<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For First Quarter and Three Months Ending March 31, 2000
OR
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9035
POPE RESOURCES, A DELAWARE
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
DELAWARE 91-1313292
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
19245 10TH AVENUE NE, POULSBO, WA 98370
TELEPHONE: (360) 697-6626
(Address of principal executive offices including zip code)
(Registrant's telephone number including area code)
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 / /
<PAGE>
P A R T I
ITEM 1
FINANCIAL STATEMENTS
<PAGE>
CONSOLIDATED BALANCE SHEETS
Pope Resources
March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
2000 1999
(Thousands) (Unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 4,880 $ 4,922
Accounts receivable 2,911 1,583
Work in progress 12,195 12,033
Current portion of contracts receivable 311 587
Prepaid expenses and other 476 550
------- -------
Total current assets 20,773 19,675
------- -------
Properties and equipment at cost:
Land and land improvements 16,296 15,611
Roads and timber (net of
accumulated depletion) 12,309 12,391
Buildings and equipment (net of
accumulated depreciation) 15,754 15,921
------- -------
44,359 43,923
------- -------
Other assets:
Contracts receivable, net of current portion 1,637 1,733
Unallocated amenities and project costs 1,342 1,356
Other 179 193
------- -------
3,158 3,282
------- -------
$68,290 $66,880
======= =======
Liabilities and Partners' Capital
Current liabilities:
Accounts payable $ 1,129 $ 1,084
Accrued liabilities 1,260 2,011
Current portion of long-term debt 415 406
Deposits 616 88
Minority interest 150 366
------- -------
Total current liabilities 3,570 3,955
------- -------
Long-term debt, net of current portion 13,163 13,282
Deferred profit 325 341
Partners' capital 51,232 49,302
------- -------
$68,290 $66,880
======= =======
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Pope Resources
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
(Thousands, except per unit data)
2000 1999
-------- --------
<S> <C> <C>
Revenues $ 13,449 $ 12,566
Cost of sales (4,005) (3,063)
Operating expenses (4,625) (4,244)
Selling general and administrative (2,343) (2,265)
-------- --------
Income from operations 2,476 2,994
-------- --------
Other income (expense):
Interest expense (310) (324)
Interest income 91 30
-------- --------
Net other expense (219) (294)
-------- --------
Income before income taxes and minority interest 2,257 2,700
Income tax benefit (provision) 113 (116)
-------- --------
Income before minority interest 2,370 2,584
Minority interest (3) (17)
-------- --------
Net income 2,367 2,567
======== ========
Allocable to general partners $ 31 $ 34
Allocable to limited partners 2,336 2,533
-------- --------
$ 2,367 $ 2,567
======== ========
Earnings per unit:
Basic $ 0.52 $ 0.57
======== ========
Diluted $ 0.52 $ 0.57
======== ========
Weighted average units outstanding:
Basic
4,528 4,519
======== ========
Diluted 4,532 4,536
======== ========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Pope Resources
Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
(Thousands) 2000 1999
------- -------
<S> <C> <C>
Net cash flows from operating activities $ 1,735 $ 1,116
Cash flows from investing activities:
Capital expenditures (1,024) (1,971)
------- -------
Net cash used in investing activities (1,024) (1,971)
------- -------
Cash flows from financing activities:
Cash distributions to unitholders (452) (452)
Minority interest distribution (212) (208)
Repayment of long-term debt (89) (149)
------- -------
Net cash used in financing activities (753) (809)
------- -------
Net increase (decrease) in cash and cash equivalents (42) (1,664)
Cash and cash equivalents at beginning of period 4,922 2,666
------- -------
Cash and cash equivalents at end of the period $ 4,880 $ 1,002
======= =======
</TABLE>
<PAGE>
POPE RESOURCES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
1. The consolidated financial statements as of March 31, 2000 and December
31, 1999 and for the 3 month periods ending March 31, 2000 and March
31, 1999 have been prepared by Pope Resources pursuant to the rules and
regulations of the Securities and Exchange Commission (the"SEC"). The
financial information for the quarters and three months ending March
31, 2000 and March 31, 1999 is unaudited, but, in the opinion of
management, reflects all adjustments (consisting only of normal
recurring adjustments and accruals) necessary for a fair presentation
of the financial position, results of operations and cash flows for the
interim periods. The financial information as of December 31, 1999, is
derived from the Partnership's audited consolidated financial
statements and notes thereto for the year ending December 31, 1999, and
should be read in conjunction with such financial statements. Certain
reclassifications of prior year's balances have been made to conform to
the current format. The results of operations for the quarter and three
months ending March 31, 2000 are not necessarily indicative of the
results of operations that may be achieved for the entire fiscal year
ending December 31, 2000.
2. The financial statements in the Partnership's 1999 annual report on
Form 10-K include a summary of significant accounting policies of the
Partnership and should be read in conjunction with this Form 10-Q.
3. Fully diluted earnings per unit include the dilutive impact of unit
options outstanding.
4. Supplemental disclosure of cash flow information: Interest paid
amounted to approximately $325,000 and $342,000 for the quarters and
three months ending March 31, 2000 and 1999, respectively.
5. Revenues and operating income by segment for the quarters and three
months ending March 31 is as follows:
<TABLE>
<CAPTION>
Timberland
(Thousands) Resources Real Estate Administrative Consolidated
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Revenues $10,159 $ 3,290 $ - $13,449
Income (loss) from operations 4,745 (253) (2,016) 2,476
1999
Revenues $10,476 $ 2,090 -- $12,566
Income (loss) from operations 5,369 (443) $(1,932) 2,994
</TABLE>
6. Certain reclassifications have been made to 1999 amounts to conform to
2000 presentation.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
March 31, 2000
Note: Certain information in this report constitutes forward-looking
statements within the meaning of federal securities laws. Forward-looking
information is subject to risks, trends, and uncertainties that could cause
actual results to differ materially from those projected. Those uncertainties
include but are not limited to changes to regulations that affect the
Partnership's ability to harvest timber and develop real estate and changes
in economic conditions, which can have a significant effect on the price the
Partnership can obtain for its timber and real estate.
This discussion should be read in conjunction with the Partnership's
consolidated financial statements included with this report.
RESULTS OF OPERATIONS
TIMBERLAND RESOURCES
Timberland Resources' revenue sources are as follows: management and
consulting fees earned from timberland management and forestry consulting
activities performed for third-party owners of timberlands as well as harvest
and sale of logs from the Partnership's 74,000-acre tree farm located in the
Hood Canal area of Washington.
Olympic Resource Management LLC (ORMLLC), a subsidiary of the
Partnership, is the western regional timberland manager for the Hancock
Timber Resource Group (HTRG). The contract covering management services
provided in the western United States runs for three years and commenced on
January 1, 1998. In conjunction with the acquisition of Simons Reid Collins,
ORM Resources Canada Ltd. (a subsidiary of ORMLLC) assumed management of
additional HTRG timberlands in British Columbia. The current British Columbia
contract ends December 31, 2000. Total acres under management for HTRG is
subject to change as HTRG's client portfolios are adjusted.
Revenues and operating income for the Timberland Resources segment
for the quarters ending March 31, 2000 and 1999, are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Year ended Revenues Operating income
- -----------------------------------------------------------------------------
<S> <C> <C>
March 31, 2000 $ 10.2 million $ 4.7 million
March 31, 1999 10.5 million 5.4 million
- -----------------------------------------------------------------------------
</TABLE>
The 3% decrease in revenues and 13% decrease in operating income in
2000 as compared to 1999 resulted primarily from a decrease in acres under
management for HTRG. Two of HTRG's clients representing 319,000 acres under
management as of March 31, 1999 decided to change investment managers during
1999. New investment managers took over the management of the timberlands for
these two clients in September 1999 and February 2000. Acres under management
for the majority of the first quarter of 2000 were reduced to 242,000 from
460,000 at December 31, 1999. As the acres under management declined, the
Partnership was not able to reduce costs commensurately and the resultant
reduction in economies of scale caused the operating income to decline more
than the reduction in revenues.
In March 2000, the Partnership began managing 365,000 acres under a
new management contract. The timberlands are located in Washington, Oregon,
and California. Revenues and operating income from the new contract are
expected to offset a portion of the decrease in revenues and operating income
associated with the reduction in acres under
<PAGE>
management for HTRG. As of March 31, 2000 the Partnership managed over
600,000 acres of timberlands in British Columbia, Washington, Oregon, and
California on behalf of ORMLLC's timberland management clients, as compared
to over 500,000 acres at March 31, 1999.
Forestry consulting revenues increased $0.2 million to $0.7 million
for the three months ending March 31, 2000. Forestry consulting activities
are the result of the Simons Reid Collins acquisition in December 1998.
Revenues in the first quarter of 2000 improved as operations focused on
expanding market share as opposed to working through the transition to
Olympic Resource Management in the first quarter of 1999. In March of 2000
ORM Resources Canada entered into a province-wide agreement with the British
Columbia Ministry of Forests to supply licenses for CRUISECOMP, ORM's cruise
compilation software.
The Partnership benefited from an improvement in log prices realized
in the first quarter of 2000. The Partnership harvested the following timber
and realized the following average log prices for the three-month period
ending March 31, 2000 and 1999:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Softwood Pulp and
Year Sawlogs Hardwood Totals
- ------------------------------------------------------------------------------
Volume Price Volume Price Volume Price
MMBF $/MBF MMBF $/MBF MMBF $/MBF
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 10.1 $647 3.0 $292 13.1 $573
1999 11.2 $615 2.2 $222 13.4 $554
- ------------------------------------------------------------------------------
</TABLE>
MMBF = million board feet
MBF = thousand board feet
Log revenues from the Partnership's timberland ownership are
significantly affected by export log market conditions. Prices realized from
the sale of logs to the export market through domestic intermediaries
increased to $744 per MBF in the first quarter of 2000 from $696 per MBF in
the first quarter of 1999. The increase in price was offset by a decrease in
volume sold to the export market from 4.8 MMBF in the first quarter of 1999
to 2.9 MMBF in the first quarter of 2000. The decrease in volume sold through
the export market is due to a combination of harvesting timber stands with a
lower percentage of logs suitable for the export market and changes in demand
for larger, higher quality logs in the export market in the first quarter of
2000 relative to the first quarter of 1999.
Domestic sawlog volumes were 7.3 MMBF and 6.4 MMBF for the three
months ending March 31, 2000 and 1999, respectively. Average domestic log
prices per MBF were $609 and $553 for the three months ending March 31, 2000
and 1999, respectively. The increase in domestic log prices is the indirect
result of export market conditions. During the first three months of 2000
export market prices were up from the first quarter of 1999 which put upward
pressure on domestic prices.
Pulp and hardwood log volumes were 3.0 MMBF and 2.2 MMBF, for the
three months ending March 31, 2000 and 1999, respectively. Harvest activities
in the first three months of 2000 were from timber stands with a higher
concentration of pulp and hardwood logs as compared to the prior year. The
Partnership also benefited from an increase in pulp and hardwood log prices
in the first quarter of 2000. The average price realized was $292 and $222
per MBF on pulp and hardwood logs for the three months ending March 31, 2000
and 1999, respectively.
In the operation and management of its tree farm, the Partnership is
subject to federal, state and local laws that govern land use. Management's
objective is to be in compliance with such laws and regulations at all times.
On March 20, 2000, the Washington State Department of Natural Resources
enacted new, temporary forest practice regulations. The regulations provide
for wider riparian management zones, greater planning requirements for
harvesting and road
<PAGE>
construction and maintenance operations, and other restrictions on timber
management activities. The Partnership is currently evaluating the effect of
these rules on the Partnership's fee timberlands.
The risk of loss from fire, while possible on any timberland, is
minimized on Partnership lands by maintaining a well-developed road system,
and an established fire monitoring and suppression plan. The Washington State
Department of Natural Resources is ultimately responsible for all fire
suppression activities in the state.
<PAGE>
REAL ESTATE
Real Estate segment revenues are derived from residential
development and income-producing properties. Residential development consists
of the sale of single-family homes, developed lots, and undeveloped acreage.
These activities span approximately 3,000 acres of the Partnership's
ownership and are concentrated in Port Ludlow, Washington. Income-producing
properties consist of the following properties in Port Ludlow: the 37-room
Heron Beach Inn on Ludlow Bay, a 300-slip saltwater marina, a 27-hole
championship golf course, a commercial center, an RV park, a
restaurant/lounge and related facilities, and the water and sewer utilities
serving the area. In addition, the Partnership manages residential and
commercial properties in Port Gamble and Kingston, Washington.
Revenues and operating income/(loss) for the Real Estate segment for
the three months ending March 31, 2000 and 1999, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year ended Revenues Operating income/(loss)
- ------------------------------------------------------------------------------------
<S> <C> <C>
March 31, 2000 $ 3.2 million $ (0.3) million
March 31, 1999 2.1 million (0.4) million
- ------------------------------------------------------------------------------------
</TABLE>
The majority of the $1.1 million increase in Real Estate revenues
and $0.1 million decrease in operating loss are due to an increase in homes
sold during the quarter. In the first three months of 2000, the Partnership's
flagship development at Port Ludlow generated revenues of $1.8 million
through the sale of two lots and five homes. This compares to 1999 revenues
of $0.4 million through the sale of one developed lot and two homes. During
1999, the Partnership began to focus more on the sale of homes at Port Ludlow
as opposed to lots. The change in strategy is expected to build value in the
Partnership's Port Ludlow properties, as the Partnership will have more
control over the quality of homes in the community and additional residents
are expected to positively affect revenues attributable to the Partnership's
income-producing properties.
Prospective home and lot buyers often pay an earnest money deposit
in anticipation of completing the eventual purchase. The Partnership does not
record a sale when earnest money deposits are received, but does track the
sales backlog which represents the total sales dollars expected to be
recorded once these properties are sold. The residential development
division's backlog of sales was approximately $5.8 million and $1.3 million
as of March 31, 2000 and 1999, respectively. The sales backlog increase
results from the Partnership's focus on home sales as opposed to lot sales.
Management expects the majority of this backlog to become revenues by the end
of the third quarter of 2000.
Income-producing property revenues in the first three months of 2000
increased 8% to $1.4 million from $1.3 million in the first three months of
1999. The increase in revenues is the result of additional residents moving
into the area and the relatively mild weather experienced by Western
Washington in the first quarter of 2000.
Land holdings throughout Washington State are affected by the
state's Growth Management Act (GMA), which requires counties to submit
comprehensive plans that identify the future direction of growth and
stipulate where population densities are to be concentrated. In Jefferson
County, where Port Ludlow is located, the GMA Hearings Board approved the
County's Comprehensive Plan. In this plan, Port Ludlow was granted status as
a Master Planned Resort facilitating future build-out and development of the
resort. In July 1999, the Partnership successfully completed a mediation
process with local residents that resulted in a proposed zoning ordinance
necessary for completion and build-out of the resort. In October 1999, the
Jefferson County Commissioners approved the zoning ordinance.
<PAGE>
As part of its July 1999 GMA plan submission, Kitsap County
designated Port Gamble as a "Rural Historic Town." This designation provides
for substantial new commercial, industrial and residential development of the
town utilizing historic land use patterns, densities and architectural
character. The GMA Hearings Board has upheld the plan. The Partnership also
initiated a legislative amendment to the GMA that will provide additional
clarification and opportunities for designations involving national historic
town sites. This legislation was signed into law in March of 2000. The
Partnership is now in a position to evaluate potential opportunities and
strategies for redevelopment of the Port Gamble town site.
The Partnership continues to work with officials in Gig Harbor
regarding the development of a 320-acre mixed-use project located within the
Gig Harbor city limits. Efforts in 1999 focused on a successful agreement to
construct an arterial road through the property which in turn connects to a
nearby freeway interchange. Construction of the road is expected to begin by
summer of 2000.
The Partnership has two additional ongoing projects in Kitsap
County: a 720-acre residential development in Kingston and a 185-acre
residential development in Hansville. Development of these sites has been
delayed pending resolution of a lawsuit (in which the Partnership is not a
party) that will establish the appropriate zoning and development regulations
applicable to projects pending throughout Kitsap County. In April 1999, the
State Court of Appeals rendered a favorable decision, but the case has been
appealed to the Washington Supreme Court for further review.
Voters in Washington State recently passed Initiative 695, which
replaced the value- based vehicle license fees in the state with a low
flat-rate license fee. This is expected to have a detrimental impact on
state, county and local government budgets. Significant adverse impacts are
also anticipated to the level of services provided by the Washington State
Ferry System and funding of highway transportation projects. The reduction of
governmental funding in these areas may affect the Partnership's real estate
holdings, which are significantly reliant on ferry service, but the impact is
unknown at this time.
OTHER
The following table sets forth expenses as a percentage of revenues
for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues 100% 100%
Cost of sales 30% 24%
Operating expenses 34% 34%
Selling, general, and administrative expenses 17% 18%
---- ----
Operating income 19% 24%
==== ====
</TABLE>
Cost of sales includes the cost of purchasing and producing tangible
goods for sale. Cost of sales for the Partnership will fluctuate due to the
various methods for selling and harvesting timber, the basis of the land the
Partnership sells, and the quantity of homes sold. The increase in the
cost-of-sales ratio in 2000 is due to the sale of five homes in 2000 vs. two
homes in 1999. Homes have a relatively high cost of sales ratio as compared
to the Partnership's other revenue producing activities.
Operating expenses consist of salary and other costs directly
attributable to a revenue-producing activity. Operating expenses as a
percentage of revenues did not fluctuate in the first three months of 2000
relative to 1999. The selling, general, & administrative (SG&A) ratio
decreased 1% for the first three months of 2000 relative to 1999 due to the
increase in revenues generated in the first quarter of 2000 while SG&A
expenses remained relatively stable.
<PAGE>
Interest income increased $61,000 in the first three months of 2000,
as the Partnership's average short-term investments were higher in the first
quarter of 2000. The Partnership's acquisition and debt retirement of the
Heron Beach Inn in December of 1998 resulted in a relatively low balance of
cash and short-term investments in the first quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Funds generated internally through operations and externally through
financing will provide the required resources for the Partnership's real
estate development and other capital expenditures. Management may also
consider increasing the Partnership's debt-to-total capitalization ratio to
participate in investments in real property, if the investments meet the
Partnership's requirements of return and provide a good fit with the
Partnership's portfolio of properties. Management considers its capital
resources to be adequate for its current plans. At March 31, 2000, the
Partnership had available an unused $20 million bank loan commitment.
Management has considerable discretion to increase or decrease the
level of logs cut and thereby may increase or decrease net income and cash
flow, assuming log prices and demand remain stable. Management's current plan
is to harvest approximately 38 million board feet of timber in 2000. Since
harvest plans are based on demand and pricing, actual harvesting may vary
subject to management's ongoing review.
For the three months ending March 31, 2000, cash provided by
operating activities was $1.7 million and overall cash and cash equivalents
decreased $42,000. Cash provided by operating activities was used for cash
payments to unitholders of $0.5 million, capital expenditures of $1.0
million, and repayment of long-term debt of $89,000.
The Partnership plans to continue making quarterly partnership distributions
during 2000.
RECENT EVENT
Gary F. Tucker retired from his position as President and CEO
effective May 8, 2000. Board members Peter Pope and Doug Norberg will play a
more active role in day-to-day management while a search is conducted for Mr.
