising
in connection with or during the meeting or voting. The Managing General Partner
shall designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting. Such person designated to
serve as chairman and to take the minutes of any such meeting may be a director
or officer of the Managing General Partner. All minutes shall be kept with the
records of the Partnership maintained by the Managing General Partner. The
Managing General Partner may make such other regulations consistent with
applicable law and this Agreement as it may deem advisable concerning the
conduct of any meeting of the Limited Partners or solicitation of consents in
writing, including regulations with respect to the appointment of proxies, the
appointment and duties of inspectors of votes and consents, the submission and
examination of proxies and other evidence of the right to vote and the
revocation of consents in writing.
SECTION 15.11 Action Without a Meeting.
Any action that may be taken at a meeting of the Limited Partners, or
any Class thereof, may be taken without a meeting if a consent in writing
setting forth the action so taken is signed by a Limited Partner or partners
owning not less than the minimum Percentage Interests that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners of
the appropriate Class were present and voted. Prompt notice of the taking of
action without a meeting shall be given to the Limited Partners who have not
consented in writing. The Managing General Partner may specify that any written
ballot submitted to Limited Partners for the purpose of taking any action
without a meeting shall be returned to the Partnership within the time, not less
than 20 days, specified by the Managing General Partner. If a ballot returned to
the Partnership does not vote all of the Units held by the Limited Partner, the
Partnership shall be deemed to have failed to receive a ballot for the Units
which were not voted. If consent to the taking of any action by the Limited
Partners, or any class of the Limited Partners, is solicited by any person other
than by or on behalf of the Managing General Partner, the written consents shall
have no force and effect unless and until (i) they are deposited with the
partnership in care of the Managing General Partner, (ii) consents sufficient to
take the action proposed are dated as of a date not more than 90 days prior to
the date sufficient consents are deposited with the Partnership, and (iii) an
Opinion of Independent Counsel is delivered to the Managing General Partner to
the effect that the exercise of such right and the action proposed to be taken
with respect to any particular matter (1) shall not cause the Limited Partners,
or any Class thereof, to be deemed to be taking part in the management and
control of the business and affairs of the partnership so as to subject the
Limited Partners, or any Class of the Limited Partners, to unlimited liability
therefor, (2) will not jeopardize the status of the partnership as a partnership
under applicable tax laws and regulations, and (3) is otherwise permissible
under the state statutes then governing the rights, duties and liabilities of
the Partnership and the Partners.
SECTION 15.12 Voting and Other Rights.
(a) Only those Record Holders of Units and Depositary Units on the
Record Date set pursuant to Section 15.6 shall be entitled to notice of, and to
vote at, a meeting of Limited Partners or to act with respect to matters as to
which consents are solicited. With respect to voting rights and
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other powers attributable to Units or Depositary Units that are held by
Assignees other than Non-citizen Assignees, the Managing General Partner shall
be deemed to be the Limited Partner with respect thereto and the Managing
General Partner shall, in exercising such voting rights or any other powers in
respect to such Units or Depositary Units on any matter, vote such Units or
Depositary Units or exercise such other powers at the direction of the Assignee.
(b) With respect to Depositary Units that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing), in whose name the
Depositary Receipts evidencing such Depositary Units are registered, such
broker, dealer or other agent shall, in exercising the voting rights in respect
of such Depositary Units on any matter, vote such Depositary Units in favor of,
and at the direction of (which may be pursuant to discretionary authority
granted to the broker, dealer or other agent), the Person on whose behalf such
broker, dealer or other agent is holding such Depositary Units and the
Partnership shall be entitled to assume it is so acting without further inquiry.
ARTICLE XVI
MERGER
SECTION 16.1 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.
SECTION 16.2 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;
(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)
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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;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 16.4 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.
SECTION 16.3 Approval by Limited Partners 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 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 holders of at least a Majority Interest,
unless the Merger Agreement contains any provision which, if contained in an
amendment to the Agreement, would require the vote or consent of a greater
percentage of the Percentage Interests of the Limited Partners, in which case
such greater percentage vote or consent shall be required for approval of the
Merger Agreement.
(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
16.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
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SECTION 16.4 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.
SECTION 16.5 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
form one entity to another having occurred.
ARTICLE XVII
PROHIBITIONS AND LIMITATIONS
SECTION 17.1 General Prohibitions.
Without the prior approval of a Majority Interest, the Managing General
Partner shall not:
(a) sell or exchange all or substantially all of the assets of the
Partnership, including, without limitation, any such sale or exchange to the
Managing General Partner or the Special General Partner (provided, however, that
this provision shall not be interpreted to preclude contributions of all or
substantially all of the assets of the Partnership to the Operating Partnership
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or to other limited partnerships or other entities, the securities of which are
distributed to the Partners); or
(b) acting on behalf of the Partnership,
(i) consent to amendments to the Operating Partnership Agreement
that would adversely affect the limited partner of the Operating
Partnership in any material respect;
(ii) elect a successor managing general partner of the Operating
Partnership;
(iii) consent to the sale of all or substantially all of the
assets of the Operating Partnership (provided, however, that this
provision shall not be interpreted to preclude contributions of assets
of the Operating Partnership to other limited partnerships or other
entities, the securities of which are distributed to the Partners); or
(iv) take any action required by the Operating Partnership
Agreement to be taken by the limited partner of the Operating
Partnership.
ARTICLE XVIII
SPECIAL PROVISIONS
SECTION 18.1 Right of IP to Purchase Units.
(a) IP shall have the right, exercisable at its option at any time
during the Purchase Period, to purchase for cash all of the Units of each Class
(whether such Units are evidenced by Certificates or Depositary Units) that are
outstanding and owned by Persons other than IP, IPFR and their respective
Affiliates on the Purchase Date fixed by IP for such purchases. Any exercise by
IP of its rights to purchase Units pursuant to this Section 18.1(i) shall
consist of the purchase by IP of all Units of each Class outstanding on the
Purchase Date for such purchase (excluding Units owned by IP, IPFR and their
respective Affiliates) and (ii) shall be at a price per Unit equal to the
Purchase Price.
(b) In the event that IP elects to exercise its right to purchase Units
pursuant to paragraph (a) above, IP shall deliver to the Purchase Agent the
Notice of Election to Purchase and IP shall cause the Purchase Agent to mail a
copy of such Notice of Election to Purchase to the Record Holders of Depositary
Units, and IP shall mail a copy of such Notice of Election to Purchase to the
record owners of undeposited Units, at least 10, but not more than 60, days
prior to the Purchase Date. In addition, IP shall cause such Notice of Election
to Purchase to be published in a daily newspaper printed in the English language
and published and of general circulation in the Borough of Manhattan, New York.
Any such Notice of Election to Purchase mailed to a Record Holder of Units at
his or her address as reflected in the records of the Depositary or, with
respect to Units withdrawn from deposit under the Deposit Agreement, to the
record owner at his other address as
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reflected in the Certificate of Limited Partnership of the Partnership, shall be
conclusively presumed to have been given whether or not the owner receives such
notice. On or prior to the Purchase Date, IP shall deposit with the Purchase
Agent cash in an amount equal to the Purchase Funds. If the Notice of Election
to Purchase shall have been duly given as aforesaid at least 10 days prior to
the Purchase Date, and if on or prior to the Purchase Date the Purchase Funds
shall have been deposited with the Purchase Agent in trust for the benefit of
the holders of Units subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Depositary Receipt or, with respect
to Units withdrawn from deposit under the Deposit Agreement, any Certificate for
Units subject to purchase shall not have been surrendered for purchase, the
Record Holders of Units subject to purchase hereunder and their Assignees (other
than IP, IPFR and their respective Affiliates) shall no longer be deemed to be
Partners, but instead shall be considered as unsecured creditors of the
Partnership with a claim to receive, upon surrender to the Purchase Agent of the
Depositary Receipts or Certificates evidencing Units purchased hereunder, an
amount, in cash or immediately available funds, equal to the number of each
Class of Units purchased hereunder multiplied by the Purchase Price thereof,
respectively. All rights of the Record Holders of Units on the Record Date
(other than IP, IPFR and their respective Affiliates) and of Assignees of such
Record Holders as Partners (including, without limitation, any rights pursuant
to Articles IV, V and XV hereof) shall be deemed transferred to IP on the record
books of the Depositary and the Partnership, and IP shall be deemed to be the
owner of all such Units from and after the Purchase Date and shall have all
rights as a Record Holder of such Units (including, without limitation, all
rights as Record Holder of such Units pursuant to Articles IV, V and XV hereof).
(c) At any time from and after the Purchase Date, a holder of an
outstanding Unit subject to purchase as provided in this Section 18.1 may
surrender his Depositary Receipt or Certificate evidencing such Unit to the
Purchase Agent in exchange for payment of the Purchase Price therefor, without
interest thereon. The Notice of Election to Purchase mailed by IP to Record
Holders of Certificates and furnished by IP to the Purchase Agent in accordance
with paragraph (b) above and, in turn, mailed by the Purchase Agent to Record
Holders of Depositary Units shall specify (i) the Purchase Date, (ii) the
Purchase Price of each Class, (iii) that IP elects to purchase such Units, upon
surrender thereof in exchange for payment, at the address of the corporate
office of the Purchase Agent in the Borough of Manhattan, New York and at such
other office or offices of the Purchase Agent as the Purchase Agent may specify,
or as may be required by any securities exchange on which Units of any Class, or
Depositary Units representing same, are listed for trading, and (iv) that from
and after the Purchase Date, provided the Purchase Funds have theretofore been
deposited with the Purchase Agent, the Record Holders on the Purchase Date fixed
for purchase by IP and the Assignees of such Record Holders (other than IP, IPFR
and their respective Affiliates) shall no longer be deemed to be Partners, but
instead shall only have an unsecured claim against the Partnership to receive,
upon surrender of their Units to the Purchase Agent, an amount, without
interest, equal to the number of each Class of Units to be purchased multiplied
by the Purchase Price thereof, respectively.