Tucker's replacement.
SEASONALITY
Timberland Resources: The Partnership's tree farm is located in the
Hood Canal region of Washington state. Most of the tree farm acreage owned by
the Partnership is at a relatively low elevation where harvest activities are
possible year around. As a result of this competitive advantage, the
Partnership tends to harvest and sell a greater portion of the annual harvest
in the first half of the year when the supply of logs tends to be lower.
Towards the end of September or October, harvest activities taper off as the
Partnership reaches the planned annual harvest volume. Other activities in
the Timberland Resource segment are not significantly seasonal.
Real Estate: The Partnership's real estate operations tend to be
highly seasonal. The income producing properties include a golf course,
marina, and Inn located in Port Ludlow, Washington. The majority of the
revenues from these activities are earned from June to September. The
majority of the Partnership's real estate development revenues have also
historically been generated during the summer months.
<PAGE>
COMMITMENTS AND CONTINGENCIES
The Partnership's commitments consist of performance bonds, letters
of credit, and operating leases entered in the normal course of business. The
Partnership may from time to time be a defendant in lawsuits arising in the
ordinary course of business. Management believes that loss to the
Partnership, if any, will not have a material adverse effect to the
Partnership's financial condition or results of operations.
FINANCIAL INFORMATION ABOUT SEGMENTS
Segment financial information is presented in Note 5 to the
Partnership's Financial Statements included with this report.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As of March 31, 2000, the Partnership had $13.5 million of fixed
rate debt outstanding with a fair value of approximately $14.0 million. Since
the debt bears interest at a fixed rate the fair value of the debt is
affected by changes in market interest rates. The following table presents
principal cash payments (in thousands) for the fixed rate debt outstanding at
March 31, 2000:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Long-term debt including current Interest
portion 2000 2001 2002 2003 2004 Thereafter Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Principal payments 289 405 446 491 541 11,047 9.65%
Local Improvement 6.5% to
District-Principal Payments 28 38 38 38 38 63 8%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II
ITEM 1: LEGAL PROCEEDINGS
From time to time, we may be subject to legal proceedings and
claims which may have a material adverse effect on our business. We are not
aware of any current legal proceedings or claims that will have, individually
or in the aggregate, a material adverse effect on our business, prospects,
financial condition or results of operations.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5: OTHER INFORMATION
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K: None.
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
10.1 Management Agreement, dated March 22, 2000, between Pioneer
Resources I, LLC and Olympic Resource Management LLC. (1)
10.2 Deed of Trust, Fixture Filing and Security Agreement with
Assignment of Rents. (1)
27 Financial Data Schedule
</TABLE>
--------------
(1) Subject to a request for confidential treatment filed with the SEC
contemporaneously with this quarterly report on Form 10-Q.
<PAGE>
POPE RESOURCES
SIGNATURE
Pursuant to the requirement 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.
POPE RESOURCES,
A Delaware Limited Partnership
Registrant
Date: May 12, 2000 By: POPE MGP, Inc.
Managing General Partner
Date: May 12, 2000 By: /s/Thomas M. Ringo
-------------------------------------------
Thomas M. Ringo
Sr. Vice President Finance & Client Relations
(Duly Authorized Signatory and
Principal Financial Officer)
Date: May 12, 2000 By: /s/Meredith R. Green
-------------------------------------------
Meredith R. Green
Vice President Finance and Treasurer
(Principal Accounting Officer)
<PAGE>
EXHIBIT 10.1
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT (the "Agreement") dated as of March 22, 2000,
by and between PIONEER RESOURCES I, LLC, a Delaware limited liability company
("Pioneer"), and OLYMPIC RESOURCE MANAGEMENT LLC, a Washington limited
liability company ("ORM" or the "Manager").
RECITALS
A. ORM is an independent contractor engaged in the business of
acquiring, operating, maintaining, managing, and disposing of timberland
properties for third parties through its employees, agents and
sub-contractors.
B. Pioneer is interested in engaging ORM to take over
responsibility for all aspects of management of Pioneer, with primary
emphasis on management and potential disposition of its Timberlands and, in
connection therewith, Pioneer and Member are interested in appointing ORM as
Manager of Pioneer under the Operating Agreement.
C. ORM is prepared to accept such engagement and appointment as
Manager of Pioneer in accordance with the terms and conditions set forth
below and in the Operating Agreement.
AGREEMENT
The parties agree as follows:
SECTION 1. DEFINITIONS.
1.1 "ADDITIONAL SERVICES" has the meaning set forth in Section 4.3 below.
1.2 "ADMINISTRATIVE SERVICES" has the meaning set forth in Section 3.1
below.
1.3 "AGREEMENT" means this Management Agreement between Pioneer and ORM, as
it may be amended, supplemented or otherwise modified from time to time.
1.4 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.5 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.6 "CASH COLLATERAL ACCOUNT" has the meaning set forth in Section 9 below.
<PAGE>
1.7 "CREDIT AGREEMENT" means the Replacement Credit Agreement dated as of
October 9, 1998, among Pioneer, the Lenders, First Union National Bank as
administrative agent, ABN AMRO Bank N.V. as syndication agent, and Bank of
America, N.A., as documentation agent, as [Omitted Confidential Information
has been filed separately with the Securities and Exchange Commission].
1.8 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.9 "DISPOSITION SERVICES" has the meaning set forth in Section 5 below.
1.10 "FEES" means [Omitted Confidential Information has been filed
separately with the Securities and Exchange Commission]
1.11 "FRAUD" with respect to Manager means common law fraud, consisting of
(i) an intentional misrepresentation by Manager of material information
actually known by Manager to be false or (ii) material dishonesty or
defalcation in the management of the affairs of Pioneer, which action was
knowingly initiated, approved or permitted by Manager.
1.12 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.13 "LENDERS" means the several banks and other financial institutions from
time to time parties to the Credit Agreement, and any successors and assigns
thereof.
1.14 "LOAN DOCUMENTS" means the collective reference to the Loan Documents
(as defined in the Credit Agreement), including without limitation, the
Credit Agreement and [Omitted Confidential Information has been filed
separately with the Securities and Exchange Commission].
1.15 "LOGS" means logs of any size or class harvested from the Timberlands.
1.16 "MANAGER" means ORM.
1.17 "MEMBER" means Strategic Timber Partners II, LP, a Georgia limited
partnership, the sole member of Pioneer.
1.18 "MISCONDUCT" with respect to Manager means the acts or omissions of
Manager which constitute (i) gross negligence, (ii) willful misconduct (which
shall include without limitation (A) subject to Section 2.5 hereof, the
willful failure of Manager to cause Pioneer to comply with the terms of the
Loan Documents, except to the extent it is outside the reasonable control of
Manager to cause such compliance; it being understood that compliance with
Section 2.6 hereof is within Manager's reasonable control and (B) the willful
failure of Manager to comply with the terms of Section 9(e) below) or (iii)
Fraud.
<PAGE>
1.19 "OPERATING AGREEMENT" means the Fifth Amended and Restated Limited
Liability Company Agreement of Pioneer dated as of March 22, 2000, between
the Manager and the Member, as it may be amended, supplemented or otherwise
modified from time to time.
1.20 "OPTIONAL SERVICES" has the meaning set forth in Section 4.4 below.
1.21 "ORM" means Olympic Resource Management LLC, a Washington limited
liability company.
1.22 "PIONEER" means Pioneer Resources I, LLC, a Delaware limited liability
company.
1.23 "PROPERTY MANAGEMENT SERVICES" has the meaning set forth in Section 4.2
below.
1.24 "REPORTING REQUIREMENTS" means those requirements for the delivery of
periodic financial reports and other information as set forth in the Credit
Agreement and the [Omitted Confidential Information has been filed separately
with the Securities and Exchange Commission].
1.25 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.26 [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
1.27 "TERMINATION FOR CAUSE" shall have the meaning set forth in Section
8.2(c) below.
1.28 "TIMBER" means the timber located on or harvested from the Timberlands,
whether standing or down and irrespective of size.
1.29 "TIMBERLANDS" means the entire Timberlands set forth in Exhibit 1, and
Timberland refers to an individual designated portion of the entire
Timberlands described in Exhibit 1.
SECTION 2. APPOINTMENT OF MANAGER.
2.1 ENGAGEMENT OF ORM AS MANAGER; SCOPE OF AUTHORITY. (a) Pioneer hereby
appoints ORM as manager of Pioneer in accordance with the terms of this
Agreement, and ORM accepts such appointment and agrees to act as manager of
Pioneer in accordance with, and comply in all respects with, the terms of
this Agreement and the Operating Agreement.
(b) As manager of Pioneer, Manager shall have the exclusive authority
and duty to direct, supervise, manage and operate the business, affairs and
properties of Pioneer, and Manager shall perform such duties in an efficient
and economical manner and in accordance with the terms of this Agreement and
the Operating Agreement. Except as otherwise provided in this Agreement or
the Operating Agreement, and subject to any non-waivable provisions of
applicable law, Manager shall have full, complete, and plenary authority,
power and discretion to manage and control the business, affairs and property
of Pioneer, and to make all decisions regarding those matters (including,
without limitation, the right to make and implement all decisions concerning
the business and affairs of Pioneer in the ordinary course of business and to
make and implement
<PAGE>
any and all decisions on behalf of Pioneer regarding all major actions
outside the ordinary course of business) and to perform any and all acts or
activities customary or incident to the management of Pioneer's business,
affairs and property. Except as otherwise expressly provided herein or in the
Operating Agreement, Manager's authority shall include, but not be limited
to, the following specific authority to: bind Pioneer to obligations with
third parties; enforce Pioneer's rights under any contract, agreement, law,
or otherwise, including by legal action if necessary; pay and discharge debts
and obligations of Pioneer from any Pioneer funds available to pay and
discharge such debts and obligations; collect and deposit in Pioneer bank
accounts all amounts owing to Pioneer from any source; cause Pioneer to
comply with the terms of this Agreement, the Operating Agreement, the Loan
Documents and any other agreement or instrument to which Pioneer is a party;
in Pioneer's name, hire, pay, oversee, direct the conduct of, and fire
employees, agents, subcontractors, legal, accounting, and other
professionals, and other service providers; and otherwise act on Pioneer's
behalf without restriction or qualification except as limited by law or as
otherwise provided in this Agreement, the Operating Agreement or the Loan
Documents. Other than Manager, no person (including without limitation, the
Member), shall have any power or authority to bind Pioneer unless such person
has been authorized to do so by this Agreement, the Operating Agreement or
Manager.
(c) Manager shall manage, operate, maintain and supervise the business,
affairs and properties of Pioneer with due care, in good faith, and in a
manner normally associated with ORM's management, operation, maintenance and
supervision of timberlands and timberland businesses of a similar size, type
and location as that of Pioneer. Manager shall at all times exercise diligent
efforts to manage and operate the business, affairs and properties of Pioneer
in compliance with (i) this Agreement, (ii) the Operating Agreement, (iii)
the Loan Documents, (iv) all other agreements and instruments to which
Pioneer is a party, and (v) all applicable governmental rules, regulations,
requirements, orders, notices, determinations and ordinances and requirements
of law (including without limitation all environmental laws and all
regulations concerning timberlands). Without in any way limiting the
foregoing, in its management of the business, affairs and properties of
Pioneer, Manager shall provide to Pioneer (w) the Administrative Services in
accordance with the provisions of Section 3 of this Agreement, (x) the
Property Management Services in accordance with the provisions of Section 4.2
of this Agreement, (y) the Additional Services and Optional Services that
Manager performs pursuant to Sections 4.3 and 4.4 of this Agreement, and (z)
such other services that are reasonably required to perform its obligations
hereunder.
2.2 FEES. [Omitted Confidential Information has been filed separately with
the Securities and Exchange Commission]
2.3 LOAN DOCUMENTS. (a) Subject to Section 2.5 of this Agreement, and to
the extent reasonably within the control of Manager, Manager shall manage
Pioneer consistent with, and cause Pioneer to comply with, the terms and
conditions of, the Loan Documents so as to avoid the occurrence of an Event
of Default by Pioneer under the Loan Documents (other than Scheduled Defaults
(as defined in [Omitted Confidential Information has been filed separately
with the Securities and Exchange Commission])), including without limitation,
terms regarding (i) the preparation of financial forecasts and a "disposition
plan", (ii) Reporting Requirements and (iii) the entering into, amending or
terminating any stumpage agreement, timber contract or any
<PAGE>
other agreement for the sale of any Timber, Logs or Timberlands (including
pursuant to timber purchase agreements), cutting rights or other real
property of Pioneer.
(b) If the Lenders (or any nominee thereof), pursuant to the exercise
of remedies under the Loan Documents, become the direct or indirect owners of
the membership interests in Pioneer (or otherwise exercise the voting rights
with respect thereto in accordance with the terms of the applicable Loan
Documents) or of all or substantially all of the Timberlands, or the Lenders
(or any such nominee) shall otherwise exercise Pioneer's rights under this
Agreement in accordance with the terms of the applicable Loan Documents, in
any such case such Lenders (or any such nominee) shall have the right to
terminate this Agreement, subject to (i) [Omitted Confidential Information
has been filed separately with the Securities and Exchange Commission], and
(ii) the payment of any other unpaid Fees and other fees, charges and
reimbursements due and payable (or accrued but not yet billed to Pioneer)
hereunder through the date of termination.
(c) (i) If the Lenders (or any nominee thereof), pursuant to the
exercise of remedies under the Loan Documents, become the direct or indirect
owners of the membership interests in Pioneer, or otherwise exercise the
voting rights with respect thereto in accordance with the terms of the
applicable Loan Documents, this Agreement, subject to the termination right
referenced in Section 2.3(b) above, shall remain in full force and effect;
provided however, in such circumstances, Manager and Pioneer shall use good
faith efforts to agree to an amendment to this Agreement to provide Pioneer
and its members with consent, approval and other rights commensurate with
such rights customarily afforded to owners and their members in similar
transactions.
(ii) If the Lenders (or any nominee thereof), pursuant to the
exercise of remedies under the Loan Documents, become the direct or indirect
owners of the Timberlands, at the request of the Lenders, Manager shall enter
into a new management agreement with the Lenders (or any such nominee) to
operate the Timberlands upon substantially same terms as provided herein,
except that (A) Manager shall provide the Lenders (or such nominee) with
consent, approval and other rights commensurate with such rights customarily
afforded to owners and their members in similar transactions, and (B)
[Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
2.4 BANK ACCOUNTS; INCOME AND EXPENSES. Manager shall maintain Pioneer's
bank accounts in accordance with the terms of the Loan Documents and shall
deposit receipts of operations and pay expenses from such accounts in
accordance with the terms of the Loan Documents.
2.5 LIMITATION OF DUTIES. Notwithstanding any other provision of this
Agreement or the Operating Agreement, Manager shall not at any time have the
obligation or responsibility to expend or risk its own funds in the conduct
of Pioneer's business or the discharge of Manager's duties hereunder, and
Manager may decline or omit to take any action involving expenditures
chargeable to Pioneer for which funds of Pioneer are not readily available.
However, Manager shall provide Pioneer with notice promptly after Manager
becomes aware of any potential shortage of available funds of Pioneer. Under
no circumstances shall Manager be responsible for the raising of additional
equity capital or the arranging of additional financing on behalf of Pioneer.
Manager shall not be required to act in its own name or for its own account
in conducting the affairs and business of Pioneer, and need act only in the
name of Pioneer, in such activity and in discharging its responsibilities
under this Agreement. Manager shall not be
<PAGE>
required to take any action or make any commitment that could, absent any
Misconduct of Manager, result in the personal liability or financial
obligation of Manager to any third party.
2.6 LIMITATION ON AUTHORITY WITH RESPECT TO THIS AGREEMENT AND TRANSACTIONS
WITH AFFILIATES. The Manager and Pioneer hereby expressly acknowledge that
Pioneer may not (and Manager shall not cause Pioneer to), without the prior
written consent of the Required Lenders (as defined in the Credit Agreement),
(a) change the compensation payable to Manager hereunder or otherwise amend,
supplement or otherwise modify this Agreement or the Operating Agreement in
any material respect, (b) waive any material provision of this Agreement, (c)
extend the term or terminate this Agreement, (d) consent to any assignment of
the rights or obligations of Manager under this Agreement, or assign any
rights or obligations under this Agreement, (e) (i) enter into any contract,
agreement or other arrangement with Manager (except as otherwise expressly
provided herein (including without limitation in Sections 4.3 and 4.4)), or
any affiliate of Manager or (ii) except in the ordinary course of business,
knowingly enter into any contract, agreement or other arrangement with any
direct or indirect owner of any portion of Pioneer or any entity controlling,
controlled by or under common control with any such direct or indirect owner,
(f) consent to the entering into of any contract under Sections 4.3 and 4.4
hereof for which Pioneer's consent is required, (g) consent to the entering
into of any contract under Section 5 hereof or (h) consent, pursuant to
Section 9 hereof, to the selection of any replacement Manager Mortgaged
Property (as defined in Section 9 below) or the arrangements with respect to
the establishment of the Cash Collateral Account (or any amendment of such
arrangements).
SECTION 3. ADMINISTRATIVE SERVICES.
3.1 GENERAL SERVICES. Manager shall manage, supervise, conduct and/or carry
out all of the business activities of Pioneer and provide such general
administrative and organizational services as shall be required by Pioneer's
assets and business (collectively, the "Administrative Services"). The
Administrative Services shall include, without limitation, administration of
the following: accounting, income tax accounting, financial reporting, filing
of any tax returns on behalf of Pioneer, capital expenditures, cash
management, collection of revenues, payment of expenses, public relations and
communications, legal matters, human resources, information services,
insurance pertaining to the assets and activities of Pioneer in accordance
with the terms of this Agreement, inventory of Pioneer's assets, estimate of
the aggregate value of Pioneer's assets and business, and other general and
administrative services necessary to manage and operate the business, affairs
and properties of Pioneer in accordance with the terms of this Agreement, the
Operating Agreement and, subject to the terms hereof, the Loan Documents. At
Pioneer's expense and for Pioneer's account, Manager may subcontract for,
oversee, and monitor the provision of Administrative Services of a type
which, in Manager's reasonable judgment (in light of the term of this
Agreement and the anticipated preparation of a disposition plan), a manager
of a business similar in size and nature to the business of Pioneer would not
typically personally perform.
3.2 OPERATIONS IN THE ABSENCE OF BUDGET APPROVAL. Prior to approval of any
forecast or budget for Pioneer in accordance with the terms of the Loan
Documents, Manager shall have the full power and authority to manage Pioneer
in accordance with its good faith exercise of its judgment and discretion
(and in a manner no less favorable to Pioneer than Pioneer's historical
<PAGE>
practice) to the same extent as it may pursuant to an approved forecast or
budget. To the extent Manager deems feasible in the good faith exercise of
its judgment and discretion, during a period in which there is no approved
forecast or budget for Pioneer, Manager shall seek to limit capital
expenditures and optional activities of Pioneer that require expenditure of
funds.
SECTION 4. TIMBERLAND SERVICES.
4.1 PROPERTIES UNDER MANAGEMENT. Manager shall manage and operate the
Timberlands in accordance with the terms of this Agreement.
4.2 PROPERTY MANAGEMENT SERVICES. With respect to the Timberlands,
Manager's primary duties and responsibilities include the following services
(collectively, the "Property Management Services"):
(a) Manager shall prepare and administer budgets for the Timberlands,
including without limitation, causing Pioneer to timely prepare and deliver
budgets and forecasts as required pursuant to the terms of the Loan Documents.
(b) Manager shall maintain regular surveillance of the Timberlands to
detect weather damage, fire damage, insect infestation and disease, timber
trespass or any other detrimental occurrences.
(c) Manager shall manage matters affecting ownership interests in and
obligations with respect to the Timberlands, including the land, Timber
(whether growing or harvested), minerals, other commercial uses, and related
matters such as unauthorized cuttings, trespass, entries, encroachments,
adverse possession claims, right-of-way disputes, or any disputes respecting
taxes, charges, or assessments associated with the Timberlands.
(d) Manager shall manage and administer the sale of all Timber and
Logs from the Timberlands. All such sales shall be made pursuant to timber
sale contracts or log sale contracts between Pioneer and the Timber or Log
buyer. Manager's services in connection with Timber or Log sales shall
include advertising, processing and handling bids, control of contract
compliance of Timber harvested, inspection of cutting and logging operations,
collection of scale tickets, accounting for all Timber and Logs sold, and the
following timber sale layout services: marking cutting lines, engineering and
marking roads, and obtaining necessary permits (surveying is not included).
Manager shall also conduct a credit check on each Timber or Log purchaser.
Manager shall collect and maintain log scaling data from log grading and
scaling bureaus.
(e) Manager shall manage and administer the sale of all minerals, oil,
rock, forest products and gravel from the Timberlands. All such sales shall
be directly between Pioneer and the buyer. Manager's services in connection
with the mineral, oil or gravel sales shall include, as appropriate, the
following services: obtaining valuation opinions from appropriate
consultants, advertising, processing and handling bids, oversight of contract
compliance, inspection of mining and gravel, mineral and oil removal and
extraction, collection of scale tickets, and accounting for such contracted
sales.
<PAGE>
(f) Manager shall monitor the activities of third parties who have a
fee, leasehold, license, mineral, or other interest in the Timberlands,
Timber, or Logs. Manager shall be responsible for processing all
documentation which is required or desirable with respect to the rights and
obligations of said third parties, including with respect to pipeline
easements; conditional and other land use permits, licenses, and
rights-of-way necessary for oil, gas or mineral exploration; permanent
easements; conservation easements; rights-of-way; and mineral or other
conveyances on behalf of Pioneer.
(g) Manager shall be responsible for administration of any hunting,
grazing, camping and other leases or licenses to which Pioneer is, or may
become, a party.
(h) Manager shall be responsible for administering, facilitating, and
monitoring all timberland management functions described in this Section 4.
(i) Manager shall maintain the property records supplied to it and
shall update them in accordance with activities occurring after the date of
this Agreement; provided, however, that Manager shall have no responsibility
for the accuracy, completeness or condition of the records received or for
changes occurring prior to the date of this Agreement not properly reflected
in the records, and Manager shall not be obligated to undertake any
comprehensive review to locate and correct errors in the records that Manager
receives.
(j) Manager shall be responsible for management of the property tax
records for each Timberland and, shall ensure that all taxes (including
without limitation ad valorem or other real property taxes, timber harvest
taxes, and personal property taxes) on the Timberlands are paid in a timely
manner. Manager shall ensure that all lease or other contractual payments
required to be made by Pioneer with respect to the Timberlands are made in a
timely manner.
(k) Manager shall develop a harvest strategy for the Timberlands,
including without limitation, determining whether an Option A plan for all or
a portion of the Timberlands located in California is appropriate or
desirable.
(l) Manager shall (i) subcontract for, oversee, and monitor the
provision of Additional Services and Optional Services in accordance with
Sections 4.3 and 4.4, (ii) solicit, receive and award suitable bids for
Additional Services and Optional Services, (iii) enter into, monitor and
enforce contracts for Additional Services and Optional Services, (iv) oversee
the completion of Additional Services and Optional Services and (v) oversee,
monitor and enforce any contract for disposition services entered into by
Pioneer and cooperate with any party engaged to perform such disposition
services.
(m) [Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
(n) Manager shall maintain existing and subsequently developed forest
inventory data, GIS data and land records.
(o) Manager shall provide an overall inventory assessment based on
existing data and assess any additional inventory needs.
<PAGE>
(p) Manager shall be responsible for such other property management
services typically personally performed by a property manager of timberlands
similar in size, nature and location to the Timberlands in light of the term
of this Agreement and the anticipated preparation of a disposition plan.
4.3 ADDITIONAL SERVICES. At Pioneer's expense and for Pioneer's account,
Manager shall subcontract for, oversee, and monitor the provision of
necessary or desirable contractual services of the type which, in Manager's
reasonable judgment (in light of the term of this Agreement and the
anticipated preparation of a disposition plan), a property manager of
property similar in size, nature and location to the Timberlands would not
typically personally perform (collectively, the "Additional Services").
Manager may not subcontract for Additional Services that are not within the
scope of the applicable approved forecast or budget without Pioneer's prior
consent. As set forth in Section 4.2(l) above, Manager's responsibilities
with respect to Additional Services shall include soliciting, receiving and
awarding suitable bids, entering into, monitoring and enforcing contracts in
conformity with budgetary allocations, and overseeing the completion of the
work to be performed. Although Manager's responsibility in connection with
Additional Services shall be as monitor and overseer in nature, Manager may
determine from time to time that it is more feasible or economical for
Manager or its affiliates to perform certain Additional Services; provided
however, that Pioneer's prior consent shall be required to permit Manager or
any affiliate of Manager to perform any Additional Services project which
Manager reasonably estimates will cost more than $75,000 to complete. In the
event that Manager or any affiliate of Manager, to the extent permitted
hereunder, shall perform such Additional Services, Pioneer shall pay Manager
for such Additional Services as additional fees at the billing rates set
forth in Exhibit 3 hereto pursuant to the terms of the form Professional
Services Agreement attached as Exhibit 4 hereto. Additional Services include,
without limitation, the following:
(a) Site preparation and planting.
(b) Road, bridge, gate and culvert construction and maintenance.
(c) Plowing and maintenance of firebreaks.
(d) Property boundary line maintenance (marking) and surveys.
(e) Vegetation management, chemical or mechanical.
(f) Prescribed burning.
(g) Hardwood control, chemical or mechanical.
(h) Insect and disease control.
(i) Aerial surveillance.
(j) Slash burning and fire suppression.
(k) Contract logging and trucking.
(l) Fertilization.
<PAGE>
(m) Stocking control.
(n) Animal control.
(o) Appraisals of mineral, oil, rock and gravel sales.
(p) Monitoring of oil and gas activities.
(q) Surveying for threatened and endangered species.
(r) Archeological or other specialized surveys outside the scope of
services customarily provided by professional timberland managers in the area
in question.
(s) Processing of harvesting or other permits, licenses, and
entitlements.
(t) Timber marking.
(u) California timber harvest plan preparation and implementation.
(v) Stream survey preparation.
(w) Road plan preparation.
(x) Habitat assessment preparation.
(y) All other subcontract work described in a budget or forecast for
which Pioneer has obtained approval in accordance with the terms of the Loan
Documents.
4.4 SPECIAL OPTIONAL SERVICES. In the event that Manager believes that
certain special services (collectively, the "Optional Services") are
necessary or desirable for the benefit of Pioneer, then such services may be
performed by Manager or under Manager's direction and supervision; provided
however that Pioneer's prior consent shall be required for any Optional
Services project which Manager reasonably estimates will cost more than
$75,000 to complete. Manager's fee with respect to Optional Services provided
by Manager shall be billed at the billing rates set forth in Exhibit 3 hereto
or as otherwise mutually agreed in writing between Pioneer and Manager. The
fee for Optional Services performed by parties other than Manager shall be as
agreed between Pioneer and such other parties. Optional services may include,
but are not limited to:
(a) Development and updating of long-term harvest modeling and
planning.
(b) Development of new forest inventory data or enhancement of current
forest inventory data.
(c) Development of new land record information or data and enhancement
of existing land record information or data
(d) Development of new GIS data or enhancement of existing GIS data.
(e) Timber cruising, appraisal, or other special evaluations.
<PAGE>
(f) Development of habitat conservation plans.
(g) Development of special regulatory implementation programs,
including without limitation the preparation, submission and implementation
of an Option A development plan in California, if applicable.
4.5 OPERATION AND MANAGEMENT RECORDS. Subject to Section 7.2 hereof with
respect to records received by Manager, Manager shall maintain full and
accurate records covering the operation and management of the Timberlands,
which records shall be sufficient to satisfy ordinary and necessary tax and
accounting reporting requirements, and the Reporting Requirements. Upon
termination of this Agreement, all records pertaining to the Timberlands and
the other assets and properties of Pioneer kept by Manager shall become or
remain the property of Pioneer and shall be turned over to Pioneer forthwith.
Any custom investment models or other custom computer software developed or
used by Manager shall be deemed the property of Manager, but any information
on such models relating to Pioneer or its business or properties shall be
turned over to, and become the property of, Pioneer. The reasonable costs
incurred by Manager in preparing and delivering such information shall be for
the account of Pioneer.
SECTION 5. DISPOSITION SERVICES. If Pioneer determines to sell some of its
Timberlands Pioneer may, but shall not have any obligation to, request the
assistance of Manager in connection with such sales. In the event that
Pioneer requests such assistance of Manager and Manager and Pioneer agree on
the scope of the services to be performed by Manager in connection with such
sales (the "Disposition Services") and the fees to be paid to Manager for its
performance of the Disposition Services (the "Disposition Fee"), Pioneer
shall engage Manager, and Manager shall agree, to provide the Disposition
Services, all in accordance with the terms of an amendment or supplement of
this Agreement. Manager shall comply with all applicable laws and
governmental regulations in carrying out Disposition Services, and Manager
may, if directed by Pioneer, engage qualified and licensed brokers and other
professionals in connection with the Disposition Services. [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission]
SECTION 6. CONFIDENTIALITY AND CONFLICTS OF INTEREST.
6.1 CONFIDENTIALITY. The parties acknowledge and agree that matters set
forth in this Agreement, and certain information that the parties obtain as a
result of this Agreement, are strictly confidential, and Pioneer and Manager
shall make every reasonable effort to ensure that, without the consent of
each of the parties hereto, the information contained herein or the
confidential information obtained as a result of this Agreement is not
disclosed to any other person or entity other than as required by law or the
Loan Documents (including without limitation, [Omitted Confidential Information
has been filed separately with the Securities and Exchange Commission]), or to
any person or entity who needs to know such information to carry out the
provisions of this Agreement. The provisions of this Section 6.1 shall not
limit the rights and obligations of Manager (including to disclose certain
otherwise confidential information which Manager reasonably determines would
not be detrimental to Pioneer to disclose) with respect to public relations
services to be performed in accordance with this Agreement. Notwithstanding
the foregoing, but without disclosure of the financial terms of its
management
<PAGE>
arrangement, ORM may disclose that it has been appointed the manager of
Pioneer and the scope of ORM's authority under this Agreement.
6.2 CONFLICTS OF INTEREST. Pioneer acknowledges that Manager is in the
business of acquiring, managing, and disposing of timberlands for its own
account and for the account of others as well as the business of forestry
consulting services, and is actively involved in the business of harvesting
and marketing timber, logs, timberlands and other products, in both the
domestic and export markets. Pioneer acknowledges that the markets for
Manager and affiliates and third parties for whom Manager acts may include
the same markets as those into which Pioneer may desire to sell its
Timberlands, Timber, and Logs. These activities of Manager may create a
conflict of interest with respect to the services which Manager is to provide
under this Agreement. Pioneer recognizes the existence of such conflict of
interest and acquiesces to it. Notwithstanding the foregoing, Manager agrees
that it will at all times act in good faith toward Pioneer with respect to
any such conflict or potential conflict in performing Manager's obligations
hereunder. Manager further agrees that, Manager, acting on its own behalf as
ORM, shall not (i) enter into any contract, agreement or other arrangement
with Pioneer (except as otherwise expressly provided herein (including
without limitation Sections 4.3 and 4.4 hereof)), or (ii) knowingly enter
into any contract, agreement or other arrangement with any affiliate of
Pioneer, any direct or indirect owner of any portion of Pioneer or any entity
controlling, controlled by, or under common control with, such direct or
indirect owner. This Agreement shall not otherwise limit or restrict in any
way Manager's ability to engage in timberland acquisition, management, or
disposition and/or the sale of logs and/or stumpage on its own behalf or on
behalf of others, or to engage in forestry consulting services on behalf of
any party, and, except to the extent expressly set forth in this Agreement,
Pioneer shall not assert that this Agreement or Manager's status as Manager
of Pioneer imposes limitations on Manager's ability to engage in activities
that are similar to and/or in competition with Pioneer. Further, in the
absence of Misconduct by Manager in the performance of Manager's duties under
this Agreement, Pioneer shall not assert at any time that any such activity
of Manager constitutes a breach of this Agreement and Manager shall not be
held liable for, or enjoined from, engaging in any competing activity or for
the manner in which such competing activity was conducted.
SECTION 7. INSURANCE, STANDARD OF PERFORMANCE, INDEMNITY.
7.1 INSURANCE AND BONDING.
(a) During the term of this Agreement, and subject to any additional
requirements which may be contained in the Loan Documents, Manager shall
maintain in full force and effect at least the following minimum levels of
insurance with carriers determined by Manager in the good faith exercise of
discretion to be financially stable insurance carriers:
(i) Manager shall maintain a policy of commercial general
liability insurance insuring Manager and Pioneer against any liability
for bodily injury or property damage claimed to have resulted from or
be in any way connected with Manager's operations under this Agreement,
in the minimum amount of $500,000 for each occurrence, $500,000 general
aggregate, plus umbrella coverage of $2,000,000. The premiums and other
costs of such
<PAGE>
general liability insurance shall be paid by ORM as a cost associated
with the operations of Manager under this Agreement.
(ii) Manager shall maintain on behalf of Pioneer and at
Pioneer's expense a policy of automobile liability insurance, including
coverage for scheduled autos, hired autos and non-owned autos, insuring
Manager and Pioneer against any liability for bodily injury or property
damage claimed to have resulted from or be in any way connected with
Manager's operations under this Agreement, in the minimum of $1,000,000
for bodily injury per accident and $500,000 for property damage.
(iii) Manager shall maintain on behalf of Pioneer and at
Pioneer's expense Workers' Compensation Liability coverages as required
by law and Employer's Liability Insurance in the amount of $500,000.
Said policies shall contain a provision under which the insurer waives
any right of subrogation as against Pioneer and their respective agents
or employees, to the full extent allowed by law.
Manager may also acquire and maintain insurance and bonding on behalf of
Pioneer and at Pioneer's expense such other and additional insurance and
bonding as it shall deem prudent and appropriate.
(b) Manager shall require and use reasonable efforts to verify that
all contractors or subcontractors hired to perform any work relating to the
Timberlands acquire and maintain the following insurance requirements,
provided, that Pioneer hereby authorizes Manager, of its own volition and in
the exercise of good-faith discretion, to waive or adjust such insurance
requirements as Manager deems appropriate:
(i) Contractors or subcontractors shall maintain a policy
of commercial general liability insurance insuring contractor or
subcontractor, as the case may be, and Pioneer and Manager against
liability for bodily injury or property damage claimed to have resulted
from or be in any way connected with contractor's or subcontractor's
operations under this Agreement, in the minimum amount of $500,000 for
each occurrence and $1,000,000 general aggregate. The premiums and
other costs of such general liability insurance shall be paid for by
the contractor or subcontractor as a cost associated with their
operations. All other insurance required under this Section 7.1(b)
shall also be the obligation of contractor or subcontractor and shall
be paid for by contractor or subcontractor.
(ii) Contractors or subcontractors shall maintain a policy
of automobile liability insurance, including coverage for scheduled
autos, hired autos and non-owned autos, insuring contractor or
subcontractor and Pioneer and Manager against any liability for bodily
injury or property damage claimed to have resulted from or be in any
way connected with contractor's or subcontractor's operations as
contemplated by this Agreement, in the minimum of $500,000 for bodily
injury per accident and $250,000 for property damage.
(iii) Contractors or subcontractors shall maintain Workers'
Compensation Liability coverages as required by law and Employer's
Liability Insurance in the amount of
<PAGE>
$500,000. Said policies shall contain a provision under which the
insurer waives any right of subrogation as against Pioneer and its
employees and Manager and its employees.
(c) During the term of this Agreement, Manager may also acquire and
maintain, at Pioneer's expense, a policy of insurance insuring Manager and
Pioneer against any liability on account of errors and omissions by Manager,
which policy shall provide such coverage as is reasonably acceptable to
Manager, but in no event shall the cost of any such policy exceed $60,000 per
year; PROVIDED that Manager may also acquire and maintain, at Pioneer's
expense, "tall" coverage on such policy that extends beyond the term of this
Agreement, but in no event shall the cost to Pioneer of any such "tail"
coverage exceed $30,000.
7.2 LIMITATION OF LIABILITY. Notwithstanding any other provision of this
Agreement, Manager shall have no liability to Pioneer, the Member or the
Lenders (as intended third party beneficiaries of this Agreement) for a
breach of this Agreement or otherwise with respect to its management of the
business, affairs and properties of Pioneer pursuant to this Agreement or the
Operating Agreement except to the extent resulting from the Misconduct of
Manager. Manager shall have no liability or responsibility for any acts or
omissions of Pioneer or any prior manager of Pioneer, or any circumstances
applicable to Pioneer, in each case that occurred or existed prior to the
date of this Agreement; provided however that, subject to the limitations on
its liabilities set forth in this Section 7.2, Manager's duties under this
Agreement shall be applicable to any such situation after Manager becomes
aware thereof. Manager shall not be responsible for the condition of any
records or other information maintained by Pioneer prior to the date of this
Agreement and, further, shall have no responsibility or liability for errors,
omissions, or other failures, shortcomings, or defaults in the management and
administration of the business and affairs of Pioneer that result in whole or
in part from the inaccuracy, inadequacy, or other deficiency in the records
or other information received by Manager from Pioneer, the prior manager,
and/or any other party unless, subject to the limitations on its liabilities
set forth in this Section 7.2, Manager discovered, or was notified of, such
errors, omissions, failures, shortcomings or defaults. Manager shall be
justified in reliance on the provisions of Section 2.5 as a basis for
refusing or failing to take action on behalf of Pioneer and shall not be
subject to liability to any party for any such refusal or failure.