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SECTION 18.2 Right of IP to Withdraw 90,000 Acres; Title to the Timberlands.
(a) On or before December 31, 1989, IP shall have the absolute right to
designate for withdrawal from the Partnership an aggregate of up to 90,000 acres
of the Original Timber Interests and may cause the Partnership to execute such
deeds or qualifications or other instruments as IP deems necessary or desirable
to evidence the fact that the Partnership has no interest in any such acreage
withdrawn by IP from and after the date designated by IP pursuant to this
Section 18.2.
(b) If IP exercises its right to withdraw 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 Original Timber
Interests attributed to the Accounting Unit to which such withdrawn property had
been attributed. The Carrying Values of such other Original Timber Interests
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 discretion, 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 18.2(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 18.2(d), the term "Timberlands" shall
be defined as set forth in the Registration Statement.
SECTION 18.3 Agreement of IP to Retain Ownership of IPFR.
Until the first to occur of (i) a Triggering Event or (ii) the
dissolution and liquidation of the Partnership in accordance with Article XIV of
this Agreement, IP covenants and agrees that it shall not sell, assign,
transfer, give, pledge, encumber, hypothecate, mortgage or otherwise dispose of
any of the shares of the Class B Common Stock that it may own at the date of
this Agreement or any additional shares of the Class B Common Stock that it may
acquire during the term of this Agreement, and shall otherwise maintain without
interruption its ability to transfer and sell such
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shares of Class B Common Stock in accordance with the last sentence of this
Section 18.3. Upon the occurrence of a Triggering Event, IP covenants and agrees
to sell all shares of Class B Common Stock that it owns on the date of a
Triggering Event in accordance with the provisions of Article Four B(5) of the
IPFR Charter.
SECTION 18.4 Right of IP to Retain or Purchase Mineral Interests.
(a) Upon the contribution by IP of the Original Timber Interests to the
Partnership pursuant to Sections 3.1 and 3.2, IP will retain the ownership of
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. 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 ownership of, or the benefits of
ownership attributable to, such minerals or mineral interests retained by IP. To
the extent the Partnership or the Operating Partnership holds any minerals or
mineral interests intended to be retained by IP, IP may elect to have such
minerals or mineral interests deemed to be an additional Capital Contribution to
the Partnership pursuant to Section 3.3. In such event, the Agreed Value of such
minerals or mineral interests should be attributed entirely to the Secondary
Account and Class A Units and Class B Units issued to IP in accordance with the
principles of Section 3.3(f)(i)(A). 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 of such
minerals or mineral interests for Units, 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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SECTION 18.5 Trademark of IP.
The logotype included on the cover page of the preliminary prospectus
and the final prospectus included in the Registration Statement is a registered
trademark and the exclusive property of IP. The Partnership and IPFR are hereby
granted a non-exclusive, non-transferable right and license to use such
trademark in connection with the preliminary prospectus and final prospectus
included in the Registration Statement, provided that none of the Limited
Partners of the Partnership shall, by such grant, have any right to use such
trademark. IP shall have all right to control all use made of the mark by the
Partnership and IPFR, and the Partnership and IP agree to submit samples of all
proposed uses of the mark for written approval thereof by IP. Any and all use of
the mark by the Partnership and IPFR shall inure to the benefit of IP.
ARTICLE XIX
GENERAL PROVISIONS
SECTION 19.1 Definitions.
The following definitions shall for all purposes, unless otherwise
clearly indicated to the contrary, apply to the terms used in this Agreement.
"Accounting Unit" means the Primary Account or the Secondary Account,
whichever the case may be.
"Accounting Unit Valuation Formula" means the following formula, which
is to be applied in arriving at the Primary Account Value and the Secondary
Account Value, as of any date of determination:
.9596 P + .0404 S = X
---------------------
.0404 P + .9596 S = Y
P = Primary Account
S = Secondary Account
X = Total number of Class A Units outstanding
multiplied by the then Issue price of Class A
Units, as of the date of such determination.
Y = Total number of Class B Units outstanding
multiplied by the then Issue Price of Class B
Units, as of the date of such determination.
"Additional Class A Limited Partner" means a Person admitted to the
partnership pursuant to Section 12.3 as a Class A Limited Partner.
"Additional Class B Limited Partner" means a Person admitted to the
Partnership pursuant to Section 12.3 as a Class B Limited Partner.
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"Additional Partner" means a Person admitted to the Partnership pursuant
to Section 12.3 as a Limited Partner.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Sections 3.5(d)(i) or 3.5(d)(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 or the Operating
Partnership.
"Affiliated Partnership" means a partnership which is an Affiliate of
the Partnership and in which the Partnership or the Operating Partnership owns a
partnership interest.
"Affiliated Partnership Agreement" means the partnership agreement
entered into by the partners of an Affiliated Partnership.
"Agreed Value" (a) of the Original Primary Account Property transferred
to the Partnership by IP as an Initial Limited Partner pursuant to Section
3.1(c) means the sum of (1) that amount arrived at by multiplying the number of
Class A Units issued to IP in exchange for the conveyance of the Original
Primary Account Property, as set forth in the Conveyance Agreement, by the
Initial Class A Unit Price, (2) that amount arrived at by multiplying the number
of Class B Units issued to IP in exchange for the conveyance of the Original
Primary Account Property, as set forth in the Conveyance Agreement, by the
Initial Class B Unit Price and (3) the amount of any indebtedness either assumed
by the Partnership upon such exchange or to which the Original Timber Interests
are subject, when contributed, that is attributed to the Original Primary
Account Property by the Managing General Partner, (b) of the Original Secondary
Account Property transferred to the Partnership by IP as an Initial Limited
Partner pursuant to Section 3.2(c) means the sum of (1) that amount arrived at
by multiplying the number of Class A Units issued to IP in exchange for the
conveyance of the Original Secondary Account Property, as set forth in the
Conveyance Agreement, by the Initial Class A Unit Price, (2) that amount arrived
at by multiplying the number of Class B Units issued to IP in exchange for the
conveyance of the Original Secondary Account Property, as set forth in the
Conveyance Agreement, by the Initial Class B Unit Price and (3) the amount of
any indebtedness either assumed by the Partnership upon such exchange or to
which the Original Timber Interests are subject, when contributed, that is
attributed to the Original Secondary Account Property by the Managing General
Partner, and (c) 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 Managing General Partner shall
allocate the Agreed Value of the Original Primary
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Account Property and the Original Secondary Account Property among each separate
property constituting Original Primary Account Property or Original Secondary
Account Property by whatever method the Managing General Partner deems
reasonable. 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 6.11 relating to an allocation between the
Accounting Units and (iii) any adjustment made upon the withdrawal of property
pursuant to Section 18.2.
"Agreement" means this agreement of limited partnership, as it may be
amended from time to time.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Depositary Units or Units have been transferred, by assignment of a Depositary
Receipt or otherwise, in a manner permitted under this Agreement or the Deposit
Agreement, and who thereby has an interest in the partnership equivalent to that
of a Limited Partner but (a) limited to the Class(es) of Units to which such
transferred Depositary Units or Units relate, (b) limited to (i) the rights and
obligations appurtenant to such Unit or Units to share in the distributions,
including liquidating distributions, of the Partnership and (ii) other rights
specifically provided to Assignees by this Agreement, and (c) otherwise subject
to the limitations under the Texas Act on the rights of an assignee who has not
become a substituted limited partner.
"Beneficial Owner" means beneficial owner as such term is defined on the
date of this Agreement in Rule 13d-3 of the General Rules and Regulations of the
Exchange Act.
"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.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or of
the State of Texas or New York shall not be regarded as a business day.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Section 3.5.
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"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 dispositions 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 6.11 relating to an allocation between the Accounting Units
and (iii) any adjustment made upon the withdrawal of property pursuant to
Section 18.2.
"Certificate" means a Class A Certificate, a Class B Certificate or a
certificate issued by the Partnership evidencing ownership of one or more other
Units issued pursuant to Section 3.3(b) or combined or reclassified Units issued
pursuant to Section 3.3(g), as the case may be.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Texas pursuant to Section 6.2, as it may be amended from time to time.
"Charitable Contribution" means the transfer of Partnership property
consisting of approximately 16,155 acres of timberlands located in Piercefield
and Colton, St. Lawrence County, New York, contributed to The Conservation Fund,
with an additional development easement on approximately 4,263 acres of
timberlands located in Piercefield, St. Lawrence County, New York, contributed
to the State of New York, all by a deed and easement executed on or about July
30, 1993, and the transfer of Partnership property consisting of approximately
6,184 acres of timberlands located in Columbus County, North Carolina, of which
a portion of the acreage's fair market value was contributed to The Conservation
Fund, all by a deed and easement executed on or about December 20, 1995.
"Citizenship Certification" means a properly completed certificate in
such form as may be specified by the Managing General Partner by which an
Assignee or a Limited Partner certifies that he (and if he is a nominee holding
for the account of another Person, that to the best of his knowledge such other
Person) is an Eligible Citizen.
"Class" means the Limited Partners holding Class A Units, the Limited
Partners holding Class B Units, the Limited Partners holding another class of
Units issued pursuant to Section 3.3(b) or the Limited Partners holding a
combined or reclassified class of Units authorized pursuant to Section 3.3(g),
whichever the case may be, such holders of Class A Units, as a group, such
holders
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of Class B Units, as a group, such holders of another class of Units, as a
group, and such holders of combined or reclassified Units, as a group, each
being considered a separate class.
"Class A Capital Account" means that Capital Account maintained for a
Class A Limited Partner pursuant to Section 3.5 with respect to such Partner's
Class A Units.
"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 or more Class A Units.