7.3 INDEMNITY. (a) To the maximum extent permitted by law, Pioneer shall
indemnify and hold harmless Manager and every employee, officer, director,
shareholder, partner, member and agent of Manager from and against any and
all claims, demands, liabilities, judgments, settlements, penalties, fines,
or expenses (including reasonable attorneys' fees and other costs)
(collectively, "Manager Claims") suffered or incurred in any manner directly
or indirectly as a result of Manager's status as Manager or performance in
the role of Manager pursuant to this Agreement or the Operating Agreement,
including performance of any and all activities conducted in the exercise of
Manager's authority and the discharge of Manager's responsibilities under
this Agreement and the Operating Agreement, except if resulting from the
Misconduct of Manager (including of any employee, officer, director,
shareholder, partner, member or agent of Manager); provided, this
indemnification of the employees, officers, directors, shareholders,
partners, members and agents of Manager shall not be applicable to any claim
asserted or proceeding maintained by Manager against any such person. This
indemnification and hold harmless commitment of Pioneer shall include as a
separate obligation the commitment of Pioneer to pay all
<PAGE>
of the expenses (including reasonable attorneys' fees and other costs)
incurred by Manager and any employee, officer, director, shareholder,
partner, member and agent of Manger in any proceeding for Manager Claims as
incurred and in advance of the final disposition of such proceeding (and
despite any allegation of the Misconduct of Manager or any such other party),
provided such indemnified party commits in writing to reimburse Pioneer for
the amounts Pioneer has paid to such indemnified party under this sentence if
a court of competent jurisdiction determines in a final, non-appealable
judgment that such Manager Claims are a result of the Misconduct of Manager
(including of any employee, officer, director, shareholder, partner, member
or agent of Manager), and thus, such indemnified party was not entitled to
indemnification hereunder.
(b) To the maximum extent permitted by law, Manager shall indemnify
and hold harmless Pioneer and every employee, officer, director, shareholder,
partner, member and agent of Pioneer from and against any and all claims,
demands, liabilities, judgments, settlements, penalties, fines, or expenses
(including reasonable attorneys' fees and other costs) (collectively,
"Pioneer Claims") suffered or incurred in any manner directly or indirectly
as a result of the Misconduct of Manager (including of any employee, officer,
director, shareholder, partner, member or agent of Manager).
SECTION 8. TERM AND TERMINATION.
8.1 TERM. [Omitted Confidential Information has been filed separately with
the Securities and Exchange Commission]
8.2 TERMINATION OF MANAGER. (a) Subject to the required consent under the
Loan Documents, Pioneer may terminate this Agreement and Manager's rights and
obligations hereunder at any time and for any reason whatsoever upon no less
than 10 days prior written notice to Manager; provided that in the event of a
Termination For Cause, no advance notice to Manager shall be required and
this Agreement shall terminate when directed by Pioneer.
(b) [Omitted Confidential Information has been filed separately
with the Securities and Exchange Commission]
(c) [Omitted Confidential Information has been filed separately
with the Securities and Exchange Commission]
8.3 TERMINATION BY MANAGER. In the event that, (i) as a result of a
shortage of funds available to Pioneer (after consideration of any amounts on
deposit in the Cash Collateral Account, but without consideration of [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission]), Pioneer fails to pay to Manager any due and payable
Fees, fees for Additional Services or fees for Optional Services, in each
case within 45 days after Pioneer has received notice of such failure, and
(ii) Manager is not in default of its obligations under this Agreement,
Manager may terminate this Agreement and resign as Manager, [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission] and all other Fees and other fees, charges and
reimbursements due and payable hereunder at the time of such termination.
Except as expressly provided in this Section 8.3,
<PAGE>
Manager shall not be entitled to terminate this Agreement or resign as
Manager at any time prior to the Termination Date.
8.4 OBLIGATIONS FOLLOWING TERMINATION. Upon the expiration or termination
of this Agreement for any reason whatsoever, Manager shall do, execute and/or
deliver to Pioneer the following promptly after termination or as soon
thereafter as reasonably practicable:
(a) a final accounting of the business of Pioneer during the period
from the date hereof through the date of termination;
(b) any monies of Pioneer held by Pioneer or Manager;
(c) all books, records, contracts, leases, bills, papers and documents
of Pioneer and its business;
(d) all documents necessary to transfer to Pioneer all licenses,
permits, leases, contracts, warranties and other items, instruments and
agreements of Pioneer or its business or properties which may be in Manager's
name; and
(e) such further actions as Pioneer may reasonably request to assure
an orderly transition of the business, affairs and properties of Pioneer.
The reasonable costs incurred by Manager in performing the foregoing
obligations in this Section 8.4 shall be for the account of Pioneer.
SECTION 9. SENIOR LIEN FOR PIONEER SECURED OBLIGATIONS. For purposes of this
Agreement and this Section 9, the following terms shall have the following
meanings:
"CASH COLLATERAL ACCOUNT" has the meaning set forth in Section 9(b)
below.
"FEE RELEASE DATE" means the date on which all Pioneer Secured Fee
Obligations are paid in full.
"INDEMNITY RELEASE DATE" means the first anniversary of the date of
termination of this Agreement, unless written notice of potential indemnity
obligations under Section 7.3(a) hereof (together with a copy of a third
party lawsuit or threatened claim) has been delivered by Manager to Pioneer
on or prior to such first anniversary, in which case the Indemnity Release
Date shall be the date upon which the claims against Manager giving rise to
the potential indemnity obligations referenced in any such notice are
dismissed or resolved entirely in the Manager's favor by final judgment(s)
(after expiration of all applicable appeal periods), or such indemnity
obligations are paid to Manager up to the amount of the Pioneer Secured
Indemnity Obligations on the date of such payment
"MANAGER MORTGAGE" means a deed of trust or mortgage in favor of
Manager, substantially in the form attached hereto as Exhibit 5 (including
any replacement mortgage referenced in Section 9(b) below) encumbering the
Manager Mortgaged Property,
<PAGE>
"MANAGER MORTGAGED PROPERTY" means certain real property owned by
Pioneer and located in the State of California, and constituting a portion of
the property commonly known as "Commander" tract, which shall be encumbered
by the Manager Mortgage pursuant to Section 9(a) below, or upon any sale or
other disposition of such property, any other real property owned by Pioneer
which may be substituted therefor and encumbered by the Manager Mortgage
pursuant to such Section 9(b) below.
"PIONEER SECURED FEE OBLIGATIONS" means (without duplication) the
collective reference to Pioneer's obligations to the Manager under, and in
accordance with the terms of, this Agreement on account of (i) all accrued
and unpaid Fees (including the Termination Fee if applicable), (ii) any
amounts to be (but not yet) billed to Pioneer for services performed by
Manager pursuant to Sections 4.3 or 4.4 and, to the extent applicable,
Section 5 hereof, and (iii) all other fees, charges and reimbursements from
time to time payable by Pioneer to Manager.
"PIONEER SECURED INDEMNITY OBLIGATIONS" means, as determined from time
to time, Pioneer's indemnity obligations to Manager under Section 7.3(a)
hereof up to an amount which shall not exceed (i) prior to the first
anniversary of the date of termination of this Agreement, [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission], and (ii) after such date, the lesser of (A) [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission] and (B) an amount equal to Manager's reasonable estimate
of Pioneer's potential indemnity obligations owing to Manager in respect of
the claims or other matters described in the notice(s) delivered by Manager
to Pioneer as contemplated by the definition of "Indemnity Release Date."
"PIONEER SECURED OBLIGATIONS" means the collective reference to the
Pioneer Secured Fee Obligations and the Pioneer Secured Indemnity Obligations.
"PIONEER SECURED OBLIGATIONS AMOUNT" means, as of the date of
determination thereof, an amount reasonably determined by Manager to be equal
to the sum (without duplication) of (i) the Pioneer Secured Fee Obligations
as of such date, (ii) the aggregate amount of all Incentive Fees which may
become payable to Manager after such date, (iii) the maximum potential amount
of Pioneer Secured Indemnity Obligations as of such date, and (iv) the
aggregate amount of all Base Fees scheduled to accrue after such date.
"RELEASE DATE" means the later of (i) the Fee Release Date and (ii) the
Indemnity Release Date.
(a) In order to secure the full and timely payment of the Pioneer
Secured Obligations, Pioneer shall execute and deliver to Manager, on or
within 10 days after the date hereof, a Manager Mortgage encumbering the
Manager Mortgaged Property. Pioneer shall pay the cost of the preparation and
recording of the Manager Mortgage and provide at its sole cost a standard
form mortgagee's title policy in respect thereof in the amount of the Pioneer
Secured Obligations Amount as of the date of the Manager Mortgage and
otherwise insuring the lien of the Manager Mortgage subject only to such
title exceptions (and with endorsements) as may be in form and substance
reasonably satisfactory to Manager.
<PAGE>
(b) In connection with any sale or other disposition of the Manager
Mortgaged Property prior to the Release Date, the net cash proceeds thereof
shall be paid to Manager to the extent of any Pioneer Secured Obligations
then due and payable. In addition, on or prior to the consummation of any
sale or other disposition of the Manager Mortgaged Property, Pioneer shall
execute and deliver to Manager, in substitution and replacement of the
initial Manager Mortgage, a new Manager Mortgage (substantially in the form
of the initial Manager Mortgage, and with the payment by Pioneer of the costs
of preparation, recording and title insurance obtained in respect thereof in
the manner set forth in paragraph (a) above) covering a new Manager Mortgaged
Property selected by Manager and Pioneer and which, in the reasonable
judgment of Manager, has a value equal to or greater than the Pioneer Secured
Obligations Amount at such time; provided that if the Manager reasonably
determines that Pioneer's then remaining real property does not have a value
equal to or greater than the Pioneer Secured Obligations Amount at such time
(or if Manager and Pioneer are unable to agree on the selection of a new
Manager Mortgaged Property), then the net cash proceeds from the sale or
other disposition of the existing Manager Mortgaged Property (remaining after
payment of any Pioneer Secured Obligations then due and payable) shall be
deposited by Manager into a cash collateral account (the "CASH COLLATERAL
ACCOUNT"), pursuant to customary cash collateral arrangements reasonably
satisfactory to Manager and Pioneer, to secure first, the Pioneer Secured
Obligations and second, the Obligations (as defined in the Credit Agreement).
(c) To the extent that, on any determination date, the amount on
deposit in the Cash Collateral Account exceeds the Pioneer Secured
Obligations Amount on such date (which determination will be made on the date
of the funding of the Cash Collateral Account, from time to time thereafter
(no less often than monthly), and on the Fee Release Date and the Indemnity
Release Date), Manager and Pioneer will transfer the amount of any such
excess to the administrative agent under the Credit Agreement for application
in accordance with the terms thereof. If Pioneer fails to pay any of the
Pioneer Secured Obligations when due, and such failure continues unremedied
for 30 days following written notice thereof to Pioneer, Manager shall be
entitled to immediately withdraw such amount from the Cash Collateral Account
and apply it to the payment of such unpaid amount of the Pioneer Secured
Obligations.
(d) Pioneer and Manager acknowledge that [Omitted Confidential
Information has been filed separately with the Securities and Exchange
Commission] (and the related lien Subordination Agreement in recordable form
to be executed by the Lenders in respect of any Manager Mortgage) will
evidence the agreement of the Lenders that (i) any Manager Mortgage (and, if
applicable, the Manager's lien on the Cash Collateral Account) shall be
senior and shall have priority over any mortgage or deed of trust in favor of
the Lenders encumbering the Manager Mortgaged Property (and, if applicable,
the Lenders' lien on the Cash Collateral Account) regardless of the time or
order of recording of any Manager Mortgage, the execution or delivery of any
security agreement or any other applicable law or rule for determining the
relative priorities of secured creditors and (ii) the Lenders will not
exercise any remedies against the Cash Collateral Account until after the
Release Date. In the event that the Lenders subordinate, pursuant to clause
(ii) of Section 13.3 of the Credit Agreement, their lien on the Manager
Mortgaged Property to easements, possessory rights, cutting rights or
permitted sales of stumpage and timber rights, the lien of the Manager
Mortgage shall be automatically subordinated to such matters, and Manager
shall execute such subordination documents reasonably requested
<PAGE>
by Pioneer or the Lenders to evidence such subordination. On the Release
Date, the lien of the Manager Mortgage and any security interest of the
Manager in the Cash Collateral Account shall be deemed to have been released,
provided, however, that the lien shall be reinstated automatically at the
time, and to the extent, that any Pioneer Secured Obligations which have been
paid to Manager are recovered from Manager as a result of an action in
bankruptcy.
(e) Subject to Manager's prior and superior rights to receive payment
of the Pioneer Secured Obligations from the net cash proceeds of any sale or
other disposition of the Manager Mortgaged Property, Manager acknowledges and
agrees solely for the benefit of the Lenders that (i) Manager shall not take
any action to enforce any Manager Mortgage or otherwise exercise any right or
remedy in respect thereof, including without limitation, any judicial,
nonjudicial or similar proceedings unless Pioneer fails to pay any Pioneer
Secured Obligations when due and such failure continues unremedied for at
least twelve months following written notice thereof to Pioneer and the
administrative agent under the Credit Agreement and (ii) as between Manager
and the Lenders, the Lenders shall have the sole right to consent to any
proposed sale or other disposition of any Manager Mortgaged Property, whether
at private sale or pursuant to foreclosure, bankruptcy or other judicial or
non-judicial proceedings (provided that the Lenders' consent shall not be
required in connection with any sale pursuant to a foreclosure proceeding
commenced by Manager in respect of the Manager Mortgaged Property), and
Manager shall be deemed to have consented to any such sale or other
disposition and the Manager Mortgage shall be automatically extinguished upon
such sale or other disposition so long as (A) the Lenders have consented
thereto in accordance with the terms of the Loan Documents; and (B) the net
cash proceeds thereof are applied first to pay any Pioneer Secured
Obligations then due and payable.
SECTION 10. NOTICES. All notices required or permitted under this Agreement
shall be in writing and shall be effective at the earlier of the time when
actually received by the other party, regardless of the method of delivery,
or one (1) day after mailing if by reputable overnight courier or three (3)
days after mailing if by certified United States mail, to the parties at the
following addresses (or to such other addresses as either party may designate
from time to time in a writing delivered to the other):
AS TO PIONEER: Pioneer Resources, LLC
c/o Olympic Resource Management LLC, its Manager
19245 Tenth Avenue NE
P. O. Box 1780
Poulsbo, Washington 98370
Attention: Senior Vice President-Finance
AS TO MANAGER: Olympic Resource Management LLC
19245 Tenth Avenue NE
P. O. Box 1780
Poulsbo, Washington 98370
Attention: Senior Vice President-Finance
<PAGE>
In the event that the last day for giving any notice hereunder falls upon a
Sunday or legal holiday, the last day shall be deemed to be the next business
day which is neither a Sunday nor a legal holiday. Any party may change its
notice address by notice to all of the parties hereto pursuant to this
Agreement. For so long as the Loan Documents remain in effect, no notice
hereunder shall be deemed delivered or received by any party hereto unless
such notice has also been delivered to First Union National Bank, as
administrative agent under the Credit Agreement, in the manner specified in
this Section 10 for notices to the parties, at the following address: First
Union National Bank, 301 South College Street, 5th Floor, Charlotte, North
Carolina 28288-0737, Attention: Scott Santa Cruz and Tom Cambern.
SECTION 11. TITLE TO TIMBERLANDS AND TIMBER. Manager shall not by reason of
this Agreement acquire title to the Timberlands or any Timberland or any
timber or other asset associated therewith.
SECTION 12. MISCELLANEOUS.
12.1 This Agreement shall be governed by the laws of the State of Delaware,
without regard to principles of conflicts of law thereof.
12.2 This Agreement shall be binding upon the parties hereto and their
successors and permitted assigns.
12.3 Neither party may assign this Agreement or any part thereof without
the express written consent of the other party, which consent shall not be
unreasonably withheld.
12.4 This Agreement may not be changed orally but may only be modified by
an Agreement in writing executed by the parties hereto.
12.5 The headings in this Agreement are for purposes of reference only and
shall not limit or define the meaning of this Agreement.
12.6 If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of the other terms of this Agreement shall in no
way be affected thereby.
12.7 This Agreement and the Operating Agreement constitute the entire
Agreement between Pioneer and Manager and supersede (i) all previous
agreements between Pioneer and Manager relating to the subject matter hereof,
and (ii) all prior drafts of and negotiations relating to this Agreement.
This Agreement may be executed in any number of counterparts, each of which
shall be an original but all of which together shall constitute but one
instrument.
12.8 In the event legal action shall be commenced by either party to
enforce or interpret the provisions of this Agreement, the parties agree that
venue shall lie exclusively in the state and federal courts located in King
County, Washington, and that such action must be brought in such courts. Each
party hereby irrevocably submits and consents to the personal jurisdiction of
such courts.
<PAGE>
12.9 In the event of any conflict between the provisions of this Agreement
and the Operating Agreement, the terms of this Agreement shall control.
SECTION 13. NON-DISCRIMINATION. During the term of this Agreement, Manager
shall not unlawfully discriminate against any employee or applicant for
employment because of race, religion, color, national origin, ancestry,
physical handicap, medical condition, marital status, age, or sex.
SECTION 14. THIRD PARTY BENEFICIARY. The Manager and Pioneer acknowledge and
agree that the Lenders shall be and are intended third party beneficiaries of
this Agreement. The Manager and Pioneer hereby further acknowledge and agree
that all of the rights of Pioneer under this Agreement constitute Contract
Rights (as defined in the applicable Loan Documents) and, therefore, all such
rights are subject to being exercised by the Lenders at the times and in the
manner set forth in the Loan Documents.
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of the date first written above.
PIONEER RESOURCES I, LLC, OLYMPIC RESOURCE MANAGEMENT LLC,
a Delaware limited liability company a Washington limited liability
company
By: Strategic Timber Partners II, LP, By: /s/ Gary F. Tucker
its sole member ---------------------------
Gary F. Tucker
Its President & Chief
Executive Officer
By: Strategic Timber Two Operating Co., LLC,
a Georgia limited liability company,
its general partner
By: Strategic Timber Trust II, LLC, a Georgia
limited liability company, its sole member
By: /s/
-------------------------
Name:
Its:
<PAGE>
EXHIBIT A
WORK AUTHORIZATION
1. PROFESSIONAL SERVICES AGREEMENT.
This Work Authorization Number ___________ is issued pursuant to
the Professional Services Agreement between Olympic Resource
Management LLC ("Contractor") and Pioneer Resources I, LLC
("Company") dated as of _____________, 2000.
2. EFFECTIVE DATE OF THIS WORK AUTHORIZATION.
This Work Authorization is effective upon execution by both parties.
3. REFERENCE TITLE FOR SERVICES UNDER THIS WORK AUTHORIZATION.
The reference title for Services under this Work Authorization is
______________.
4. SERVICES TO BE PERFORMED:
5. DELIVERABLES AND SCHEDULE OF PERFORMANCE.
Detailed descriptions of the deliverables for the Services performed
under this Work Authorization are set forth below:
6. COMPENSATION AND PAYMENT SCHEDULE FOR SERVICES:
7. ACCEPTANCE CRITERIA.
The Acceptance Criteria that will be used to determine if the
Contractor has satisfactorily delivered the specified Deliverables are
set forth below:
8. CHANGES.
Any amendment or modification of this Work Authorization shall be
agreed in writing by both parties ("Change Order").
Agreed to and accepted by:
COMPANY CONTRACTOR
Pioneer Resources I, LLC Olympic Resource Management LLC
By By
----------------------------- ----------------------------
Title Title
-------------------------- -------------------------
Date Date
--------------------------- --------------------------
<PAGE>
EXHIBIT 1
PIONEER PROPERTY DESCRIPTION
A. FEE OWNERSHIP
The major portion of the Subject Property is located within the
following Geographic areas: eastern Oregon, western Washington, and
northern California. A brief description of each of the various
timberland tracts within these general areas is as follows:
EASTERN OREGON
KINZUA
This timberland is generally located south of the towns of Heppner and
Condon, primarily in Wheeler and Morrow Counties. Pioneer currently owns an
estimated 116,554 acres. The Kinzua property has been divided into three
tracts as follows: (1) Block 2; 60,491 acres; (2) Block 3; 41,112 acres; and
(3) Johnson Creek; 14,951 acres.
PILOT ROCK
This property is approximately 92,000 acres. The tract is located in
Umatilla, Grant and union Counties, south of Pendleton on both sides of
Highway 395. The Pilot Rock Block has been divided into eleven tracts as
follows: Brush Creek, Buckaroo, Desolation, Elk Grove, Indian Creek, Ritter,
Texas Bar, River, Tip Top, Ukiah, and Wilkins.
ROGABELL TRACT
This property is 5,804 acres in size and is locate din Wheeler County,
approximately 20 miles southeast of the town of Fossil. The parcel is
continuous with Kinzua Block 2.
BLAKE RANCH
The Blake Ranch contains 1,523 acres and is located in Morrow County, Oregon.
BAPTIST
The Baptist tract is 280 acres in size and is located in Walla Walla County,
Washington. It is the only Pioneer property located in southeastern
Washington.
BURNS RANCH
The ranch is located in Morrow County, Oregon, and approximately 20 miles
south of Heppner and adjoins Pioneers ownership in Kinzua Block 3. The
property contains 4,552 acres located in two main blocks and five additional
closely separated parcels.
WESTERN WASHINGTON
RIFFE LAKE
The Riffe Lake tract is 4,900 acres in size and is located in Lewis County,
Washington, approximately five to eight miles south of the town of Morton. It
is also just south of Riffe Lake, a reservoir on the Cowlitz River.
ALOHA TRACT
The Aloha tract is 5,777 acres in size and is located in the northwest of
Aberdeen in Grays Harbor County, Washington. All the property lies within
five miles of the Pacific Ocean.
NORTHERN CALIFORNIA
COMMANDER
The 43,313 acre Commander tract is locate din the Mendocino Mountains of the
coast range and is divided into three administrative blocks. The southern
block is located primarily in Glenn County, however, there is a minor amount
in Lake County to the south and Mendocino County to the west. The south block
is relatively contiguous and generally surrounded by National Forest
(Mendocino N.F.). The central block is a narrow band of scattered parcels
located primarily in Tehama County and is also nearly surrounded by national
forest land. The northern tract is in Tehama County, is comprised of small
contiguous units and scattered parcels. The northwestern corner of the block
is adjacent
<PAGE>
to the Yolla Bolla Middle Eel Wilderness area. Much of this block is also
bordered by National Forest. However, the northern portion is bordered by
other private land, primarily that of Crane Mills Co.
WILLITS WOODS/WILLIAMS RANCH
The Willits Woods and Williams Ranch tracts are locate din Mendocino County,
California southwest of the town of Willits. The two tracts contain a total
of 18,718 acres.
LONGVIEW
The Longview tract is located in Mendocino and Sonoma Counties, California,
generally west of the town of Cloverdale. The tract contains a total of
60,308 acres.
B. TIMBER DEEDS
The subject appraisal includes 7 timber deeds.
All the deeded timber is located in Eastern Oregon with the exception
of the Lucas deed, which located in Walla Walla County, Washington. The
largest of the deeds, Cherry Ranch, is approximately 20,655 acres in
size. The ranch is located in Wheeler County south of Fossil, Oregon.
The Murray Howard parcel is located wet of the Cherry Ranch tract. The
termination dates for several of the timber deeds are listed below:
<TABLE>
<S> <C>
Dean Forth 10/31/2011
Seeger Ranch 12/31/2018
Catherine Cr. 12/31/2018
Devin/Harvey 12/31/2047
</TABLE>
The termination dates for the others are unknown.
<PAGE>
EXHIBIT 2
[Omitted Confidential Information has been filed separately with the
Securities and Exchange Commission]
<PAGE>
EXHIBIT 3
ORM BILLING RATES FOR PIONEER RESOURCES, LLC
1. COMPENSATION FOR TIME:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
POSITION CLASS HOURLY BILLING RATE
- -------------------------------------------------------------------------------------------------------
<S> <C>
Clerk I/Technician I [Omitted Confidential Information has
Clerk II/Technician II been filed separately with the
Clerk III/Technician III Securities and Exchange Commission]
Clerk IV/Technician IV/Admin Assistant I
Clerk V/Technician V/Admin Assistant II
Exec Assistant I/Technician VI/Professional I
Technician VII/Professional II
Professional III/Manager I
Professional IV/Manager II
Professional V/Manager III
Professional VI/Manager IV
Professional VII/Manager V
Professional VIII/Manager VI
Manager VII
Executive
- -------------------------------------------------------------------------------------------------------
</TABLE>
2. COMPENSATION FOR COSTS OF MATERIALS AND CONTRACTED SERVICES OTHER THAN
WORK CONTRACTED OUT THROUGH A BID PROCESS: 1.2 times actual cost
3. MILEAGE CHARGES: $0.325 per mile
4. WORK CONTRACTED OUT THROUGH A BID PROCESS: 1.0 times actual cost
<PAGE>
EXHIBIT 4
PROFESSIONAL SERVICES AGREEMENT
This AGREEMENT FOR PROFESSIONAL SERVICES ("Agreement") made and entered into
this day _____________ of______________ , 2000, is between PIONEER RESOURCES
I, LLC, a Delaware limited liability company ("COMPANY") and OLYMPIC RESOURCE
MANAGEMENT LLC, a Washington limited liability company ("CONTRACTOR").
COMPANY and CONTRACTOR agree as follows:
1. SERVICES. CONTRACTOR is currently the manager of the COMPANY pursuant
to a Management Agreement, dated ______________, 2000 (the "Management
Agreement"). Pursuant and subject to the Management Agreement,
CONTRACTOR may from time-to-time provide Additional Services and/or
Optional Services as defined therein ("Services"). During the term
of this Agreement, CONTRACTOR shall make itself available to perform
the Services in accordance with executed Work Authorizations entered
into from time-to-time, which Work Authorizations shall be in the
form attached hereto as Exhibit A and incorporated herein by
reference ("Work Authorization"). Rates charged for services shall
be as set forth in the applicable Work Authorization or, if
applicable, in accordance with the rate schedule attached to the
Management Agreement as Exhibit 3 ("Rate Schedule"), if applicable.
The rates shown on the Rate Schedule shall apply, without change,
for the term of this Agreement unless otherwise specifically
provided in this Agreement. All requests for services shall be
accompanied by a completed and executed Work Authorization. Upon
execution by both parties, each Work Authorization shall be deemed
incorporated herein by reference.
2. TERM. CONTRACTOR shall make itself available to perform the Services
for a period commencing on the date this Agreement is executed by both
parties and ending on the date that the Management Agreement is
terminated, unless extended in writing by mutual agreement of the
parties or terminated as provided herein. COMPANY may terminate this
Agreement at any time, with or without cause, upon three (3) business
days advance written notice to CONTRACTOR. Upon termination, COMPANY
shall not be obligated to CONTRACTOR, its successors or assigns, for
any payment hereunder other than for services actually performed or
authorized expenses incurred prior to the date of termination.
3. PAYMENT. Payment for services and expenses shall be in accordance with
the applicable Work Authorization.
4. TRAVEL AND MISCELLANEOUS EXPENSES. CONTRACTOR will be reimbursed by
COMPANY for reasonable travel expenses incurred directly in connection
with the performance of Services only to the extent that all such
travel expenses have been approved in advance by COMPANY or the travel
expenses are provided for in the Work Authorization. CONTRACTOR shall
provide COMPANY with a detailed monthly statement of travel and
miscellaneous expenses incurred.
5. INDEPENDENT CONTRACTOR. CONTRACTOR, in performing the services pursuant
to this Agreement, shall act solely as an independent contractor.
CONTRACTOR, and any employees or agents of CONTRACTOR, shall under no
circumstances be treated as, or deemed to be, employees of COMPANY.
Nothing in this Agreement shall be construed to create a partnership,
agency, joint venture or employer-employee relationship between the
parties. CONTRACTOR understands that COMPANY has no federal, state, or
local obligations regarding employee liability or insurance or
otherwise with respect to CONTRACTOR's employees.
6. TAXES. CONTRACTOR shall be responsible for and pay all costs associated
with governmental compliance of its business, including, but not
limited to, city, county, state or federal licenses, permits, taxes or
assessments of any kind. CONTRACTOR shall be responsible for payment of
its income taxes, employment taxes and employee withholding, Social
Security taxes and workers' compensation premiums. CONTRACTOR shall
indemnify COMPANY and hold it harmless from paying such business costs
or taxes.
7. COMPLIANCE WITH LAW. In the event that rendition of the Services
provided for herein requires CONTRACTOR to be located at facilities of
COMPANY, CONTRACTOR shall comply with all applicable federal or state
laws and regulatory requirements and all safety and health regulations
prescribed
<PAGE>
by COMPANY for its own personnel. CONTRACTOR shall comply with all
applicable federal, state and local laws and regulations with regard
to the services rendered hereunder.
8. NOTICES. All notices authorized or required to be given hereunder shall
be in writing and shall be deemed effective when delivered to the
parties as follows:
COMPANY: Pioneer Resources I, LLC
c/o Olympic Resource Management LLC
19245 Tenth Avenue NE
P.O. Box 1780
Poulsbo, Washington 98370
Attention: Senior Vice President - Finance
CONTRACTOR: Olympic Resource Management LLC
19245 Tenth Avenue NE
P.O. Box 1780
Poulsbo, Washington 98370
Attention: Senior Vice President - Finance
In the event that the last day for giving any notice hereunder falls
upon a Sunday or legal holiday, the last day shall be deemed to be the
next business day which is neither a Sunday nor a legal holiday. Any
party may change its notice address by notice to all of the parties
hereto pursuant to this Agreement. For so long as the Management
Agreement remains in effect, no notice hereunder shall be deemed
delivered or received by any party hereto unless such notice has also
been received by First Union National Bank, 301 South College Street,
5th Floor, Charlotte, North Carolina 28288-0737, Attention: Scott Santa
Cruz and Tom Cambern.
9. SEVERABILITY. If any provision of this Agreement is invalid or
unenforceable by a court of competent jurisdiction, such invalidity or
unenforceability shall not affect any other provision of this
Agreement.
10. GOVERNING LAW AND VENUE. This Agreement shall be interpreted in
accordance with Delaware law. Venue for any litigation shall be the
Superior Court of King County, Washington.
11. ENTIRE AGREEMENT. This Agreement, including executed Work
Authorizations, constitutes the entire agreement between the parties
rendered pursuant to this Agreement. Any changes to this Agreement must
be agreed to by both parties in writing.
IN WITNESS WHEREOF, the parties have executed this Agreement on or about the
date set forth above.
COMPANY CONTRACTOR
Pioneer Resources I, LLC Olympic Resource Management LLC
By By
----------------------------- ----------------------------
Title Title
-------------------------- -------------------------
Date Date
--------------------------- --------------------------
<PAGE>
EXHIBIT 10.2
This Instrument Prepared By,
Recording Requested By and
After Recording Return to:
Craig L. Jones, Esq.
Olympic Resource Management LLC
19245 Tenth Avenue NE
P.O. Box 1780
Poulsbo, Washington 98370
Until further notice all tax notices SPACE ABOVE THIS LINE RESERVED FOR
shall be sent to: RECORDER'S USE ONLY
Pioneer Resources I, LLC
c/o Olympic Resource Management LLC
19245 Tenth Avenue NE
P.O. Box 1780
Poulsbo, Washington 98370
- --------------------------------------------------------------------------------
DEED OF TRUST, FIXTURE FILING AND SECURITY AGREEMENT WITH
ASSIGNMENT OF RENTS
This DEED OF TRUST, FIXTURE FILING AND SECURITY AGREEMENT WITH ASSIGNMENT
OF RENTS (the "DEED OF TRUST") is made as of April 7, 2000 by PIONEER RESOURCES
I, LLC, a Delaware limited liability company (who acquired title as Pioneer
Resources LLC, an Oregon limited liability company) with its mailing address at
c/o Olympic Resource Management LLC, its Manager, 19245 Tenth Avenue NE, P.O.
Box 1780, Poulsbo, Washington 98370, Attention: Senior Vice President Finance
(hereinafter referred to as "GRANTOR") to OREGON TITLE INSURANCE COMPANY with
its principal place of business and mailing address at 450 Country Club Rd.,
Suite 150, Eugene, OR 97440, as Trustee ("TRUSTEE"), and in trust for the
benefit of OLYMPIC RESOURCE MANAGEMENT LLC, 19245 Tenth Avenue NE, P.O. Box
1780, Poulsbo, Washington 98370 ("BENEFICIARY");
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W I T N E S S E T H T H A T :
WHEREAS, Grantor and Beneficiary have entered into a Management Agreement
dated March 22, 2000 (the "Management Agreement," which term shall include all
written amendments thereto), pursuant to which Grantor engaged and appointed
Beneficiary to take over responsibility for certain management functions as
described more fully therein;
WHEREAS, Grantor agreed to grant Beneficiary security interests in certain
property in order to secure the Pioneer Secured Obligations (as that term is
defined in the Management Agreement);
NOW, THEREFORE, the parties agree as follows:
SECURING CLAUSE
The "INDEBTEDNESS HEREBY SECURED" shall refer to all of the following
indebtedness, obligations and liabilities:
(i) payment and performance of the Pioneer Secured Obligations;
(ii) payment of any costs and expenses incurred by Beneficiary pursuant to
and in accordance with Sections 13 and 52 of this Deed of Trust which
Beneficiary reasonably determines are appropriate to preserve the
value of the Mortgaged Premises described below (such costs and
expenses incurred by Beneficiary being collectively referred to as
the "PRESERVATION COSTS"), together with interest thereon at the
Interest Rate (as hereafter defined) from when incurred until paid;
and
(iii) (A) payment of any costs and expenses (other than Preservation Costs)
incurred by Beneficiary in enforcing its rights or remedies under
this Deed of Trust, including, without limitation, Sections 19, 21,
and 25 hereof; (B) payment of any amounts due from Grantor under any
indemnities contained hereunder, including, without limitation, under
Sections 32 and 50 hereof; and (C) the performance of all other
covenants and agreements contained herein and not covered in
subsection (i) or (ii) above; PROVIDED, HOWEVER, that the amounts
described in this subsection (iii), when combined
with the Pioneer Secured Indemnity Obligations (as that term is
defined in the Management Agreement), shall not exceed the maximum
permissible amount of the Pioneer Secured Indemnity Obligations as
such amount is determined pursuant to Section 9 of the Management
Agreement from time to time.
In order to secure the indebtedness hereby secured, Grantor hereby
irrevocably GRANTS, TRANSFERS, BARGAINS, SELLS, CONVEYS, MORTGAGES, WARRANTS,
ASSIGNS AND PLEDGES to Trustee, IN TRUST WITH POWER OF SALE AND RIGHT
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OF ENTRY AND POSSESSION, a security interest in all and singular all of
Grantor's rights, title, interests and privileges in and to the properties
described in Granting Clauses I, II, III, IV, V, VI, VII and VIII below, all of
the same being collectively referred to herein as the "Mortgaged Premises":
GRANTING CLAUSE I
All right, title and interest of the Grantor in respect of that certain
real property located, lying and being in the State of California, as more
particularly described in Schedule I attached hereto and made a part hereof,
including, but not limited to, all standing trees (both merchantable and
pre-merchantable) and all downed trees, in either case now or hereafter growing,
grown or located on said real property.
GRANTING CLAUSE II
All buildings and improvements of every kind and description heretofore or
hereafter erected or placed on the property described in Granting Clause I and
all materials intended for construction, reconstruction, alteration and repairs
of the buildings and improvements now or hereafter erected thereon, all of which
materials shall be deemed to be included within the premises immediately upon
the delivery thereof to the said real estate, and all fixtures, machinery,
apparatus, equipment, fittings, and articles of personal property of every kind
and nature whatsoever now or hereafter attached to said real estate and the
buildings and improvements now or hereafter located thereon and the operation,
maintenance and protection thereof, and all proceeds thereof; it being mutually
agreed, intended and declared that all the aforesaid property shall, so far as
permitted by law, be deemed to form a part and parcel of the real estate and for
the purpose of this Deed of Trust to be real estate and covered by this Deed of
Trust; and as to the balance of the property aforesaid, this Deed of Trust is
hereby deemed to be as well a Security Agreement under the provisions of the
California Commercial Code for the purpose of creating hereby a security
interest in said property (including, without limitation, all timber located
thereon or severed therefrom), which is hereby granted by Grantor as debtor to
Beneficiary as secured party, securing the indebtedness hereby secured. The
addresses of Grantor (debtor) and Beneficiary (secured party) appear at the
beginning hereof.
GRANTING CLAUSE III
All right, title and interest of Grantor now owned or hereafter acquired in
and to all and singular the estates, tenements, hereditaments, privileges,
easements, licenses, franchises, appurtenances and royalties, timber, logs,
mineral, oil, and water rights belonging or in any wise appertaining to the
property described in the preceding Granting Clause I and the buildings and
improvements now or hereafter located thereon and the reversions, rents, issues,
revenues and profits thereof, including all interest of Grantor in all rents,
issues and profits of the aforementioned property and all rents, issues,
profits, revenues, royalties, bonuses, rights and benefits due, payable or
accruing (including all deposits of money as advanced rent or for
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security) under any and all leases or subleases and renewals thereof of, or
under any contracts or options for the sale of all or any part of, said property
(including during any period allowed by law for the redemption of said property
after any foreclosure or other sale), together with the right, but not the
obligation, to collect, receive and receipt for all such rents and other sums
and apply them to the indebtedness hereby secured and to demand, sue for and
recover the same when due or payable; PROVIDED that the assignments made hereby
shall not impair or diminish the obligations of Grantor under the provisions of
such leases or other agreements nor shall such obligations be imposed upon
Trustee or Beneficiary. By acceptance of this Deed of Trust, Trustee agrees,
that until an Event of Default shall occur which, subject to Section 52 hereof,
gives Trustee the power of sale or the right to foreclose this Deed of Trust,
Grantor may collect, receive and enjoy all such rents, issues, profits,
revenues, royalties, bonuses, rights and benefits.
GRANTING CLAUSE IV
All judgments, awards of damages, settlements and other compensation
heretofore or hereafter made resulting from condemnation proceedings or the
taking of the property described in Granting Clause I or any part thereof or any
building or other improvement now or at any time hereafter located thereon or
any easement or other appurtenance thereto under the power of eminent domain or
any similar power or right (including any award from the United States
Government at any time after the allowance of the claim therefor, the
ascertainment of the amount thereof and the issuance of the warrant for the
payment thereof), whether permanent or temporary, or for any damage (whether
caused by such taking or otherwise) to said property or any part thereof or the
improvements thereon or any part thereof, or to any rights appurtenant thereto,
including severance and consequential damage, and any award for change of grade
of streets (collectively, "CONDEMNATION AWARDS").