"Class A Depositary Units" means that certain Class of Depositary Units
representing Class A Units on deposit with the Depositary pursuant to the
Depositary Agreement.
"Class A Limited Partner" means each Initial Class A Limited Partner,
each Substituted Class A Limited Partner, each Additional Class A Limited
Partner and any Departing Partner upon conversion of its Partnership Interest or
its interest in the Operating Partnership into Class A Units pursuant to Section
13.3.
"Class A Portion" means (a) as of the Commencement Date, with respect to
the Net Agreed Value of the Original Primary Account Property, that amount
arrived at by multiplying the Primary Account Value times IP's Primary Account
Percentage Interest (in its capacity as a Class A Limited Partner), and (b) as
of the Commencement Date, with respect to the Net Agreed Value of the Original
Secondary Account Property, that amount arrived at by multiplying the Secondary
Account Value times IP's Secondary Account Percentage Interest (in its capacity
as a Class A Limited Partner).
"Class A Units" means that certain class of Units representing the
Partnership Interests of all Class A Limited Partners.
"Class B Capital Account" means that Capital Account maintained for a
Class B Limited Partner pursuant to Section 3.5 with respect to such Partner's
Class B Units.
"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 or more Class B Units.
"Class B Common Stock" means the Class B common stock, $.50 par value,
of IPFR.
"Class B Depositary Units" means the certain Class of Depositary Units
representing Class B Units on deposit with the Depositary pursuant to the
Depositary Agreement.
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"Class B Limited Partner" means IP, each Substituted Class B Limited
Partner, each Additional Class B Limited Partner and any Departing Partner upon
conversion of its Partnership Interest or its interest in the Operating
Partnership into Class B Units pursuant to Section 13.3.
"Class B Portion" means (a) as of the Commencement Date, with respect to
the Net Agreed Value of the Original Primary Account Property, that amount
arrived at by multiplying the Primary Account Value times IP's Primary Account
Percentage Interest (in its capacity as a Class B Limited Partner), and (b) as
of the Commencement Date, with respect to the Net Agreed Value of the Original
Secondary Account Property, that amount arrived at by multiplying the Secondary
Account Value times IP's Secondary Account Percentage Interest (in its capacity
as a Class B Limited Partner).
"Class B Units" means that certain class of Units representing the
Partnership Interests of all Class B Limited Partners.
"Class Percentage Interest" means, with respect to a particular Limited
Partner or Assignee included in a Class, that fraction, expressed as a
percentage, the numerator of which is such Limited Partner's or Assignee's
Depositary Units or undeposited Units of such Class, and the denominator of
which is the total number of such Depositary Units and undeposited Units of such
Class outstanding as of the date of such determination.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
"Commencement Date" means March 14, 1985.
"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)(i), 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 in exchange for Units.
"Conveyance Agreement" means that certain agreement to be entered into
among IP, the Partnership and the Operating Partnership wherein (a) IP
contributed and conveyed to the Partnership certain assets and the Partnership
agreed to assume certain liabilities as such assets and liabilities are
scheduled therein and (b) the Partnership contributed and conveyed such assets
to the Operating Partnership and the Operating Partnership agreed to assume such
liabilities.
"Cut Timber" means timber that has been harvested from Timberlands and
is held or sold.
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"Departing Partner" means a General Partner, as of the effective date of
any withdrawal or removal of such General Partner pursuant to Section 13.1 or
13.2.
"Deposit Account" means the account or accounts established by the
Depositary pursuant to the Deposit Agreement.
"Deposit Agreement" means the agreement so designated, dated as of March
14, 1985, among the Managing General Partner as Attorney-in-fact of Limited
Partners, all holders from time to time of Depositary Receipts, the Partnership
and the Depositary, as it may be amended or supplemented from time to time.
"Depositary" means Manufacturers Hanover Trust Company of New York, or
any successor to it as depositary under the Deposit Agreement.
"Depositary Receipt" means a depositary receipt, issued by the
Depositary or agents appointed by the Depositary in accordance with the Deposit
Agreement, evidencing ownership of one or more Class A Depositary Units, Class B
Depositary Units or such other Depositary Units evidencing any other class of
Units issued pursuant to Section 3.3(g), as the case may be.
"Depositary Unit" means a Class A Depositary Unit, a Class B Depositary
Unit or a Unit issued pursuant to Section 3.3(b) or such other combined or
reclassified Unit issued pursuant to Section 3.3(g) that has been deposited with
the Depositary, as the case may be.
"Eligible Citizen" means a Person qualified to own interest in real
property in jurisdictions in which the Partnership or the Operating Partnership
does business or proposes to do business from time to time, who does not subject
the Partnership or the Operating Partnership to a substantial risk of
cancellation or forfeiture of any of their property or any interest therein.
"Event of Dissolution" shall have the meaning assigned to it in Section
14.1.
"Event of Withdrawal" shall have the meaning assigned to it in Section
13.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successors to such statute.
"Expenses" shall have the meaning assigned to it in Section 6.8.
"General and Administrative Overhead" means those customary, routine and
necessary costs and expenses incurred or generated by the Managing General
Partner and the Special 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
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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, in their
respective capacities as general partners of the Partnership.
"Indemnitee" shall have the meaning assigned to it in Section 6.8.
"Initial Class A Limited Partner" means IP and each Underwriter in their
respective capacities of having acquired Class A Units in the Initial Offering.
"Initial Class A Unit Price" means that price specified in the
Underwriting Agreement as the price at which a Class A Unit was purchased by the
Underwriters.
"Initial Class B Limited Partner" means IP in its capacity of having
acquired all of the Class B Units on the Commencement Date.
"Initial Class B Unit Price" means the fair market value of each Class B
Unit acquired by IP on the Commencement Date, as determined by IPFR.
"Initial Limited Partner" means IP and each Underwriter that purchased a
Class A Unit in accordance with Section 3.1(c).
"Initial Offering" means the initial public offering of the Class A
Depositary Units, as more fully described in the Registration Statement.
"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.
"IPFR Charter" means the First Amended and Restated Certificate of
Incorporation of IPFR, as amended and supplemented from time to time during the
term of this Agreement.
"Issue Price" means the price at which a Unit is purchased from the
Partnership.
"Limited Partner" means each Class A Limited Partner, each Class B
Limited Partner, each Substituted Limited Partner, each Additional Partner, the
Managing General Partner upon conversion of its partnership interest in this
Partnership or the Operating Partnership into Units, and the Special
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General Partner upon conversion of its partnership interest in this Partnership
or the Operating Partnership into Units.
"Liquidator" has the meaning specified in Section 13.3.
"Majority Interest" means (A) with respect to any determination made
during the Initial Term, those Class A Limited Partners whose Percentage
Interests, in the aggregate, exceed 50% of the Percentage Interests of all Class
A Limited Partners, those Class B Limited Partners whose Percentage Interests,
in the aggregate, exceed 50% of the Percentage Interests of all Class B Limited
Partners, and the vote of any Class of Additional Units to the extent specified
in the designations, preferences or special rights of such Class at the time of
issuance pursuant to Section 3.3(b), such determination to be made separately by
Class, and (B) with respect to any determination made after the Initial Term,
those Limited Partners whose aggregate Percentage Interest exceed 50% of the
aggregate Percentage Interest of the Limited Partners of all Classes, considered
for purposes of such determination as one Class unless otherwise provided in the
designations, preferences or special rights of a Class of Units issued pursuant
to Section 3.3(b).
"Managing General Partner" means IPFR or its successors.
"NASDAQ" means the National Association of Securities Dealers Automated
Quotation System.
"National Securities Exchange" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Securities Exchange
Act of 1934, as amended.
"Net Agreed Value" means (a) in the case of a partnership interest in
the Operating Partnership contributed to the Partnership by a Departing Partner
pursuant to Section 13.3, the amount of the capital account attributable to such
partnership interest under the Operating Partnership Agreement as of the end of
the month immediately preceding the month during which such contribution is
made, (b) in the case of any other Contributed Property, the Agreed Value of
such property reduced by any indebtedness either assumed by the Partnership upon
such contribution or to which such property is subject when contributed, (c) 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 an indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution, and (d) in the case of any property distributed to a Partner in
liquidation of the Partnership pursuant to Sections 14.3 and 14.4, the fair
market value of such property at the time of such distribution (as determined
pursuant to Section 14.4) reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution.
"Non-citizen Assignee" means a Person who has been deemed by the
Managing General Partner to not be an Eligible Citizen and as to whose
Partnership Interest the Managing General Partner has become the Substituted
Limited Partner, pursuant to Section 11.5.
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"Notice of Election to Purchase" means the notice which set forth such
information regarding the election by IP to purchase outstanding Units
(including Units represented by Depositary Units) as is required by Section
18.1(c).
"Official Capacity" shall have the meaning assigned to it in Section
6.8.
"Operating Partnership" means IP Timberlands Operating Company, Ltd.,
until all or substantially all the assets of the Operating Partnership have been
contributed to a limited partnership or other entity, and thereafter means such
limited partnership or entity.
"Operating Partnership Agreement" means the limited partnership
agreement entered into among IPFR, as managing general partner, IP, as special
general partner, and the Partnership, as limited partner, as it may be amended
from time to time, provided that such limited partnership agreement shall no
longer be considered the Operating Partnership Agreement and shall be superseded
for all purposes hereof by the limited partnership agreement, or, in the case of
an entity other than a limited partnership, the governing documents thereof,
applicable to any limited partnership or other entity which is a successor
Operating Partnership as contemplated by the definition of "Operating
Partnership," as such limited partnership agreement or other governing
documents, as the case may be, may be amended from time to time.
"Opinion of Counsel" means a written opinion of counsel acceptable to
the Managing General Partner.
"Opinion of Independent Counsel" means a written opinion of independent
counsel (who may be regular counsel to the Partnership or the Managing General
Partner) acceptable to the Managing General Partner.