GRANTING CLAUSE V
All property and rights, if any, which are by the express provisions of
this Deed of Trust required to be subjected to the lien hereof and any
additional property and rights that may from time to time hereafter, by
installation or writing of any kind, be subjected to the lien hereof by Grantor
or by anyone in Grantor's behalf.
GRANTING CLAUSE VI
All rights in and to common areas and access roads on adjacent properties
heretofore or hereafter granted to Grantor and any after-acquired title or
reversion in and to the beds of any ways, roads, streets, avenues and alleys
adjoining the property described in Granting Clause I or any part thereof.
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<PAGE>
GRANTING CLAUSE VII
All Contract Rights, whether now existing or hereafter arising, or in which
Grantor now has or hereafter acquires any rights (the term "CONTRACT RIGHTS"
means and includes, without limitation, all Grantor's right, title and interest
in, to and under all contracts for the purchase, sale, harvest or transportation
of timber or related inventory now or hereafter growing, grown or located on the
real property described in Granting Clause I (as each and any of such contracts
or agreements may be amended, supplemented or otherwise modified from time to
time) together with all rights of Grantor to receive monies due and to become
due under or pursuant to said contracts or agreements, all rights of Grantor to
receive proceeds of any insurance, indemnity, warranty or guaranty with respect
to said contracts or agreements or to the return of amounts deposited with
others, all claims of Grantor for damages arising out of or for breach of or
default under said contracts or agreements, and all rights of Grantor to
terminate, amend, supplement or modify said contracts or agreements, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder), PROVIDED that until an Event of Default shall occur which, subject
to Section 52 hereof, gives Trustee the power of sale or the right to foreclose
this Deed of Trust, Trustee shall not exercise any rights included in or
relating to the Contract Rights and Grantor shall be entitled to exercise all
such rights, including, but not limited to, the right to collect, receive and
enjoy any and all amounts due or to become due under or pursuant to any of said
contracts or agreements.
GRANTING CLAUSE VIII
All proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquidated claims, including, without limitation,
all proceeds of insurance.
TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and
privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted,
pledged and assigned, and in which a security interest is granted, or intended
so to be, unto Trustee, its successors and assigns, forever; PROVIDED, HOWEVER,
that this Deed of Trust is upon the express condition that if the conditions set
forth in both of clauses (a) and (b) below have been met or the condition
precedent set forth in clause (c) below has been met, then this Deed of Trust
and the estate and rights hereby granted shall cease, terminate and be void and
this Deed of Trust shall be released by Trustee upon the written request and at
the expense of Grantor, otherwise to remain in full force and effect: (a) more
than one (1) year has passed since the expiration or termination of the
Management Agreement; and (b) the Pioneer Secured Obligations and all other
indebtedness hereby secured has been fully paid and performed or, in the case of
the Pioneer Secured Indemnity Obligations, the Indemnity Release Date (as that
term is defined in the Management Agreement) shall have occurred; or (c) the
Mortgaged Premises are subject to a Transfer (as defined in Section 12 hereof)
in accordance with Section 9 of the Management Agreement, but only after all of
the conditions precedent and conditions
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<PAGE>
concurrent to the termination of this Deed of Trust as set forth in such
Section 9 shall have been satisfied.
Grantor hereby covenants and agrees with Trustee and Beneficiary as follows
(it being understood that (a) the exercise of rights and remedies by the Trustee
or the Beneficiary under this Deed of Trust are subject to certain limitations
solely for the benefit of the Lenders, and not for the benefit of Grantor, as
described in Section 52 hereof and more fully set forth in Section 9 of the
Management Agreement and (b) in its capacity as Manager under the Management
Agreement, Beneficiary has agreed, subject to the terms, conditions, standards,
limitations, exceptions, and other provisions set forth in the Management
Agreement, and only so long as Beneficiary serves as Manager thereunder, to
cause Grantor to comply with its covenants and other obligations under this Deed
of Trust):
1. PAYMENT OF THE INDEBTEDNESS. The indebtedness hereby secured will be
promptly paid as and when the same becomes due.
2. FURTHER ASSURANCES. Grantor will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Deed of Trust and, without
limiting the foregoing, to make subject to the lien hereof any property agreed
to be subjected hereto or covered by the Granting Clauses hereof or intended so
to be.
3. OWNERSHIP OF THE MORTGAGED PREMISES. Grantor covenants and warrants
that it is lawfully seized of and has good and marketable fee title to the
Mortgaged Premises free and clear of all liens, charges and encumbrances
whatsoever except for (a) those matters existing on the date hereof and set
forth on Schedule II attached hereto; (b) any such liens, charges, or
encumbrances permitted under Section 9 of the Management Agreement; and (c) the
junior liens on the Mortgaged Premises to be granted pursuant to the Bridge
Consent (as defined in the [Omitted Confidential Information has been filed
separately with the Securities and Exchange Commission] referred to in Section
40 below) (collectively, the "PERMITTED ENCUMBRANCES") and Grantor has good
title, full power and authority to convey, transfer and mortgage the same to
Trustee for the uses and purposes set forth in this Deed of Trust; and Grantor
will warrant and defend the title to the Mortgaged Premises against all claims
and demands whatsoever except Permitted Encumbrances.
4. POSSESSION. Provided no Event of Default has occurred and is
continuing hereunder which, subject to Section 52 hereof, gives Trustee and
Beneficiary the right to exercise rights and remedies under this Deed of Trust,
Grantor shall be suffered and permitted to remain in full possession, enjoyment
and control of the Mortgaged Premises, subject always to the observance and
performance of the terms of this Deed of Trust.
5. PAYMENT OF TAXES. Grantor shall pay before delinquent all general and
special taxes and assessments, all water, drainage and sewer charges and all
other charges of any kind whatsoever, ordinary or extraordinary, which may be
levied, assessed, imposed or charged on
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or against the Mortgaged Premises or any part thereof, except that, unless and
until foreclosure, distraint, sale or other similar proceedings shall have been
commenced, no such charge or claim need be paid if being contested (except to
the extent any full or partial payment shall be required by law), after notice
to Beneficiary, by appropriate proceedings which shall operate to prevent the
collection thereof or the sale or forfeiture of the Mortgaged Premises or any
part thereof to satisfy the same, conducted in good faith and with due diligence
and if Grantor shall have furnished such security, if any, as may be required in
the proceedings or as may be reasonably requested by Trustee or Beneficiary.
Grantor shall, upon written request, exhibit to Beneficiary official receipts
evidencing payments of all taxes and charges that Grantor is required to pay
under this Deed of Trust.
6. [Intentionally deleted.]
7. RECORDATION AND PAYMENT OF TAXES AND EXPENSES INCIDENT THERETO.
Grantor will cause this Deed of Trust, all trust deeds supplemental hereto and
any financing statement or other notice of a security interest required by
Trustee or Beneficiary at all times to be kept, recorded and filed at its own
expense in such manner and in such places as may be required by law for the
recording and filing or for the rerecording and refiling of a mortgage, security
interest, assignment or other lien or charge upon the Mortgaged Premises, or any
part thereof, in order fully to preserve and protect the rights of Trustee and
Beneficiary hereunder and, without limiting the foregoing, Grantor will pay or
reimburse Trustee or Beneficiary for the payment of any and all taxes, fees or
other charges incurred in connection with any such recordation or rerecordation,
including any documentary stamp tax or tax imposed upon the privilege of having
this Deed of Trust or any instrument issued pursuant hereto recorded.
8. [Intentionally deleted.]
9. [Intentionally deleted.]
10. EMINENT DOMAIN. Grantor acknowledges that Condemnation Awards have
been assigned to Trustee and Beneficiary. Grantor shall, immediately upon
learning of the actual or threatened institution of any proceeding for the
condemnation or other taking of any of the Mortgaged Premises (including any
easement therein or appurtenance thereof or severance or consequential damage
and change in grade of streets), notify Trustee and Beneficiary of the pendency
of such proceeding and deliver to Trustee and Beneficiary copies of any and all
papers served in connection with any such proceedings, and Grantor agrees that
Beneficiary may participate in any such proceeding, and Grantor from time to
time will deliver to Trustee and Beneficiary all instruments reasonably
requested by Trustee or Beneficiary to permit such participation. Beneficiary is
authorized to collect the proceeds of any condemnation claim or award, and shall
apply the same as follows: (a) first, to pay any then due and payable amounts
owing on account of any Pioneer Secured Obligations or other indebtedness hereby
secured in such order of application as the Beneficiary may elect, and (b) the
remainder shall be deposited into the Cash Collateral Account described in
Section 9 of the Management Agreement, and shall be held and disbursed in
accordance therewith.
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Grantor further covenants and agrees to make, execute and deliver to
Beneficiary, at any time or times upon request, free, clear and discharged of
any encumbrances of any kind whatsoever, any and all further assignments and/or
instruments deemed necessary by Beneficiary for the purpose of validly and
sufficiently assigning all awards and other compensation heretofore and
hereafter to be made to Grantor for any taking, either permanent or temporary,
under any such proceeding.
11. [Intentionally deleted.]
12. SALES, TRANSFERS AND ENCUMBRANCES. Grantor shall be permitted to
Transfer (as defined below) the Mortgaged Premises to the extent permitted by,
and subject to full compliance with all of the conditions, requirements, and
limitations of, the terms of Section 9 of the Management Agreement. Except to
such extent, and except in the case of Permitted Encumbrances, Grantor will not,
directly or indirectly, whether voluntarily, involuntarily or by operation of
law do any of the following (hereinafter, a "TRANSFER"): sell, transfer, lease,
exchange, convey, assign, mortgage, hypothecate, pledge or otherwise encumber or
dispose of the Mortgaged Premises or any portion thereof or legal or equitable
interest therein, and shall not enter into any agreement or arrangement
therefor, including, without limitation, any contract sale, installment sale or
sale under articles of agreement for deed. Any Transfer in violation of this
Section 12 shall constitute an immediate Event of Default hereunder.
13. RIGHT OF TRUSTEE OR BENEFICIARY TO PERFORM GRANTOR'S COVENANTS, ETC.
Subject to Section 52 hereof, if Grantor shall fail to make any payment or
perform any act required to be made or performed hereunder, Trustee or
Beneficiary, without waiving or releasing any obligation or default, may (but
shall be under no obligation to) at any time thereafter make such payment or
perform such act for the account and at the expense of Grantor, and may enter
upon the Mortgaged Premises or any part thereof for such purpose and take all
such action thereon as, in the reasonable opinion of Trustee or Beneficiary, may
be necessary or appropriate therefor. All sums so paid by Trustee or Beneficiary
and all costs and expenses (including without limitation attorneys' fees and
expenses) so incurred, together, to the extent such sums, costs, and expenses
constitute Preservation Costs, with interest thereon from the date of payment or
incurrence at the Interest Rate, shall constitute so much additional
indebtedness hereby secured and shall be paid by Grantor to the party who made
such payment on demand. Trustee or Beneficiary in making any payment authorized
under this Section relating to taxes or assessments may do so according to any
bill, statement or estimate procured from the appropriate public office without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien or title or claim
thereof. Trustee or Beneficiary, in performing any act hereunder, shall be the
sole judge (acting, at all times, in good faith) of whether Grantor is required
to perform same under the terms of this Deed of Trust.
14. AFTER-ACQUIRED PROPERTY. Any and all property hereafter acquired with
respect to the property described in Granting Clauses I-VIII above and which is
of the kind or nature
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herein provided, or intended to be and become subject to the lien hereof, shall
IPSO FACTO, and without any further conveyance, assignment or act on the part of
Grantor, become and be subject to the lien of this Deed of Trust as fully and
completely as though specifically described herein; but nevertheless Grantor
shall from time to time, if requested by Trustee or Beneficiary, execute and
deliver any and all such further assurances, conveyances and assignments as
Trustee or Beneficiary may reasonably require for the purpose of expressly and
specifically subjecting to the lien of this Deed of Trust all such property.
15. INSPECTION BY TRUSTEE OR BENEFICIARY. Trustee and Beneficiary shall
have the right to inspect the Mortgaged Premises (including, without limitation,
the right to have a cruise of all timber on the Mortgaged Premises by an
independent timber cruiser) at all reasonable times, and access thereto shall be
permitted for that purpose.
16. [Intentionally deleted.]
17. SUBROGATION. Grantor acknowledges and agrees that Trustee and
Beneficiary shall be subrogated to any lien discharged out of any advance by
Trustee or Beneficiary hereunder, irrespective of whether or not any such lien
may have been released of record.
18. EVENTS OF DEFAULT. Time is of the essence of the Management Agreement
and this Deed of Trust (collectively, as the same may be amended in writing from
time to time, the "ORM DOCUMENTS". The occurrence of any of the following,
without further demand or notice, shall be an "Event of Default":
(a) Failure by Grantor to pay the Pioneer Secured Obligations or any
other indebtedness hereby secured as and when due; or
(b) A Transfer other than as permitted in Section 12 hereof occurs,
whether voluntary, involuntary or by operation of law, and whether or not
Beneficiary has waived or failed to assert its rights in connection with any
previous Transfer. In the event of a Transfer other than as permitted in Section
12, Beneficiary may, without notice to Grantor, deal with the transferee with
respect to this Deed of Trust, the indebtedness hereby secured and the other ORM
Documents, as if the transferee were Grantor, and such dealing shall neither
satisfy nor discharge Grantor's liability for the indebtedness hereby secured or
under the ORM Documents, nor constitute Beneficiary's consent to the Transfer.
19. REMEDIES. Subject to any applicable limitations on the exercise of
rights and remedies as set forth in Section 52 hereof (such limitations being
solely for the benefit of Lenders, and not for the benefit of Grantor), when any
Event of Default has occurred and is continuing, in addition to such other
rights as may be available under applicable law, but subject at all times to any
mandatory legal requirements:
(a) UNIFORM COMMERCIAL CODE. Trustee shall, with respect to any
part of the Mortgaged Premises constituting property of the type in respect of
which realization on a
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lien or security interest granted therein is governed by the Uniform Commercial
Code, have all the rights, options and remedies of a secured party under the
California Commercial Code, including without limitation, the right to the
possession of any such property, or any part thereof, and the right to enter
without legal process any premises where any such property may be found. Any
requirement of said California Commercial Code for reasonable notification shall
be met by delivery of written notice to Grantor at its address above set forth
at least five (5) days prior to the sale or other event for which such notice is
required. The costs and expenses of retaking, selling, and otherwise disposing
of said property, including attorneys' fees and expenses incurred in connection
therewith, shall constitute so much additional indebtedness hereby secured and
shall be payable upon demand. In connection with any sale or sales hereunder,
Beneficiary may elect to treat any of the Mortgaged Premises which consists of a
right in action or which is property that can be severed from the real property
covered hereby or any improvements thereon without causing structural damage
thereto as if the same were personal property, and dispose of the same in
accordance with applicable law, separate and apart from the sale of real
property. Any sale of any personal property hereunder shall be conducted in any
manner permitted by Section 9501 or any other applicable section to the
California Commercial Code. Where the Mortgaged Premises consists of real and
personal property or fixtures, whether or not such personal property is located
on or within the real property, Beneficiary may elect in its discretion to
exercise its rights and remedies against any or all of the real property,
personal property, and fixtures in such order and manner as is now or hereafter
permitted by applicable law. Without limiting the generality of the foregoing,
Beneficiary may, in its sole and absolute discretion without regard to the
adequacy of its security, elect to proceed against any or all of the real
property, personal property and fixtures in any manner permitted under Section
9501(4)(a) of the California Commercial Code; and if Beneficiary elects to
proceed in the manner permitted under Section 9501(4)(a)(ii) of the California
Commercial Code, the power of sale herein granted shall be exercisable with
respect to all or any of the real property, personal property and fixtures
covered hereby, as designated by Beneficiary, and the Trustee is hereby
authorized and empowered to conduct any such sale of any real property, personal
property and fixtures in accordance with the procedures applicable to real
property. Where the Mortgaged Premises consists of real property and personal
property, any reinstatement of the indebtedness hereby secured following default
which is made by Grantor or any other person or entity permitted to exercise the
right of reinstatement under Section 2924c of the California Civil Code or any
successor statute, shall not, in accordance with the terms of California
Commercial Code Section 9501(4)(c)(iii), prohibit Beneficiary from conducting a
sale or other disposition of any personal property or fixtures or from otherwise
proceeding against or continuing to proceed against any personal property or
fixtures in any manner permitted by the California Commercial Code; nor shall
any such reinstatement invalidate, rescind or otherwise affect any sale,
disposition or other proceedings held, conducted or instituted with respect to
any personal property or fixtures prior to such reinstatement or pending at the
time of such reinstatement. Any sums paid to Beneficiary in effecting any
reinstatement pursuant to Section 2924c of the California Civil Code shall be
applied to the indebtedness hereby secured and to Beneficiary's and Trustee's
reasonable costs and expenses in the manner
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required by Section 2924c. Should Beneficiary elect to sell any portion of the
Mortgaged Premises which is real property or which is personal property or
fixtures that Beneficiary has elected under Section 9501(4)(a)(ii) of the
California Commercial Code to sell together with real property in accordance
with the laws governing a sale of real property, Beneficiary or Trustee shall
give such notice of default and election to sell as may then be required by law.
Any requirement of the California Commercial Code for reasonable notification
shall be met by mailing written notice to Grantor at its address above set forth
at least 10 days prior to the sale or other event for which such notice is
required.
(b) FORECLOSURE. Trustee or Beneficiary may proceed to protect
and enforce the rights of Trustee or Beneficiary hereunder (i) by any action at
law, suit in equity or other appropriate proceedings, whether for the specific
performance of any agreement contained herein, or for an injunction against the
violation of any of the terms hereof, or in aid of the exercise of any power
granted hereby or by law, or (ii) by the foreclosure of this Deed of Trust or
(iii) by Trustee's sale under the power of sale. Grantor agrees that the
agreements of Grantor herein contained shall be specifically enforceable by
injunction or any other appropriate equitable remedy and that for the purpose of
any suit brought under this subparagraph, Grantor hereby waives the defense of
laches and any applicable statute of limitations. In the event of foreclosure,
Grantor authorizes and empowers Trustee or Beneficiary to effect insurance upon
the Mortgaged Premises in amounts aforesaid for a period covering the time of
redemption from foreclosure sale provided by law, and if necessary therefor, to
cancel any or all existing insurance policies.
(c) TRUSTEE'S SALE. Upon the occurrence of an Event of Default,
Beneficiary may deliver to Trustee a written declaration of default and demand
for sale and of written notice of default and of election to cause the Mortgaged
Premises to be sold, which notice Trustee shall cause to be filed for record.
After Trustee shall have given and recorded such other notice as the law then
requires as a condition precedent to a Trustee's sale under power of sale, after
the lapse of such time as may then be required by law following the recordation
of said notice of default and notice of sale having been given as then required
by law, Trustee, without notice to or demand upon Grantor except as otherwise
required by law, may sell the Mortgaged Premises at the time and place of sale
fixed by it in the notice of sale, either as a whole or in separate parcels and
in such order as it or Beneficiary may determine, at public auction to the
highest bidder for cash in lawful money of the United States, payable at time of
sale (the indebtedness hereby secured being the equivalent of cash for purposes
of said sale). Grantor shall have no right to direct the order in which the
Mortgaged Premises are sold. Trustee may postpone sale of all or any portion of
the Mortgaged Premises by public announcement at such time and place of sale and
from time to time thereafter may postpone such sale by public announcement at
such time fixed by the preceding postponement. Trustee shall deliver to the
purchaser at such sale a deed conveying the Mortgaged Premises or portion
thereof so sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof absent manifest error. Any person, including Grantor or
Beneficiary may
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purchase at such sale. After deducting all costs, fees and expenses of Trustee,
and of this Trust, including, without limitation, cost of evidence of title and
attorneys' fees in connection with sale, all as provided in this Section 19 and
Section 21 hereof, Trustee shall apply the proceeds of sale as prescribed in
Section 22 hereof. Before any such Trustee's sale under power, Beneficiary may
rescind such notices of default and of election to cause the Mortgaged Premises
or any part thereof to be sold by delivering to Trustee a written notice of
rescission, which notice, when recorded, shall cancel any prior declaration of
default and demand for sale. The exercise of such right of rescission shall not
constitute a waiver of any default then existing or subsequently occurring, or
impair the right of Beneficiary to deliver to Trustee other declarations of
default and demands for sale or notices of default and of election to cause the
Mortgaged Premises or any part thereof to be sold, or otherwise affect any
provision of this Deed of Trust or any of the rights, obligations or remedies of
Beneficiary or Trustee hereunder.
(d) APPOINTMENT OF RECEIVER. Trustee or Beneficiary shall, as a
matter of right, without notice or without giving bond to Grantor or anyone
claiming by, under or through it, and without regard to the solvency or
insolvency of Grantor or the then value of the Mortgaged Premises, be entitled
to have a receiver appointed of all or any part of the Mortgaged Premises and
the rents, issues and profits thereof, with such power as the court making such
appointment shall confer, and the Grantor hereby consents to the appointment of
such receiver and shall not oppose any such appointment. Any such receiver may,
to the extent permitted under applicable law, without notice, enter upon and
take possession of the Mortgaged Premises or any part thereof by force, summary
proceedings, ejectment or otherwise, and may remove Grantor or other persons and
any and all property therefrom, and may hold, operate and manage the same and
receive all earnings, income, rents, issues and proceeds accruing with respect
thereto or any part thereof, whether during the pendency of any foreclosure or
until any right of redemption shall expire or otherwise.
(e) TAKING POSSESSION, COLLECTING RENTS, ETC. Trustee or Beneficiary
or their agent may enter and take possession of the Mortgaged Premises or any
part thereof and manage, operate, insure, repair and improve the same and take
any action which, in Trustee's or Beneficiary's judgment, is necessary or proper
to conserve the value of the Mortgaged Premises, including, but not limited to,
the harvest and sale of timber from the Mortgaged Premises. Beneficiary may also
take possession of, and for these purposes use, any and all personal property
contained in the Mortgaged Premises and used in the operation, rental or leasing
thereof or any part thereof. Trustee or Beneficiary or their agent shall be
entitled to collect and receive all earnings, revenues, rents, issues and
profits of the Mortgaged Premises or any part thereof, including, but not
limited to, all earnings, revenues, and profits arising from the harvest and
sale of timber from the Mortgaged Premises (and for such purpose Grantor does
hereby irrevocably constitute and appoint Beneficiary its true and lawful
attorney-in-fact for it and in its name, place and stead to receive, collect and
receipt for all of the foregoing, Grantor irrevocably acknowledging that any
payment made to Beneficiary hereunder shall be a good receipt and acquittance
against Grantor to the extent so made) and
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to apply same to the reduction of the indebtedness hereby secured. The right to
enter and take possession of the Mortgaged Premises and use any personal
property therein, to manage, operate and conserve the same, and to collect the
rents, issues and profits thereof, shall be in addition to all other rights or
remedies of Trustee or Beneficiary hereunder or afforded by law, and may be
exercised concurrently therewith or independently thereof. Trustee, at
Beneficiary's sole discretion without notice thereof to Grantor, and without
taking possession of the Mortgaged Premises may notify any or all of the
obligors of the leases and subleases of the Mortgaged Premises that such leases
and subleases have been assigned to Trustee, and Trustee, in the name of
Trustee, Grantor or in both names, may direct such obligors thereafter to make
all payments due from them under such leases and subleases directly to Trustee.
Grantor, immediately upon demand by Trustee, irrevocably shall direct all
obligors of the leases and subleases then and thereafter to make all payments
then and thereafter due from them under the leases and subleases directly to
Trustee. The costs and expenses (including any receiver's fees and expenses,
attorneys' fees and expenses and agent's compensation) incurred pursuant to the
powers herein contained shall be so much additional indebtedness hereby secured
which Grantor promises to pay upon demand. Trustee or Beneficiary shall not be
liable to account to Grantor for any action taken pursuant hereto other than to
account for any rents actually received by Trustee or Beneficiary. Without
taking possession of the Mortgaged Premises, Trustee or Beneficiary may, in the
event the Mortgaged Premises becomes vacant or is abandoned, take such steps as
it deems appropriate to protect and secure the Mortgaged Premises (including
hiring watchmen therefor) and all costs incurred in so doing shall constitute so
much additional indebtedness hereby secured payable upon demand and, to the
extent such costs constitute Preservation Costs, with interest thereon at the
Interest Rate.
20. WAIVER OF RIGHT TO REDEEM FROM SALE - WAIVER OF APPRAISEMENT,
VALUATION, ETC. Grantor shall not and will not apply for or avail itself of any
appraisement, valuation, stay, extension or exemption laws, or any so-called
"MORATORIUM LAWS", now existing or hereafter enacted in order to prevent or
hinder the enforcement or foreclosure of this Deed of Trust, but hereby waives
the benefit of such laws. Grantor for itself and all who may claim through or
under it waives any and all right to have the property and estates comprising
the Mortgaged Premises marshaled upon any foreclosure of the lien hereof and
agrees that any court having jurisdiction to foreclose such lien may order the
Mortgaged Premises sold as an entirety. In the event of any sale made under or
by virtue of this Deed of Trust, the whole of the Mortgaged Premises may be sold
in one parcel as an entirety or in separate lots or parcels at the same or
different times, all as the Beneficiary may determine. Beneficiary shall have
the right to become the purchaser at any sale made under or by virtue of this
Deed of Trust and Beneficiary so purchasing at any such sale shall have the
right to be credited upon the amount of the bid made therefor by Beneficiary
with the amount payable to Trustee by Grantor out of the net proceeds of such
sale. To the extent permitted by applicable law, Grantor hereby waives any and
all rights of redemption from any sale under any order or decree of foreclosure
pursuant to rights herein granted, on behalf of Grantor, and each and every
person acquiring any interest in, or title to the Mortgaged Premises described
herein
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subsequent to the date of this Deed of Trust, and on behalf of all other persons
to the extent permitted by applicable law.
21. COSTS AND EXPENSES OF FORECLOSURE. Subject to any limitations thereon
imposed by applicable law, in case of any sale of the Mortgaged Premises, or any
part thereof, pursuant to any judgment or decree of any court or pursuant to the
power of sale herein contained or in connection with the enforcement of any of
the terms of this Deed of Trust or otherwise under or by virtue of this Deed of
Trust, there shall be allowed and included as so much additional indebtedness
hereby secured to be paid out of the proceeds of such sale, reasonable Trustee's
fees incurred in connection with any exercise of the power of sale granted
hereunder for all services rendered by Trustee, its agents, attorneys and
counsel in and about foreclosure, enforcement or other protection of this Deed
of Trust and all reasonable expenditures and expenses which may be paid or
incurred by or on behalf of Trustee and/or Beneficiary for attorneys' fees,
appraisers' fees, environmental auditors' fees, outlays for documentary and
expert evidence, stenographic charges, publication costs and costs (which may be
estimated as the items to be expended after such Trustee's sale or the entry of
any foreclosure order or decree) of procuring all such abstracts of title, title
searches and examination, guarantee policies, Torrens certificates and similar
data and assurances with respect to title as Trustee or Beneficiary may deem to
be reasonably necessary either to prosecute any foreclosure or sale proceeding
or to evidence to the bidder at any sale pursuant thereto the true condition of
the title to or the value of the Mortgaged Premises, all of which compensation
and expenditures shall become so much additional indebtedness hereby secured
which Grantor agrees to pay and all of such shall be immediately due and payable
upon demand.
22. APPLICATION OF PROCEEDS. The proceeds of any foreclosure or other sale
of the Mortgaged Premises or of any sale of property pursuant to Section 19
hereof shall be distributed in the following order of priority: FIRST, on
account of all costs and expenses incident to the foreclosure or other
proceedings including all such items as are mentioned in Sections 19 and 21
hereof; and SECOND, to the reduction of Pioneer Secured Obligations and the
other indebtedness hereby secured in such order as Beneficiary shall elect, with
any surplus to the Lenders or whomsoever shall be lawfully entitled to same.
23. DEFICIENCY DECREE. If at any foreclosure proceeding the Mortgaged
Premises shall be sold for a sum less than the total amount of indebtedness for
which judgment is therein given, the judgment creditor shall be entitled to the
entry of a deficiency decree against Grantor and against the property of Grantor
for the amount of such deficiency; and Grantor does hereby irrevocably consent
to the appointment of a receiver for the Mortgaged Premises and the property of
Grantor and of the rents, issues and profits thereof after such sale and until
such deficiency decree is satisfied in full.
24. TRUSTEE'S AND BENEFICIARY'S REMEDIES CUMULATIVE - NO WAIVER. No remedy
or right of Trustee or Beneficiary shall be exclusive of but shall be cumulative
and in addition to
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every other remedy or right now or hereafter existing at law or in equity or by
statute or otherwise. No delay in the exercise or omission to exercise any
remedy or right accruing on any default shall impair any such remedy or right or
be construed to be a waiver of any such default or acquiescence therein, nor
shall it affect any subsequent default of the same or a different nature. Every
such remedy or right may be exercised concurrently or independently, and when
and as often as may be deemed expedient by Trustee or Beneficiary.
25. TRUSTEE AND BENEFICIARY PARTY TO SUITS. If Trustee or Beneficiary (in
its capacity as Beneficiary, but not in its capacity as Manager under the
Management Agreement) shall be made a party to or shall intervene in any action
or proceeding affecting the Mortgaged Premises or the title thereto or the
interest of Trustee and Beneficiary under this Deed of Trust (bankruptcy
proceedings), or if Trustee and Beneficiary employs an attorney to collect any
or all of the indebtedness hereby secured or to enforce any of the terms hereof
or realize hereupon or to protect the lien hereof, or if Trustee and Beneficiary
(in its capacity as Beneficiary, but not in its capacity as Manager under the
Management Agreement) shall incur any costs or expenses in preparation for the
commencement of any foreclosure proceedings or for the defense of any threatened
suit or proceedings which might affect the Mortgaged Premises or the security
hereof, whether or not any such foreclosure or other suit or proceeding shall be
actually commenced, then in any such case, Grantor agrees to pay to Trustee and
Beneficiary, immediately and without demand, all reasonable costs, charges,
expenses and attorneys' fees incurred by Trustee and Beneficiary in any such
case, and the same shall constitute so much additional indebtedness hereby
secured payable upon demand. Beneficiary's rights, in its capacity as Manager
under the Management Agreement (and not as Beneficiary hereunder), to payment of
attorneys' fees, costs and expenses, are governed by the Management Agreement
and the Operating Agreement.
26. MODIFICATIONS NOT TO AFFECT LIEN. Subject to Section 52 hereof,
Trustee and Beneficiary, without notice to anyone, and without regard to the
consideration, if any, paid therefor, or the presence of other liens on the
Mortgaged Premises, may in its discretion release any part of the Mortgaged
Premises or any person liable for any of the indebtedness hereby secured, may
extend the time of payment of any of the indebtedness hereby secured and may
grant waivers or other indulgences with respect hereto and thereto, and may
agree with Grantor to modifications to the terms and conditions contained herein
or otherwise applicable to any of the indebtedness hereby secured (including
modifications in the rates of interest applicable thereto), without in any way
affecting or impairing the liability of any party liable upon any of the
indebtedness hereby secured or the priority of the lien of this Deed of Trust
upon all of the Mortgaged Premises not expressly released, and any party
acquiring any direct or indirect interest in the Mortgaged Premises shall take
same subject to all of the provisions hereof.
27. NOTICES. All communications provided for herein shall be in writing
and shall be deemed to have been given when delivered personally or mailed by
first class mail, postage prepaid, addressed to the parties hereto at their
addresses as shown at the beginning of
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this Deed of Trust or to such other and different address as Grantor, Trustee,
or Beneficiary may designate pursuant to a written notice sent in accordance
with the provisions of this Section. The parties hereto agree to provide a copy
of any such notice to First Union National Bank, 301 South College Street, 5th
Floor, Charlotte, North Carolina 28288, Attention: Scott Santa Cruz and Tom
Cambern.
28. COMPLIANCE WITH ENVIRONMENTAL LAWS. Grantor represents and warrants
that, the Mortgaged Premises comply (to the extent that failure to comply
therewith would constitute a material adverse effect on the Grantor) in all
material respects with all applicable federal, state, regional, county or local
laws, statutes, rules, regulations or ordinances, including, but not limited to,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Section 9601 ET SEQ., the Resource Conservation and Recovery Act of 1976,
as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
Section 6901 ET SEQ., the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. Section 1251 ET SEQ., the Toxic Substances
Control Act of 1976, 15 U.S.C. Section 2601 ET SEQ., the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 ET SEQ., the Clean
Air Act of 1966, as amended, 42 U.S.C. Section 7401 ET SEQ., the National
Environmental Policy Act of 1975, 42 U.S.C. Section 4321, the Rivers and
Harbours Act of 1899, 33 U.S.C. Section 401 ET SEQ., the Occupational Safety and
Health Act of 1970, 29 U.S.C. Section 651 ET SEQ., and the Safe Drinking Water
Act of 1974, as amended, 42 U.S.C. Section 300(f) ET SEQ., and all rules,
regulations and guidance documents promulgated or published thereunder, and any
state, regional, county or local statute, law, rule, regulation or ordinance
relating to public health, safety or the environment (all of the foregoing are
sometimes referred to collectively as "ENVIRONMENTAL LAWS"), including, without
limitation, relating to releases, discharges, emissions or disposals to air,
water, land or groundwater, to the withdrawal or use of groundwater, to the use,
handling or disposal of polychlorinated biphenyls (PCB's), asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, its derivatives or
by-products, or other hydrocarbons), to exposure to toxic, hazardous, or other
controlled, prohibited or regulated substances, to the transportation, storage,
disposal, management or release of gaseous or liquid substances, and any
regulation, order, injunction, judgment, declaration, notice or demand issued
thereunder.
29. CONDITION OF PROPERTY. Grantor represents and warrants that the
Mortgaged Premises, including all personal property, is free from contamination,
that there has not been thereon a release, discharge or emission, or threat of
release, discharge or emission, of any hazardous substance, gas or liquid
(including, without limitation, petroleum, its derivatives or by-products, or
other hydrocarbons), or any other substance, gas or liquid, which is prohibited,
controlled or regulated under applicable law, or which poses a threat or
nuisance to safety, health or the environment (all of such hazardous substances,
gases and liquids are sometimes referred to collectively as "HAZARDOUS
MATERIALS"), and that the Mortgaged Premises do not contain, and are not
affected by: (i) asbestos, (ii) urea formaldehyde foam
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insulation, (iii) polychlorinated biphenyls (PCB's), (iv) underground storage
tanks, (v) landfills, land disposals or dumps or (vi) petroleum, its derivatives
or by-products, or other hydrocarbons.
30. NOTICE OF ENVIRONMENTAL PROBLEM. Grantor represents and warrants that
it has not given, nor should it give, nor has it received, any notice, letter,
citation, order, warning, complaint, inquiry, claim or demand that: (i) Grantor
has violated, or is about to violate, any federal, state, regional, county or
local Environmental Law, judgment or order; (ii) there has been a release, or
there is a threat of release, of Hazardous Materials (including, without
limitation, petroleum, its by-products or derivatives, or other hydrocarbons)
from the Mortgaged Premises; (iii) Grantor may be or is liable, in whole or in
part, for the costs or cleaning up, remediating or responding to a release of
Hazardous Materials (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons); or (iv) any of the Grantor's property or
assets are subject to a lien in favor of any governmental body for any
liability, costs or damages, under federal, state or local Environmental Law
arising from or costs incurred by such governmental entity in response to a
release of a Hazardous Materials (including, without limitation, petroleum, its
by-products or derivatives, or other hydrocarbons). In the event that Grantor
receives any notice of the type described in this Section, Grantor shall
promptly provide a copy to Beneficiary, and in no event, later than fifteen (15)
days from Grantor's receipt or submission thereof.
31. USE OF PROPERTY AND FACILITIES. (a) Grantor represents and warrants
that it has never in the past engaged in, and agrees that in the future it shall
not conduct, any business, operations or activity on the Mortgaged Premises, or
employ or use the personal property or facilities, to manufacture, use,
generate, treat, store, transport or dispose of any Hazardous Materials
(including, without limitation, petroleum, its derivatives or by-products, or
other hydrocarbons), or any other substance which is prohibited, controlled or
regulated under applicable law, or which poses a threat or nuisance to safety,
health or the environment, including, without limitation, any business,
operation or activity which would bring Grantor, its property or facilities,
within the ambit of any Environmental Law, including, without limitation, any
state statute providing for financial responsibility for cleanup for the release
or threatened release of substances provided for thereunder. The provisions of
this Section shall apply to all real and personal property, without limitation,
owned or controlled by Grantor or its subsidiaries.
(b) Notwithstanding any other provision in this Deed of Trust to the
contrary, Grantor shall be permitted to use petroleum products, insecticides,
hardwood suppressants and other chemicals or materials which may constitute
Hazardous Materials for purposes of this Deed of Trust as part of Grantor's
timber management activities, PROVIDED that (i) the use of any such chemicals or
materials is not prohibited by any of the Environmental Laws, (ii) Grantor uses
such chemicals or materials in a safe and responsible manner and in accordance
with the method of application approved by the manufacturer of each such
chemical or material, (iii) Grantor uses such chemicals or materials in strict
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accordance with any and all Environmental Laws applicable to the use thereof,
and (iv) before using any such chemicals or materials on the Mortgaged Premises,
Grantor shall have obtained any and all permits which may from time to time be
required by any regulatory agency or other public body as a condition to such
use. Any prior use of such chemicals or materials in accordance with the
conditions set forth in the preceding sentence shall be deemed a qualification
of and exception to the representations and warranties of Grantor set forth in
this Deed of Trust.