"Original Primary Account Property" means that timber included within
the Original Timber Interests that the Managing General Partner reasonably
estimates will be harvested in accordance with sound forestry management
practices during the Initial Term. The Managing General Partner may, in its sole
discretion, periodically revise such 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 considerations 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 Original Timber
Interests, other than any Original Primary Account Property.
"Original Timber Interests" means the undivided ownership interest in
Timber Interests originally contributed by IP in exchange for Class A Units and
Class B Units pursuant to Sections 3.1(c) and 3.2(c).
"Partner" means a General Partner, a Limited Partner or an Assignee.
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"Partnership" means the limited partnership established by this
Agreement.
"Partnership Interest" means the interest of a Partner in the
Partnership.
"Percentage Interest" means (a) as to the Managing General Partner,
0.99%, (b) as to the Special General Partner, 0.01% and (c) as to a Limited
Partner or Assignee included in a Class (i) if such determination is made during
the Initial Term, the product, expressed as a percentage, of 99% times the Class
Percentage Interest of each such Limited Partner with respect to the Class for
which the determination is being made, or (ii) if such determination is being
made after the Initial Term and the Class A Units and Class B Units have not
theretofore been combined or reclassified into a single Class pursuant to
Section 3.3(g), the product, expressed as a percentage, of 4% times the Class
Percentage Interest of each such Limited Partner with respect to Class A Units
plus the product, expressed as a percentage, of 95% times the Class Percentage
Interest of each such Limited Partner with respect to Class B Units, or (iii) if
such determination is being made after the Initial Term and the Class A Units
and Class B Units have theretofore been combined or reclassified into a single
Class pursuant to Section 3.3(g), the product, expressed as a percentage, of 99%
times the Class Percentage Interest of each Limited Partner, or (iv) if one or
more additional Classes or series of Units have been issued pursuant to Section
3.3(b), the Percentage Interest determined in accordance with such designations,
preferences and special rights as are fixed by the Managing General Partner
pursuant to Section 3.3(b) with respect to such Class or series of Units.
"Person" means an individual, partnership, limited partnership, foreign
limited partnership, trust, estate, corporation, custodian, trustee, executor,
administrator, nominee, or entity in its own or a representative capacity.
"Primary Account" means a separate Accounting Unit maintained during the
Initial Term 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, the Timberlands 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.
"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.
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"Primary Account Percentage Interest" means (a) as to the Managing
General Partner, 0.99%, (b) as to the Special General Partner, 0.01%, (c) as to
a Class A Limited Partner or Class A Assignee, the product of (i) 95% multiplied
by (ii) the Class Percentage Interest of such Partner with respect to Class A
Units, as of the date of such determination, and (d) as to a Class B Limited
Partner or Class B Assignee, the product of (i) 4% multiplied by (ii) the Class
Percentage Interest of such Partner with respect to Class B Units, as of the
date of such determination; provided, however, following the expiration of the
Initial Term, the Primary Account Percentage Interest of any Partner shall be
deemed to expire.
"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.
"Primary Account Value" means, as of any date of determination, the
aggregate net value of assets attributed to the Primary Account, such net value
arrived at by dividing the amount attributed to the Primary Account through
application of the Accounting Unit Valuation Formula, as of such date of
determination, by 99%.
"Proceeding" shall have the meaning assigned to it in Section. 6.8.
"Purchase Agent" means Manufacturers Hanover Trust Company, a New York
corporation, or any successor to it as specified by IP.
"Purchase Date" means the date determined by IP as the date for purchase
of all outstanding Units (excluding Units owned by IP, IPFR and their respective
Affiliates) pursuant to Section 18.1 of this Agreement, as specified in the
Notice of Election to Purchase that is furnished to Limited Partners pursuant to
Section 18.1.
"Purchase Funds" means an amount in cash equal to the aggregate purchase
price (determined in accordance with Section 18.1(a) hereof) of all Units
subject to purchase by IP on the Purchase Date in accordance with Section 18.1.
"Purchase Period" means the period beginning on January 1, 1988 and
ending upon the occurrence of any Triggering Event.
"Purchase Price" means (i) if the exercise by IP of its right to
purchase Units in accordance with Section 18.1 hereof occurs on or before
December 31, 1991, a price per Unit of each Class equal to 150% of the Unit
Price of each such Class, respectively, determined as of the 10th day prior to
the date that the Notice of Election to Purchase is first mailed to the Record
Holders, or (ii) if the exercise by IP of its right to purchase Units in
accordance with Section 18.1 hereof occurs on or after January 1, 1992, a price
per Unit of each Class equal to 133% of the Unit Price of each such Class,
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<PAGE>
respectively, determined as of the 10th day prior to the date that the Notice of
Election to Purchase is first mailed to the Record Holders.
"Recapture Income" means any gain recognized by the Partnership (but
computed without regard to any adjustment required by Sections 734 or 743 of the
Code) upon the disposition of any property or asset of the Partnership that is
not a capital gain due to the recapture of certain deductions previously taken
with respect to such property or asset.
"Record Date" means the date established by the Managing General Partner
for determining (a) the identity of Limited Partners entitled to notice of or to
vote at any meeting of Limited Partners or entitled to vote by ballot or give
consent to Partnership action in writing without a meeting or entitled to
exercise rights in respect to any other lawful action of Limited Partners, or
(b) the identity of Partners entitled to receive any report or distribution.
"Record Holder" (i) as applied to a Depositary Unit, means the Person in
whose name the Depositary Receipt is issued, and in whose name the Depositary
Units evidenced thereby are registered on the books of the depositary or a
Transfer Agent as of the close of business on a particular business day, and
(ii) as applied to the holder of a Unit that is not on deposit pursuant to the
Deposit Agreement, means the Person shown as the owner of such Unit on the
records of the Partnership or the Transfer Agent, as the case may be.
"Redeemable Units" means any Units or Depositary Units for which a
redemption notice has been given, and has not been withdrawn, under Section
11.6.
"Registration Statement" means the Registration Statement on Form S-1
filed by the Partnership with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, to register the offering and sale by the
Underwriters of the Class A Depositary Units in the Initial Offering, as it may
be amended from time to time.
"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 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.
"Sale or exchange" means a disposition for value, but shall not include
(a) the contribution by the Operating Partnership of all or substantially all of
the assets of the Operating 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 contributor, the Partnership or the Managing General Partner,
and further provided that the provisions of the limited partnership agreement or
other governing documents of the 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 Partnership as are
the provisions of the Operating Partnership Agreement as in effect immediately
prior to such
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contribution, or (b) any distribution to the Partnership of any securities or
interests received by the contributor referred to in (a) above in return for any
such contribution.
"Secondary Account" means a separate Accounting Unit maintained
throughout the term of the Partnership in which there shall be reflected the
Capital Contribution of the Original Secondary Account Property and all other
Capital Contributions attributed to such Accounting Units, 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 the
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 Factor" means (a) with respect to timber located on a
particular tract of Timberland or a particular aggregation of Standing Timber
contributed to, purchase 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, purchase 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, 0.99%, (b) as to the Special General Partner, 0.01%, (c) as to
a Class A Limited Partner or Class A Assignee, the product of (i) 4% multiplied
by (ii) the Class Percentage Interest of such Partner with respect to Class A
Units, as of the date of such determination, and (d) as to a Class B Limited
Partner or Class B Assignee, the product of (i) 95% multiplied by (ii) the Class
Percentage Interest of such Partner which respect to Class B Units, as of the
date of such determination.
"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.
"Secondary Account Value" means, as of any date of determination, the
aggregate net value of assets attributed to the Secondary Account, such net
value arrived at by dividing the amount attributed to the Secondary Account
through application of the Accounting Unit Valuation Formula, as of such date of
determination, by 99%.
"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).
"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).
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"Special General Partner" means IP or its successor.
"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" and "substantially
all of the assets of the Operating Partnership" means assets of the Partnership
or the Operating Partnership, respectively, with a fair market value exceeding
50 percent of the fair market value of all of the assets of the respective
entity, as determined in good faith by the Managing General Partner.
"Substituted Class A Limited Partner" means a person who is admitted to
the Partnership as a Class A Limited Partner pursuant to this Agreement in place
of and with all the rights of a Class A Limited Partner pursuant to Section
12.2.
"Substituted Class B Limited Partner" means a person who is admitted to
the Partnership as a Class B Limited Partner pursuant to this Agreement in place
of and with all the rights of a Class B Limited Partner pursuant to Section
12.2.
"Substituted Limited Partner" means a person who is admitted to the
Partnership as a Substituted Class A Limited Partner, a Substituted Class B
Limited Partner, or a person who is admitted to the Partnership as a Limited
Partner with respect to any other Class of Units in place of and with all the
rights of a Limited Partner pursuant to Section 12.2, as the case may be.
"Texas Act" shall have the meaning assigned to it in Section 1.1.
"Timber Cutting Contracts" means a 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.
"Transfer Agent" means the Depositary or any bank, trust company or
other Person appointed by the Partnership to act as transfer agent for
Depositary Receipts.
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"Transfer Application" means an application and agreement for transfer
of Depositary Units in the form set forth on the back of the Depositary Receipt
or in a form substantially to the same effect in a separate instrument by which
a transferee requests admission as a Substituted Limited Partner, agrees to be
bound by the terms and conditions of this Agreement, grants a power of attorney
to the Managing General Partner and, if a U.S. citizen,, certified under
penalties of perjury that he is a U.S. citizen.
"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.
"Triggering Event" means (i) that point in time when IP beneficially
owns, directly or indirectly, (A) during the Initial Term, less than 50% of the
then outstanding Percentage Interests of either the Class A Units or the Class B
Units, or (B) after the Initial Term, less than 50% of the then outstanding
Percentage Interests of all Classes of Units; or (ii) the execution and delivery
by IP of a definitive agreement to sell, or a determination of IP to distribute,
Partnership Interests which, if sold or distributed, would result in, or the
occurrence of any other event that within 90 days after the occurrence thereof
would result in, IP beneficially owning, directly or indirectly (A) during the
Initial Term, less than 50% of the then outstanding Percentage Interests of
either the Class A Units or the Class B Units, or (B) after the Initial Term,
less than 50% of the then outstanding Percentage Interests of all Classes of
Units; or (iii) the distribution by IP of securities convertible into, or rights
or warrants to acquire, Partnership Interests which, if fully converted or
exercised, (A) during the Initial Term, would reduce to less than 50% IP's
ownership of the then outstanding Percentage Interests of either the Class A
Units or the Class B Units, or (B) after the Initial Term, would reduce to less
than 50% IP's ownership of the then outstanding Percentage Interests of all
Classes of Units; provided, however, that if such securities, rights or warrants
are redeemable by IP immediately following their distribution, a Triggering
Event shall not be deemed to have occurred unless and until such securities,
rights or warrants are no longer redeemable by IP. To the extent that the term
"Triggering Event" as defined in Section 6(c) of Article Four of the IPFR
Charter is amended or modified, the foregoing definition of Triggering Event
shall be modified in conformity therewith.
"Underwriters" means those underwriting firms listed in the Underwriting
Agreement or an exhibit or schedule thereto that purchased Class A Units from
the Partnership.
"Underwriting Agreement" means that certain underwriting agreement,
dated March 7, 1985, between the Partnership and the Underwriters with respect
to the purchase of certain Class A Units by the Underwriters.
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"Unit" means a Partnership Interest of a Limited Partner or Assignee in
the Partnership representing such fractional part of the Partnership Interest of
all the Limited Partners and Assignees as shall be determined by the Managing
General Partner pursuant to this Agreement. For all purposes of this Agreement,
the purchase, acquisition, sale, transfer or other disposition of a Unit shall
be deemed to refer to an appropriate transaction by which the holder of a Unit
assigns the Partnership Interest evidenced thereby to another person as assignee
under the Texas Act.
"Unit Price" of a Unit or a Depositary Unit means, as of any date of
determination, (a) if such Unit or Depositary Unit is one of a Class of
Depositary Units listed or admitted to trading on one or more National
Securities Exchanges, the average of the last reported sale prices per
Depositary Unit regular way or, in case no such reported sales take place on any
such day, the average of the last reported bid and asked prices per Depositary
Unit regular way, in either case on the principal National Securities Exchange
on which such Depositary Units are listed or admitted to trading, for the five
trading days immediately preceding the date of determination; (b) if such Unit
or Depositary Unit is not a Class of Depositary Units listed or admitted to
trading on a National Securities Exchange but is of a class quoted by NASDAQ,
the average of the closing bid and ask prices per Depositary Unit for the five
trading days immediately preceding such date of determination, as furnished by
the National Quotation Bureau Incorporated or such other nationally recognized
quotation service as may be selected by the Managing General Partner for such
purpose, if said bureau is not at the time furnishing quotations; or (c) if such
Unit or Depositary Unit is not of a Class of Depositary Units listed for trading
on a National Securities Exchange or quoted by NASDAQ, an amount equal to the
fair market value of such Unit as of such date of determination, as determined
by the Managing General Partner using any reasonable method of valuation it may
select.
"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.
SECTION 19.2 Addresses and Notices.
The address of each Partner for all purposes shall be the address set
forth on the books and records of the Partnership. 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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SECTION 19.3 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.
SECTION 19.4 Pronouns and Plurals.
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
SECTION 19.5 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.
SECTION 19.6 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.
SECTION 19.7 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.
SECTION 19.8 Creditors.
None of the provisions of this Agreement shall be for the benefit of or
enforceable by any creditors of the Partnership.
SECTION 19.9 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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SECTION 19.10 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 part.
SECTION 19.11 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.
SECTION 19.12 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.
SECTION 19.13 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 tax 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.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
undersigned parties on this ___day of ______________, 1988.
MANAGING GENERAL PARTNER:
IP FOREST RESOURCES COMPANY
ATTEST: By:_________________________
By:_________________________
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SPECIAL GENERAL PARTNER:
INTERNATIONAL PAPER COMPANY
ATTEST: By:_________________________
By:_________________________
LIMITED PARTNERS:
All Limited Partners now and
hereafter admitted as limited
partners of the Partnership,
pursuant to Powers of
Attorney now and hereafter
executed in favor of, and
delivered to, the Managing
General Partner
By: IP FOREST RESOURCES COMPANY
Attorney-in-fact for all Limited Partners
ATTEST: By:_________________________
By:_________________________
STATE OF
COUNTY OF
Subscribed to and sworn before me this ___ day of _____, 1988.
___________________________
Notary Public
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ANNEX I
CERTIFICATE
for
CLASS A LIMITED PARTNERS' UNITS
in
IP TIMBERLANDS, LTD.
No._________________ CLASS A UNITS
IP FOREST RESOURCES COMPANY, as the Managing General Partner of IP
TIMBERLANDS, LTD., a Texas limited partnership ("IPT"), hereby certifies that
__________ is a Class A Limited Partner of IPT, as set forth in the Agreement of
Limited Partnership under which IPT was organized and is existing and in its
Certificate of Limited Partnership, as amended, filed for record in the Office
of the Secretary of State of the State of Texas (copies of which are on file at
IPT's principal office in New York, New York) and is the owner of __________
Class A Units of limited partnership interest in IPT (the "Class A Units").
This Certificate is not negotiable or transferable except by operation of
law; provided, however, that this Certificate, when coupled with an assignment
in the form set forth on the reverse hereof (or otherwise sufficient to convey
an interest in a limited partnership pursuant to the Texas Revised Limited
Partnership Act), duly executed in blank or assigned to a named assignee, may be
deposited pursuant to the terms of the Deposit Agreement as defined in said
Agreement of Limited Partnership, to which reference is hereby made for a
statement of the rights, preferences and limitations pertaining to the Units.
The Class A Units evidenced by this Certificate are subject to redemption
if IPT makes certain determinations as to the holder's citizenship status and
the effect thereof, as provided in the Agreement of Limited Partnership of IPT.
Subject to certain limitations, the Class A Units evidenced by this Certificate
are subject to purchase by International Paper Company at any time after
December 31, 1987, as provided in Section 18.1 of the Agreement of Limited
Partnership of IPT.
DATED:____________________________ IP FOREST RESOURCES COMPANY
Managing General Partner of IP Timberlands,
Ltd.
ATTEST:
By:_______________________________ By:________________________________________
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[Form of Reverse Side of Certificate]
ASSIGNMENT OF CLASS A LIMITED PARTNERS' UNITS
FOR VALUE RECEIVED, the undersigned (the "Assignor") hereby assigns,
conveys, sells and transfers unto
_____________________________ ______________________________
Please insert Social Security Please print or typewrite name
or other identifying and address of Assignee
number of Assignee
all right and interest of the Assignor in the aforementioned Class A Units, and
irrevocably constitutes and appoints the Managing General Partner of IP
Timberlands, Ltd. ("IPT") as its attorney-in-fact with full power of
substitution in the premises to transfer the same on the books of IPT and to
file and record an amendment to said Agreement of Limited Partnership and
Certificate of Limited Partnership.
Date: _____________________ Signature:__________________________________
Signature Guaranteed
NOTE: The signature to any endorsement hereon must correspond with the
name as written upon the face of the Certificate, in every particular, without
alteration or enlargement or any change whatever. If the endorsement is executed
by an attorney, executor, administrator, trustee or guardian, the person
executing the endorsement must give his full title in such capacity, and proper
evidence of authority to act in such capacity, if not on file with IPT or its
transfer agent, must be forwarded with this Certificate. The signature must be
guaranteed by an authorized employee of a bank, trust company or member of a
national securities exchange.
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ANNEX II
CERTIFICATE
for
CLASS B LIMITED PARTNERS' UNITS
in
IP TIMBERLANDS, LTD.
No._________________________ CLASS B UNITS
IP FOREST RESOURCES COMPANY, as the Managing General Partner of IP
TIMBERLANDS, LTD., a Texas limited partnership ("IPT"), hereby certifies that
__________ is a Class B Limited Partner of IPT, as set forth in the Agreement of
Limited Partnership under which IPT was organized and is existing and in the
First Amended and Restated Certificate of Limited Partnership filed for record
in the Office of the Secretary of State of the State for Texas (copies of which
are on file at IPT's principal office in New York, New York) and is the owner of
__________ Class B Units of limited partnership interest in IPT (the "Class B
Units").
This Certificate is not negotiable or transferable except by operation of
law; provided, however, that this Certificate, when coupled with an assignment
in the form set forth on the reverse hereof (or otherwise sufficient to convey
an interest in a limited partnership pursuant to the Texas Revised Limited
Partnership Act), duly executed in blank or assigned to a named assignee, may be
deposited pursuant to the terms of the Deposit Agreement as defined in said
Agreement of Limited Partnership, to which reference is hereby made for a
statement of the rights, preferences and limitations pertaining to the Units.
The Class B Units evidenced by this Certificate are subject to redemption
if IPT makes certain determinations as to the holder's citizenship status and
the effect thereof, as provided in the Agreement of Limited Partnership of IPT.
Subject to certain limitations, the Class B Units evidenced by this Certificate
are subject to purchase by International Paper Company at any time after
December 31, 1987, as provided in Section 18.1 of the Agreement of Limited
Partnership of IPT.
DATED:____________________________ IP FOREST RESOURCES COMPANY
Managing General Partner of IP Timberlands,
Ltd.
ATTEST:
By:_______________________________ By:________________________________________
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[Form of Reverse Side of Certificate]
ASSIGNMENT OF CLASS B LIMITED PARTNERS' UNITS
FOR VALUE RECEIVED, the undersigned (the "Assignor") hereby assigns,
conveys, sells and transfers unto
_____________________________ ______________________________
Please insert Social Security Please print or typewrite name
or other identifying and address of Assignee
number of Assignee
all right and interest of the Assignor in the aforementioned Class B Units, and
irrevocably constitutes and appoints the Managing General Partner of IP
Timberlands, Ltd. ("IPT") as its attorney-in-fact with full power of
substitution in the premises to transfer the same on the books of IPT and to
file and record an amendment to said Agreement of Limited Partnership and First
Amended and Restated Certificate of Limited Partnership.
Date: _____________________ Signature:__________________________________
Signature Guaranteed
NOTE: The signature to any endorsement hereon must correspond with the
name as written upon the face of the Certificate, in every particular, without
alteration or enlargement or any change whatever. If the endorsement is executed
by an attorney, executor, administrator, trustee or guardian, the person
executing the endorsement must give his full title in such capacity, and proper
evidence of authority to act in such capacity, if not on file with IPT or its
transfer agent, must be forwarded with this Certificate. The signature must be
guaranteed by an authorized employee of a bank, trust company or member of a
national securities exchange.
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No assignment of the Class A Depositary Units evidenced by a Depositary Receipt
will be registered on the books of the Depositary or of IP Timberlands, Ltd.
unless an Application for Transfer of Class A Depositary Units has been executed
by an assignee either (1) on the form of Transfer Application set forth below or
(2) on a separate Transfer Application on a form that the Depositary or IP
Timberlands, Ltd. will furnish on request and without charge. An assignor of a
Depositary Receipt shall have no duty to the assignee with respect to the
requirement of delivery of an executed Transfer Application in order for the
assignee to obtain registration of the transfer of the Depositary Receipt.
APPLICATION FOR TRANSFER OF CLASS A DEPOSITARY UNITS
The undersigned ("Applicant") hereby applies for transfer to the name of
the Applicant of the Class A Depositary Units evidenced by the within Receipt
and hereby (i) agrees to be bound by the terms and conditions of the Deposit
Agreement and the Receipt, (ii) requests admission as a Substituted Class A
Limited Partner in IP Timberlands, Ltd. ("IPT") and agrees to be bound by the
Agreement of Limited Partnership of IPT and (iii) appoints the Managing General
Partner of IPT as his attorney to execute, swear to, acknowledge and file any
document, necessary or appropriate for the Applicant's admission as a
Substituted Class A Limited Partner in IPT and as a party to the Agreement of
Limited Partnership of IPT, if consent to such admission is given by the
Managing General Partner in its sole discretion.
Dated:_______________________________ ______________________________________
Residence Address
_____________________________________ ______________________________________
Social Security or other Signature of Applicant
identifying number of Applicant
Purchase Price:_____________________
(including Commissions, if any)
Type of Entity (Check One):
[ ] Individual [ ] Partnership [ ] Corporation [ ] Trust [ ] Other (specify)
Nationality (Check One):
[ ] U.S. Citizen, Resident or Domestic Entity;
[ ] Foreign corporation, or [ ] Non-resident alien
If the Applicant is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing
("Nominee"), and is holding for the account of any Person, this application
should be completed by an officer thereof, or, in the case of a broker or
dealer, by
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a registered representative who is a member of a registered national securities
exchange, or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a Person performing a similar
function. Pursuant to temporary regulations under Section 1445 of the Internal
Revenue Code, notice is hereby provided to all Nominees that unless
certification of non-foreign status is timely provided to IPT as to the
citizenship status of any beneficial interest holder, IPT will withhold with
respect to such interest as required under Section 1445.
- --------------------------------------------------------------------------------
If the U.S. Citizen, Resident or Domestic Entity Box is checked, the
Certification on the reverse side hereof must be completed.
- --------------------------------------------------------------------------------
If the U.S. Citizen, Resident or Domestic Entity Box is checked, the
following Certification must be completed.
Under Section 1445(e) of the Internal Revenue Code, IPT must withhold tax
with respect to certain transfers of property if a holder of an interest in IPT
is a foreign person. To inform IPT that no withholding is required with respect
to the undersigned Applicant's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interest holder).
Complete Either A or B.
A. Individual Applicant:
1. I am not a non-resident alien for purposes of U.S.
income taxation;
2. My U.S. taxpayer identifying number (Social Security
Number) is __________; and
3. My home address is ______________________________.
B. Entity Applicant:
1. ____________________(Name of Applicant) is not a foreign
corporation, foreign partnership, foreign trust,
or foreign estate (as those terms are defined in the
Internal Revenue Code and Income Tax Regulations);
2. The Applicant's U.S. employer identification number is
__________; and
3. The Applicant's office address is ____________________
and place of incorporation (if applicable) is
____________________
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The Applicant understands that this certification may be disclosed to the
Internal Revenue Service by IPT and that any false statement contained herein
could be punishable by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, (and, if applicable, I further declare that I have authority to sign
this document on behalf of ______________________________)
Name of Applicant
____________________________________________
Signature and Date
____________________________________________
Title (if applicable)
98
<PAGE>
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-2
1.4 Principal Office.....................................................B-2
1.5 Power of Attorney....................................................B-3
1.6 Term.................................................................B-4
ARTICLE II
Purpose
ARTICLE III
Capital Contributions
3.1 Primary Account......................................................B-4
3.2 Secondary Account....................................................B-5
3.3 Additional Contributions of Limited Partner..........................B-7
3.4 No Preemptive Rights.................................................B-8
3.5 Capital Accounts.....................................................B-9
3.6 Interest............................................................B-12
3.7 No Withdrawal.......................................................B-12
3.8 Loans from Partners.................................................B-12
ARTICLE IV
Maintenance of the Accounting Units; Distributions
4.1 Sharing of Costs and Expenses of the Primary Account................B-12
4.2 Sharing of Costs and Expenses of the Secondary Account..............B-13
4.3 Sharing of Revenues of the Primary Account..........................B-14
4.4 Sharing of Revenues of the Secondary Account........................B-14
4.5 Allocation of Costs and Revenues....................................B-15
4.6 Classification of Certain Costs and Revenues........................B-15
4.7 Financing of Costs and Distributions................................B-16
4.8 Affiliated Corporations and Partnerships............................B-17
B-(i)
<PAGE>
4.9 Closing of the Primary Account......................................B-18
4.10 Current Distributions...............................................B-18
4.11 Inter-Account and Related Party Loans...............................B-19
ARTICLE V
Federal Income Tax Allocations
5.1 Capital Account Allocations.........................................B-19
5.2 Tax Allocations.....................................................B-20
ARTICLE VI
Management and Operation of Business
6.1 Management..........................................................B-24
6.2 Organizational Certificate..........................................B-25
6.3 Reliance by Third Parties and Effect on Limited Partner.............B-25
6.4 Compensation and Reimbursement of the General Partners..............B-25
6.5 Outside Activities..................................................B-26
6.6 Partnership Funds...................................................B-26
6.7 Contracts with Affiliates; Joint Ventures...........................B-27
6.8 Loans to or from a General Partner and Others.......................B-27
6.9 Indemnification of General Partners.................................B-28
6.10 Liability of General Partners.......................................B-32
6.11 Other Matters Concerning the General Partners.......................B-32
6.12 Tax Basis and Value Determinations..................................B-32
6.13 Resolution of Conflicts of Interest.................................B-33
ARTICLE VII
Rights and Obligations of Limited Partner
7.1 Limitation of Liability.............................................B-33
7.2 Management of Business..............................................B-33
ARTICLE VIII
Books, Records, Accounting and Reports
8.1 Records, Accounting and Reports.....................................B-33
8.2 Fiscal Year.........................................................B-34
8.3 Annual Reports......................................................B-34
8.4 Other Information...................................................B-34
B-(ii)
<PAGE>
ARTICLE IX
Income Tax Matters
9.1 Preparation of Tax Returns..........................................B-34
9.2 Tax Elections.......................................................B-35
9.3 Tax Controversies...................................................B-35
9.4 Organizational Expenses.............................................B-35
9.5 Taxation as a Partnership...........................................B-35
ARTICLE X
Transfer of Interest
10.1 Transfer............................................................B-35
10.2 Transfer of Interest of General Partners............................B-36
10.3 Transfer of Interest of Limited Partner.............................B-36
ARTICLE XI
Admission of Substituted Partners
11.1 Admission of the Limited Partner....................................B-36
11.2 Admission of Successor Limited Partner..............................B-36
11.3 Admission of Successor Managing General Partner.....................B-36
11.4 Admission of Successor Special General Partner......................B-36
11.5 Amendment of Agreement..............................................B-37
ARTICLE XII
Withdrawal or Removal of the General Partners
12.1 Withdrawal or Removal of the Managing General Partner...............B-37
12.2 Withdrawal or Removal of Special General Partner....................B-37
12.3 Interest of Departing Partner.......................................B-37
ARTICLE XIII
Dissolution and Liquidation
13.1 Dissolution.........................................................B-38
13.2 Continuation of the Partnership.....................................B-39
13.3 Liquidation.........................................................B-39
13.4 Distribution in Kind................................................B-40
13.5 Return of Capital...................................................B-40
13.6 Waiver of Partition.................................................B-40
B-(iii)
<PAGE>
ARTICLE XIV
Amendment of Partnership Agreement
14.1 Amendments..........................................................B-41
ARTICLE XVI
Limitations...............................................................B-44
16.1 Sale of Substantially All Assets....................................B-44
ARTICLE XVII
Special Provisions
17.1 Withdrawal of Acreage by Limited Partner; Title to the Timberlands. B-45
17.2 Right of IP to Retain or Purchase Mineral Interests.................B-45
ARTICLE XVIII
General Provisions
18.1 Definitions.........................................................B-46
"Accounting Unit"...................................................B-46
"Adjusted Property".................................................B-46
"Affiliate".........................................................B-46
"Affiliated Corporation"............................................B-46
"Affiliated Partnership"............................................B-46
"Affiliated Partnership Agreement"..................................B-46
"Agreed Value"......................................................B-46
"Agreement".........................................................B-47
"Assignee"..........................................................B-47
"Bulk Sale".........................................................B-47
"Capital Account"...................................................B-47
"Capital Contribution"..............................................B-47
"Carrying Value"....................................................B-47
"Certificate of Limited Partnership"................................B-48
"Class A Capital Account"...........................................B-48
"Class A Certificate"...............................................B-48
"Class A Limited Partner"...........................................B-48
"Class A Portion"...................................................B-48
"Class A Unit"......................................................B-48
"Class B Capital Account"...........................................B-48
"Class B Certificate"...............................................B-48
"Class B Limited Partner"...........................................B-48
B-(iv)
<PAGE>
"Class B Portion"...................................................B-48
"Class B Unit"......................................................B-48
"Code"..............................................................B-48
"Commencement Date".................................................B-49
"Contributed Property"..............................................B-49
"Contributing Partner"..............................................B-49
"Contribution Agreement"............................................B-49
"Cut Timber"........................................................B-49
"Departing Partner".................................................B-49
"General and Administrative Overhead"...............................B-49
"General Partners"..................................................B-49
"Initial Limited Partner"...........................................B-49
"Initial Managing General Partner" .................................B-49
"Initial Term"......................................................B-49
"IP"................................................................B-50
"IPFR"..............................................................B-50
"IPT Partnership Agreement".........................................B-50
"IPT Unit"..........................................................B-50
"Limited Partner"...................................................B-50
"Liquidator"........................................................B-50
"Managing General Partner"..........................................B-50
"Net Agreed Value"..................................................B-50
"Opinion of Counsel"................................................B-50
"Original Primary Account Property".................................B-50
"Original Secondary Account Property"...............................B-51
"Original Timber Interests".........................................B-51
"Partner"...........................................................B-51
"Partnership".......................................................B-51
"Partnership Interest"..............................................B-51
"Person"............................................................B-51
"Primary Account"...................................................B-51
"Primary Account Cash"..............................................B-51
"Primary Account Factor"............................................B-51
"Primary Account Percentage Interest"...............................B-52
"Primary Account Portion"...........................................B-52
"Recapture Income"..................................................B-52
"Residual Gain" or "Residual Loss"..................................B-52
"Secondary Account".................................................B-52
"Secondary Account Cash"............................................B-52
"Secondary Account Factor"..........................................B-52
"Secondary Account Percentage Interest".............................B-52
"Secondary Account Portion".........................................B-53
"Section 631(a) Cut"................................................B-53
B-(v)
<PAGE>
"Section 631(b) Sale"...............................................B-53
"Special General Partner"...........................................B-53
"Standing Timber"...................................................B-53
"Texas Act".........................................................B-53
"Timber Cutting Contracts" .........................................B-53
"Timber Deed".......................................................B-53
"Timber Interests"..................................................B-54
"Timberland"........................................................B-54
"Transferred Gain"..................................................B-54
"Unit"..............................................................B-54
"Unrealized Gain"...................................................B-54
"Unrealized Loss"...................................................B-54
18.2 Addresses and Notices...............................................B-55
18.3 Titles and Captions.................................................B-55
18.4 Pronouns and Plurals................................................B-55
18.5 Further Action......................................................B-55
18.6 Binding Effect......................................................B-55
18.7 Integration.........................................................B-55
18.8 Creditors...........................................................B-55
18.9 Waiver..............................................................B-55
18.10 Counterparts........................................................B-55
18.11 Applicable Law......................................................B-55
18.12 Invalidity of Provisions............................................B-56
18.13 Opinions Regarding Taxation as a Partnership........................B-56
ANNEXES
ANNEX I - Certificate for Class A Limited Partnership Units
in IP Timberlands Operating Company, Ltd............................B-51
ANNEX II - Certificate for Class B Limited Partnership Units
in IP Timberlands Operating Company, Ltd............................B-52
B-(vi)
<PAGE>
AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
IP TIMBERLANDS OPERATING COMPANY, LTD.
THIS 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, and INTERNATIONAL PAPER COMPANY, a
New York corporation.
RECITALS
A. WHEREAS, the Partnership was previously 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
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 Limited Partner and its .99% managing general partner
interest in the Partnership to the Managing General Partner;
E. WHEREAS, the Limited Partner and the Managing General Partner were
admitted to the Partnership;
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;
B-1
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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; and
I. WHEREAS, the Partners now desire to change the name of the Partnership
to IP Timberlands Operating Company, Ltd.
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 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 March 29, 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 have entered into this Agreement in order to set forth their respective
rights and obligations. Except as expressly provided herein to the contrary, the
rights and obligations of the Partners and the administration, dissolution and
termination of the 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
B-2
<PAGE>
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.
(a) 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 jurisdiction 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; (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.
(b) 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
B-3
<PAGE>
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.
ARTICLE III
Capital Contributions
3.1 Primary Account. The 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.
(ii) 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 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
B-4
<PAGE>
(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.
(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.
(ii) Following the Commencement Date, whenever the Limited
Partner makes a Capital Contribution to the Partnership pursuant to
Section 3.3, 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 being attributed to the Primary
Account pursuant to this paragraph (b)(ii), paragraph (a)(ii) hereof and
Section 3.3.
(c) Initial Limited Partner. On the Commencement Date, the
Initial Limited Partner contributed WCFR Primary Account Property to the
Partnership pursuant to the 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 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 Partners and their predecessors in interest
have made 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
B-5
<PAGE>
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.
(ii) 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.
(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, 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.
(c) Initial Limited Partner. On the Commencement Date, the
Initial Limited Partner contributed WCFR Secondary Account Property to
the Partnership pursuant to the 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 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
B-6
<PAGE>
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 Limited Partner. Following the
Commencement Date, the 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:
(a) (i) During the Initial Term, any Timber Interests contributed
to the Partnership by the Limited Partner will be deemed to have been
contributed (A) 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 (B) 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 (A) 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 (B) 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 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 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.
(ii) Following the Initial Term, any Timber Interests contributed
to the Partnership by the Limited Partner will be deemed to have been
contributed (A) with respect to the Class A Unit to the extent of 4.04%
of the Net Agreed Value of such Timber Interests and (B) 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
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 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 Limited Partner shall
be credited with the Net Agreed Value of such Timber Interests.
B-7
<PAGE>
(b) (i) During the Initial Term, the Primary Account Portion of
the Agreed Value of any Timber Interests contributed by the 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.
(ii) Following the Initial Term, the Agreed Value of any Timber
Interests contributed by the Limited Partner pursuant hereto will be
attributed in full to the Secondary Account.
(c) (i) During the Initial Term, any cash contributed by the
Limited Partner pursuant hereto, which cash was received by the Limited
Partner as a contribution to capital, shall be deemed to have been
contributed (A) 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 (B) 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.
(ii) Following the Initial Term, any cash contributed by the
Limited Partner pursuant hereto, which cash was received by the Limited
Partner as a contribution to capital, shall be deemed to have been
contributed (A) with respect to the Class A Unit to the extent of 4.04%
of such cash and (B) 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 Limited Partner will be attributed in full to the Secondary Account.
(d) 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 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.
3.4 No Preemptive Rights. No Partner shall have any preemptive,
preferential or other right with respect to (a) additional Capital
Contributions; (b) issuance or sale of Class A Units, Class B Units or any other
Units; (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 or any other Units; (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.
B-8
<PAGE>
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 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.
Subject to paragraph (e) hereof, the Partnership shall also
maintain for the 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.
(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).
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(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.
(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.
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(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.
(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 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 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 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 Limited
Partner for redemption of IPT Units
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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 Limited Partner, as well as any adjustments made to
the capital accounts of the general partners of the 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 Limited Partner's properties
shall be made to the Carrying Values of the same properties of the
Partnership.
(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 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 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 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 and XIII.
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 Partners in
accordance with their respective Primary Account Percentage Interests:
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(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.
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 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).
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(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 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).
(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 Partners in accordance with their
respective Secondary Account Percentage Interests:
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(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.
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 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.
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(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.
(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.
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 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 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
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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 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 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.
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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 to
the Primary Account to fund any such repayment or distribution). Immediately
thereafter, the Primary Account shall be closed.
4.10 Current Distributions. (a) Unless otherwise provided herein, the
Managing General Partner may make such cash distributions 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. In its sole discretion, the Managing General Partner may also distribute
to the 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 Partners in accordance
with (A) as to distributions with respect to the Primary Account, the
Partners' respective Primary Account Percentage Interests and (B) as to
distributions with respect to the Secondary Account, the 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 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
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distributions concurrently to all Partners in accordance with
their respective Secondary Account Percentage Interests.
(b) Notwithstanding the terms of paragraph (a) above, the
Managing General Partner shall not cause the Partnership to make any
distributions (except distributions made in accordance with paragraph (b) above)
to the Partners from the Secondary Account at any time during which the
Partnership is indebted to either of the General Partners.
(c) Any amounts paid pursuant to Section 6.4 shall not be deemed
to be distributions for purposes of this Agreement.
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
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deduction (computed in accordance with Section 3.5(b)) shall be allocated among
the Partners in the following manner:
(a) 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 Limited Partner, in
its capacity as the Class A Limited Partner, and the Limited Partner, in
its capacity as the Class B Limited Partner, in accordance with their
respective Primary Account Percentage Interests.
(b) 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 Limited Partner, in
its capacity as the Class A Limited Partner, and the Limited Partner, in
its capacity as the Class B Limited Partner, in accordance with their
respective Secondary Account Percentage Interests.
(c) 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
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(c) is intended to constitute a "qualified income offset"
within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
(d) 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(d), "minimum gain" shall be
determined in accordance with Treasury Regulation Section
1.704-1(b)(4)(iv). This Section 5.1(d) 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) 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
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General Partner, the Special General Partner, the Limited Partner, in
its capacity as the Class A Limited Partner, and the Limited Partner, in
its capacity as the Class B Limited Partner, in accordance with their
respective Primary Account Percentage Interests.
(ii) 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 Limited Partner, in
its capacity as the Class A Limited Partner, and the Limited Partner, in
its capacity as the Class B Limited Partner, in accordance with their
respective Secondary Account Percentage Interests.
(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 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, 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
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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.
(d) 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 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.
(e) 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.
(f) 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
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benefits attributable to the increased basis in Partnership property resulting
from any election under Section 754 of the Code.
(g) 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.
(h) 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 of allocation as it determines
necessary, to the extent permitted by Section 706 of the Code and regulations or
rulings promulgated thereunder.
(i) 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 (h) hereof.
(j) 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).
(k) 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(c).
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(l) If any Partner's Capital Account has a deficit balance as
described in Section 5.1(d), 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(d).
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.
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 Partner when
required under Section 15.1); (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
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
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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 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.
6.3 Reliance by Third Parties and Effect on Limited Partner.
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 Partner hereby
agrees to be bound by any representations made by the Managing General Partner
acting in good faith; and the Limited Partner hereby waives 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.
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6.5 Outside Activities. (a) The Managing General Partner shall not
acquire any assets (other than its general partner interests in the Limited
Partner and in WCFR and depositary units or units of the 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 Partnership, the 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 Partner, 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 Partner owns an
interest, without having or incurring any obligation to offer any interest in
such properties, businesses or activities to the Partnership, the Limited
Partner 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 Partner 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 Conveyance 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 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 Partner 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 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 Limited Partner
in which funds of the 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
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Managing General Partner or by its agents, which agents may be an Affiliate of
the Managing 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) 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.
(b) The Partnership may lend or contribute funds to the 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 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 Limited
Partner or any other Person. The
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Partnership may lend funds to a General Partner or any Affiliate thereof,
including the 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.
(c) Notwithstanding the provisions of Section 6.8(a), assumption
of indebtedness by the Partnership pursuant to the 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 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
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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 the 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 Partner. 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
Limited Partner. The 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.
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(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 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
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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 Partner 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.
(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.
(ii) 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.
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(iii) 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 Partner 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 Partner or to any owner of a Class A Unit or Class B 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 Partner 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.
(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
Limited Partner and its 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,
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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 the 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 Partner, 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 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 Partner
7.1 Limitation of Liability. The Limited Partner shall have no liability
under this Agreement except as provided by the Texas Act.
7.2 Management of Business. The Limited Partner 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 Partner
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
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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.
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 Limited Partner reports 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 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
Partner 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 Partner or its
representatives, at its request, any further information required to be
furnished under the Texas Act, in such form as it may reasonably request
relative to any phase of the operations of the Partnership. The Limited Partner
and its 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 Partner within 90 days after
the close of the 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
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will be furnished to the 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 Partner, 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
Partner 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 Partner agrees 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.
9.5 Taxation as a Partnership. No election shall be made by the
Partnership, the General Partners or the Limited Partner, 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.
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.
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(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 Limited Partner, such General Partner shall
transfer its Partnership Interest as a General Partner of the Partnership to
such Person. The Limited Partner hereby consents to any such transfer.
10.3 Transfer of Interest of Limited Partner. The Limited Partner may
not transfer all or any part of its Partnership Interest as the Limited Partner
except that a successor of the Limited Partner may succeed to its Partnership
Interest as the Limited Partner in the Partnership.
ARTICLE XI
Admission of Substituted Partners
11.1 Admission of the Limited Partner. 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 Limited Partner, and the Limited Partner was admitted to the
Partnership.
11.2 Admission of Successor Limited Partner. The successor of the
Partnership Interest of the Limited Partner shall be admitted to the Partnership
as a substitute Limited Partner 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 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 Limited Partner. The Partners agree that the selection of
a successor managing general partner of the 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 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 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 Limited Partner. The Partners
agree that the selection of a successor special general partner of the 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 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
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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
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 Partners. In such event, such successor shall be
entitled to .99% or .01%, as the case may be, of all Partnership allocations and
distributions.
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;
(c) an election to dissolve the Partnership given to the General
Partner by the 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
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(f) dissolution of the Limited Partner, unless the 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 Partner 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
Partner. The Liquidator shall agree not to resign at any 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 Partner. 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 Partner. 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
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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 in accordance with the
provisions of Sections 13.3(c) and 13.3(d), 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 Partner 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
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14.1 Amendments. (a) Amendments to this Agreement may be proposed by the
Managing General Partner or by the Limited Partner. Any such amendment shall be
proposed by submitting to the Managing General Partner and the Limited Partner
in writing the proposed amendment. Subject to Sections 14.1(b), (c) and (d), any
such amendment shall become effective only upon the consent of the Limited
Partner.
(b) Notwithstanding Section 14.1(a), amendments to this Agreement
that (i) do not adversely affect the 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 Partner has limited liability
under the laws of any state or that is advisable in the opinion of the Managing
General Partner to ensure that 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.
(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 Partner.
(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 Partner 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.
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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;
(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 Partner either at a meeting
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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 Limited Partner.
(c) After such approval by vote or consent of the Limited
Partner, and at any time prior to the filing of the certificate of merger
pursuant to Section 15.4, the merger or 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. 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.
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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 Limited Partner. 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 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 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 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 Limited Partner from and after the date designated by
IP pursuant to Section 18.2 of the IPT Partnership Agreement.
(b) If the 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.)
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(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.
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 Limited
Partner, such minerals or mineral interests shall be deemed to be an additional
Capital Contribution to the Partnership by the 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 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,
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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.
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.
"Accounting Unit" means the Primary Account or the Secondary Account,
whichever the case may be.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 3.5(d).
"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.
"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 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
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Agreed Value constituted the Agreed Value of such property at the time it was
contributed to the Partnership).
"Agreement" means this agreement of limited partnership, as it may be
amended from time to time.
"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 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 relating to an allocation between the Accounting Units
and (iii) any adjustment made upon the withdrawal of property pursuant to
Section 16.1.
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"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 March 29, 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
Limited Partner pursuant to Section 3.5 with respect to such 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 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 Limited Partner as a Class A Limited Partner.
"Class B Capital Account" means that Capital Account maintained for the
Limited Partner pursuant to Section 3.5 with respect to such 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 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 Limited Partner, in its capacity as a Class B
Limited Partner.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
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"Commencement Date" means [the date on which the Certificate of Limited
Partnership was filed with the Secretary of State of the State of Texas].
"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.
"Contribution Agreement" means that certain agreement dated March 29,
1996 entered into between WCFR, IP and the Partnership wherein WCFR and IP
contribute and convey to the Partnership certain designated assets and the
Partnership agrees to assume certain designated liabilities.
"Cut Timber" means timber that has been harvested from Timberland and is
held or sold, whichever the case may be, as logs.
"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.
"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.
"Initial Limited Partner" means WCFR with respect to the 99% limited
partner interest issued pursuant to Section 2.1(b) of the 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
Contribution Agreement..
"Initial Term" means that period beginning with the Commencement Date
and ending at the close of business on December 31, 1999.
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"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 Limited Partner.
"IPT Unit" means a partnership interest of a limited partner in the
Limited Partner, including both Class A and Class B partnership interests and
partnership interests represented by depositary units.
"Limited Partner" means IP Timberlands, Ltd., a limited partnership
organized under the Texas Act, and any successors thereof.
"Liquidator" has the meaning specified in Section 13.3.
"Managing General Partner" means IPFR and its successors.
"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.
"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 Primary Account Property" means the WCFR Primary Account
Property conveyed to the Partnership pursuant to the 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
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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 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 Partner.
"Partnership" means the limited partnership established by this
Agreement.
"Partnership Interest" means the interest of a Partner in the
Partnership.
"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.
"Primary Account Cash" means, with respect to any contribution of cash
to the Partnership by the Limited Partner, that portion of such cash that was
contributed to the 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 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.
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"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 Limited Partner in its capacity as the Class A Limited Partner, 95% and (d)
as to the 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.
"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.
"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 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.
"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 Limited Partner, that portion of such cash contributed
to the 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 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.
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"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 Limited Partner in its capacity as the Class A Limited Partner, 4% and (d)
as to the 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).
"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
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 Partner 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.
"Special General Partner" means IP or its successors.
"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.
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"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.
"Unit" means the Partnership Interest of the Limited Partner, in its
capacity as either the Class A Limited Partner or the Class B Limited Partner.
"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.
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"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.
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.
B-55
<PAGE>
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.
B-56
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Managing General Partner, Special General Partner and the Limited Partner on
this day of , 1996.
MANAGING GENERAL PARTNER:
IP FOREST RESOURCES COMPANY
By:___________________________
SPECIAL GENERAL PARTNER:
INTERNATIONAL PAPER COMPANY
By:___________________________
LIMITED PARTNER:
IP TIMBERLANDS, LTD.
By:___________________________
B-57
<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:___________________________________
B-58
<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:___________________________________
B-59
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,876
<SECURITIES> 0
<RECEIVABLES> 409,093
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 417,969
<PP&E> 683,684
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,103,786
<CURRENT-LIABILITIES> 29,241
<BONDS> 0
0
0
<COMMON> 1,044,149
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,103,786
<SALES> 79,367
<TOTAL-REVENUES> 81,108
<CGS> 0
<TOTAL-COSTS> 27,030
<OTHER-EXPENSES> 484
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,499
<INCOME-PRETAX> 686,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 686,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 686,300
<EPS-PRIMARY> 5.66
<EPS-DILUTED> 5.66
</TABLE>