32. ENVIRONMENTAL INDEMNITY. The Grantor hereby does and shall indemnify,
defend and hold harmless the Trustee, Beneficiary, and their respective
successors and assigns forever, from and against all loss, liability, damage and
expense, including reasonable attorneys' fees (including allocated cost of
in-house counsel), suffered or incurred by the Trustee, Beneficiary, and their
respective successors and assigns, in connection with or arising from or out of
any action taken by any person, entity or public authority pursuant to any of
the Environmental Laws (as hereinafter defined) or under common law, or
otherwise, pertaining to Hazardous Materials with respect to or in connection
with the Mortgaged Premises, including, but not limited to (i) the Environmental
Laws, including without limitation any violation thereof or noncompliance
therewith or the assertion of any lien, security interest, change or encumbrance
of any nature whatsoever thereunder, (ii) the presence of any Hazardous
Materials on, at or from the Mortgaged Premises, including, without limitation,
human exposure thereto, (iii) any spill, release, discharge or emission
affecting the Mortgaged Premises whether or not the same originates or emanates
from the Mortgaged Premises or any contiguous real estate, including, without
limitation, any loss of value of the Mortgaged Premises as a result thereof, and
(iv) a misrepresentation in any representation or warranty or breach of or
failure to perform any covenant made by the Grantor in Sections 28, 29, 30 and
31, which indemnity and agreement to defend and hold harmless shall survive any
termination or satisfaction of this Deed of Trust or the indebtedness hereby
secured or the sale, assignment or foreclosure thereof or the sale, transfer or
conveyance of all or part of the Mortgaged Premises or any other circumstances
which might otherwise constitute a legal or equitable release or discharge, in
whole or in part, of Borrower under the indebtedness hereby secured or
otherwise, PROVIDED that such indemnity and agreement to defend and hold
harmless shall apply only to acts and omissions occurring prior to any such
sale, assignment or foreclosure or any such sale, transfer or conveyance unless
such contaminations arises from any Hazardous Materials that were present at the
Mortgaged Premises prior to such sale, assignment, foreclosure, transfer or
conveyance of the Mortgaged Premises.
33. LIENS ABSOLUTE, ETC. The Grantor acknowledges and agrees that the
liens and security interests hereby created are absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of the Trustee, Beneficiary or any other holders of any of the
indebtedness hereby secured, and without limiting the generality of the
foregoing, the lien and security hereof shall not be impaired by any acceptance
by Trustee, Beneficiary or any other holder of any of the indebtedness hereby
secured of any other security for or guarantees upon any of the indebtedness
hereby secured
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or by any failure, neglect or omission on the part of Trustee,
Beneficiary or any other holder of any of the indebtedness hereby secured to
realize upon to protect any of the indebtedness hereby secured or any collateral
security therefor. The lien and security hereof shall not in any manner be
impaired or affected by any sale, pledge, surrender, compromise, settlement,
release, renewal, extension, indulgence, alteration, substitution, exchange,
change in, modification or disposition of any of the indebtedness hereby
secured, or of any collateral security therefor, or of any guaranty thereof, or
of the Management Agreement (except in accordance with the terms thereof). In
order to realize hereon and to exercise the rights granted Trustee and
Beneficiary hereby and under applicable law, there shall be no obligation on the
part of Trustee, Beneficiary or any other holder of any of the indebtedness
hereby secured at any time to first resort for payment to the obligor on any
note or other document or instrument evidencing any of the indebtedness hereby
secured or to any guaranty of any of the indebtedness hereby secured or any part
thereof or to resort to any other collateral security, property, liens or any
other rights or remedies whatsoever, and Trustee shall have the right to enforce
this instrument irrespective of whether or not other proceedings or steps are
pending seeking resort to or realization upon or from any of the foregoing.
34. DIRECT AND PRIMARY SECURITY - NO SUBROGATION. The lien and security
herein created and provided for stands as direct and primary security for the
Pioneer Secured Obligations as well as for any of the other indebtedness hereby
secured. No application of any sums received by the Trustee or Beneficiary in
respect of the Mortgaged Premises or any disposition thereof to the reduction of
the indebtedness hereby secured or any part thereof shall in any manner entitle
Grantor to any right, title or interest in or to the indebtedness hereby secured
or any collateral security therefor, whether by subrogation or otherwise, unless
and until all indebtedness hereby secured has been fully paid and satisfied.
35. SUBSTITUTE TRUSTEE. Trustee, or any substitute Trustee, may be removed
at any time with or without cause, at the option of Beneficiary, by written
declaration of such removal signed by Beneficiary and duly recorded in the same
records as this Deed of Trust, without any notice to or demand upon Trustee or
substitute Trustee so removed, or Grantor or any other person. If at any time
Trustee or any substitute Trustee should be so removed, or should absent himself
from California, die, or refuse, fail or be unable to act as such Trustee or
substitute Trustee, Beneficiary may appoint any person as substitute Trustee
hereunder, without any formality other than a written declaration of such
appointment executed by Beneficiary and duly recorded in the same records as
this Deed of Trust; and immediately upon such appointment, the substitute
Trustee so appointed shall automatically become vested with all the estate and
title in the Mortgaged Premises, and with all of the rights, powers, privileges,
authority, options and discretions, and charged with all of the duties and
liabilities, vested in or imposed upon Trustee by this Deed of Trust, and any
conveyance executed by such substitute Trustee, including the recitals therein
contained, shall have the same effect and validity as if executed by Trustee.
36. [Intentionally deleted.]
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37. MULTISITE REAL ESTATE TRANSACTION. Grantor acknowledges that this Deed
of Trust may be one of several deeds of trust and other security documents (the
aforesaid being together called the "OTHER SECURITY DOCUMENTS") which secure the
Pioneer Secured Obligations and indebtedness hereby secured. Grantor agrees that
the lien of this Deed of Trust shall be absolute and unconditional and shall not
in any manner be affected or impaired by any acts or omissions whatsoever of the
Trustee or Beneficiary and, without limiting the generality of the foregoing,
the lien hereof shall not be impaired by any acceptance by the Trustee or
Beneficiary of any security for or guarantees upon any of the indebtedness
hereby secured, or by any failure, neglect or omission on the part of the
Trustee or Beneficiary to realize upon or protect any of the indebtedness hereby
secured or any security therefor including the Other Security Documents. The
lien hereof shall not in any manner be impaired or affected by any release
(except as to the property released), sale, pledge, surrender, compromises,
settlement, renewal, extension, indulgence, alteration, changing, modification
or disposition of any of the indebtedness hereby secured or of any of the
collateral security therefor, including, without limitation, the Other Security
Documents or of any guarantee thereof, and the Trustee or Beneficiary may at
their discretion foreclose, exercise any power of sale, or exercise any other
remedy available to them under any or all of the Other Security Documents
without first exercising or enforcing any of its rights and remedies hereunder.
Such exercise of Trustee's or Beneficiary's rights and remedies under any or all
of the Other Security Documents shall not in any manner impair the indebtedness
hereby secured, except to the extent of its reduction by payment, or the lien of
this Deed of Trust and any exercise of the rights or remedies of hereby secured,
except to the extent of its reduction by payment, or the lien of this Deed of
Trust and any exercise of the rights or remedies of Trustee or Beneficiary
hereunder shall not impair the lien of any of the Other Security Documents or
any of the Trustee's or Beneficiary's rights and remedies thereunder. Grantor
specifically consents and agrees that Beneficiary may exercise its rights and
remedies hereunder and under the Other Security Documents separately or
concurrently and in any order that it may deem appropriate.
38. INTEREST RATE. For purposes of this Deed of Trust, the term "INTEREST
RATE" shall mean the rate per annum determined by adding 3% to the Base Rate (as
defined in the Credit Agreement described in Section 40) in effect from time to
time.
39. GOVERNING LAW. This Deed of Trust shall be governed by and construed
in accordance with the internal laws of the state in which the Mortgaged
Premises is located without regard to principles of conflicts of law.
40. CERTAIN DEFINED TERMS. The term "CREDIT AGREEMENT" means that certain
Replacement Credit Agreement dated as of October 9, 1998, among (i) Pioneer
Resources, LLC, an Oregon limited liability company ("ORIGINAL BORROWER"), the
predecessor in interest to Grantor, (ii) the several banks and other financial
institutions from time to time parties thereto (collectively, the "LENDERS"),
(iii) First Union National Bank, as administrative agent for the Lenders (the
"ADMINISTRATIVE AGENT"), ABN AMRO Bank N.V., as Syndication Agent,
20
<PAGE>
and Bank of America, N.A., as Documentation Agent, as such Replacement Credit
Agreement is amended by the [Omitted Confidential Information has been filed
separately with the Securities and Exchange Commission] described in the
following sentence. [Omitted Confidential Information has been filed separately
with the Securities and Exchange Commission]
41. SECURITY AGREEMENT. To secure the indebtedness hereby secured, Grantor
hereby grants to Beneficiary a security interest in all timber that is severed
from the real property covered by this Deed of Trust as well as in any of the
Mortgaged Premises that constitutes personal property. This Deed of Trust shall
constitute a security agreement under Article 9 of the California Commercial
Code with the Beneficiary having the rights of a secured party under Article 9
thereof. The mailing address of Grantor and the address of Beneficiary from
which information may be obtained are set forth in the introductory paragraph of
this Deed of Trust.
42. FIXTURE FILING. Certain of the personal property covered by this Deed
of Trust is or will become fixtures on the real property which is a part of the
Mortgaged Premises described on Schedule I, and this Trust Deed upon being filed
for record in the real estate records of the county wherein such fixtures are
situated shall operate also as a financing statement filed as a fixture filing
in accordance with the applicable provisions of the California Commercial Code
upon such of the properties which are or may become fixtures. The mailing
address of Grantor and the address of Beneficiary from which information may be
obtained are set forth in the introductory paragraph of this Deed of Trust. The
Grantor has an interest of record in such real property.
43. PARTIAL INVALIDITY. All rights, powers and remedies provided herein
are intended to be limited to the extent necessary so that they will not render
this Deed of Trust invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law. If any term of this Deed of Trust
shall be held to be invalid, illegal or unenforceable, the validity and
enforceability of the other terms of this Deed of Trust shall in no way be
affected thereby.
44. SUCCESSORS AND ASSIGNS. Whenever any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party; and all the covenants, promises and agreements in this Deed of Trust
contained by or on behalf of Grantor, or by or on behalf of Trustee or
Beneficiary, shall bind and inure to the benefit of the respective successors
and assigns of such parties, whether so expressed or not. If more than one party
signs this instrument as Grantor, then the term "GRANTOR" as used herein shall
mean all of such parties, jointly and severally.
45. HEADINGS. The headings in this instrument are for convenience of
reference only and shall not limit or otherwise affect the meaning of any
provision hereof.
21
<PAGE>
46. CHANGES, ETC. This instrument and the provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
47. ACCEPTANCE OF TRUST, NOTICE OF INDEMNIFICATION. Trustee accepts this
Trust when this Deed of Trust, duly executed and acknowledged, becomes a public
record as provided by law. Trustee is not obligated to notify any party hereto
of pending sale under any other deed of trust or of any action or proceeding in
which Grantor, Beneficiary or Trustee shall be a party unless Trustee brings
such action under this Deed of Trust. Trustee shall not be obligated to perform
any act required of it hereunder unless the performance of such act is requested
in writing and Trustee is reasonably indemnified against loss, cost, liability
and expense.
48. POWERS OF TRUSTEE. At any time or from time to time upon written
request of Beneficiary and the presentation of this Deed of Trust and without
affecting the personal liability of any person for payment of any indebtedness
hereby secured or performance of the indebtedness hereby secured, Trustee may,
without liability therefor and without notice: reconvey all or any part of the
Mortgaged Premises; consent to the making of any map or plat thereof; join with
Grantor in granting any easement thereon; join with Grantor in any declaration
of covenants and restrictions; or join with Grantor in any extension agreement
or any agreement subordinating the lien or charge hereof. Trustee or Beneficiary
may from time to time apply to any court of competent jurisdiction for aid and
direction in the execution of the trusts hereunder and the enforcement of the
rights and remedies available hereunder, and Trustee or Beneficiary may obtain
orders or decrees directing or confirming or approving acts in the extension of
said trusts and the enforcement of said rights and remedies. Grantor shall pay
to Trustee reasonable compensation and reimbursement for services and expenses
in the administration of the trusts created hereunder, including reasonable
attorneys' fees.
49. RECONVEYANCE. Upon Beneficiary's written request, and upon surrender
to Trustee of this Deed of Trust and upon payment of its fees, Trustee shall
reconvey, without warranty, the Mortgaged Premises or that portion thereof then
held hereunder. The recitals in such reconveyance of any matters or facts shall
be conclusive proof of the truthfulness thereof. To the extent permitted by law,
the reconveyance may be described by the grantee as "the person or persons
legally entitled thereto." Neither Beneficiary nor Trustee shall have any duty
to determine the rights of persons claiming to be rightful grantees of any
reconveyances. When the Mortgaged Premises have been fully reconveyed, the last
such reconveyance shall operate as a reassignment of all future rents, issues
and profits of the Mortgaged Premises to the person or persons legally entitled
thereto, unless such reconveyance expressly provides to the contrary.
50. NO LIABILITY ON TRUSTEE OR BENEFICIARY. Notwithstanding anything
contained herein, this Deed of Trust is only intended as security for the
indebtedness hereby secured, and Trustee and Beneficiary (in its capacity as
Beneficiary, but not in its capacity as Manager
22
<PAGE>
under the Management Agreement) shall not be obligated to perform or discharge,
and do not hereby undertake to perform or discharge, any obligation, duty or
liability of Grantor with respect to any of the Mortgaged Premises. The
foregoing sentence shall not be construed as a limitation on the duties and
obligations of Beneficiary in its capacity as Manager under the Management
Agreement, which duties and obligations as Manager are set forth in, and subject
to the requirements and limitations of, the Management Agreement and the
Operating Agreement (as that term is defined in the Management Agreement).
Except for their gross negligence or willful misconduct, no liability shall be
enforced or asserted against Trustee or Beneficiary in their exercise of the
powers herein respectively granted to them, and Grantor expressly waives and
releases any such liability. Grantor shall and does hereby agree to indemnify
and hold Trustee and Beneficiary harmless of and from any and all liability,
loss or damage which any of them may or might incur under or by reason of the
exercise of their respective rights hereunder and of and from any and all claims
and demands whatsoever which may be asserted against any of them by reason of
any alleged obligations or undertakings on any of their parts to perform or
discharge any of the terms, covenants or agreements of Grantor contained herein
or with respect to any of the Mortgaged Premises, nor shall they be responsible
or liable for any negligence in the management, operation, upkeep, repair or
control of the Mortgaged Premises resulting in loss or injury or death to any
licensee, employee, tenant or stranger. Without limiting the foregoing, neither
Trustee nor Beneficiary shall be responsible for any recitals herein or for
insuring the Mortgaged Premises, or for the recording, filing or refiling of
this Deed of Trust; nor shall Trustee or Beneficiary be bound to ascertain or
inquire as to the performance or observance of any covenants, conditions or
agreements on the part of the Grantor contained herein.
51. MONEYS RECEIVED BY TRUSTEE. All moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated in any manner from any
other moneys, except to the extent required by law, and Trustee shall be under
no liability for interest on any moneys received by him hereunder.
52. SPECIAL PROVISIONS FOR THE BENEFIT OF THE LENDERS. By acceptance of
this Deed of Trust, Beneficiary and Trustee each acknowledges solely for the
benefit of the Lenders that as long as any amounts due the Lenders under the
Credit Agreement or the Bridge Loan Agreement (as defined in the [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission) remain unpaid: (a) the Management Agreement, together with
[Omitted Confidential Information has been filed separately with the Securities
and Exchange Commission], contains certain provisions that under the
circumstances set forth therein limit or delay Beneficiary's right to enforce
this Deed of Trust or exercise its rights or remedies under this Deed of Trust
or require Beneficiary to release or subordinate the lien of this Deed of Trust,
all as set forth more fully in the Management Agreement; (b) Grantor, Trustee,
and Beneficiary may not agree to amend this Deed of Trust without first
obtaining the Lenders' written consent in accordance with the terms of the
Credit Agreement; and (c) Beneficiary shall not have the right to make any
payments that are to be
23
<PAGE>
claimed as Preservation Costs (as defined in the Securing Clause above) unless
and until Beneficiary has given the Grantor and the Lenders at least sixty (60)
days' notice in accordance with the notice provisions of the Management
Agreement of the proposed payment(s), and the Lenders fail to make such
payment(s) within such sixty- (60-) day period. At the request of the Lenders,
Beneficiary and Trustee shall release from the lien of this Deed of Trust, and
reconvey to Grantor, the personal property which is part of the Mortgaged
Property, including without limitation, the Contract Rights; PROVIDED, HOWEVER,
if Beneficiary, in its reasonable judgment, determines that the remaining
Mortgaged Property does not provide adequate security for the Pioneer Secured
Obligations, the obligation to release and reconvey personal property set forth
herein shall be conditioned upon Grantor granting an additional security
interest to Beneficiary covering additional real property (to be selected and
documented in the manner set forth in Section 9 of the Management Agreement)
such that the Pioneer Secured Obligations shall be adequately secured (as
determined by Beneficiary, in its reasonable judgment, in accordance with the
terms of the Management Agreement).
53. NO BENEFIT FOR GRANTOR. Grantor acknowledges that the provisions of
Section 52 and the restrictions described therein are solely for the benefit of
the Lenders, and not for the benefit of Grantor, and that Grantor shall not be
deemed a beneficiary of such provisions. Grantor further acknowledges that the
references throughout this Deed of Trust to Section 52, including without
limitation those references that declare the rights of the Trustee and/or the
Beneficiary to be subject to Section 52, are solely for the purpose of
recognizing the rights of the Lenders and the intercreditor arrangements between
the Lenders and Beneficiary under the Management Agreement and the [Omitted
Confidential Information has been filed separately with the Securities and
Exchange Commission]. As between Grantor and Beneficiary and between Grantor and
Trustee, such references shall be disregarded and shall be deemed to be of no
force or effect; Grantor shall not be entitled to any benefit therefrom or to
rely in any respect thereon; and Grantor may not assert the existence of such
provisions as a limitation upon or a basis for delay with respect to the
exercise of rights or remedies under this Deed of Trust by Trustee and/or
Beneficiary.
IN WITNESS WHERE, Grantor has caused these presents to be executed the day
and year first written above.
24
<PAGE>
PIONEER RESOURCES I, LLC, a Delaware
limited liability company
By: OLYMPIC RESOURCE MANAGEMENT LLC,
a Washington limited liability
company, Its Manager
By:
--------------------------------
Gary F. Tucker
Its President and Chief Executive
Officer
STATE OF WASHINGTON )
) ss.
COUNTY OF KITSAP )
On this_____ day of April, 2000, before me, a Notary Public in and for the
State of Washington, personally appeared GARY F. TUCKER, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
signed the instrument; on oath stated that he was authorized to execute this
instrument as the President and Chief Executive Officer of OLYMPIC RESOURCE
MANAGEMENT LLC, a Washington limited liability company, the company that
executed the instrument; acknowledged the said instrument to be the free and
voluntary act and deed of said limited liability company for the uses and
purposes therein mentioned; and on oath stated that he was duly elected,
qualified, and acting as said officer of the company; that said company is the
manager of PIONEER RESOURCES I, LLC, a Delaware limited liability company; that
said Washington limited liability company was authorized to execute the said
instrument on behalf of said Delaware limited liability company as its manager;
and that said instrument was the free and voluntary act and deed of said
Delaware limited liability company for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
--------------------------------------
NOTARY PUBLIC in and for the State of
Washington, residing at
---------------
My appointment expires
---------------
Print Name
----------------------------
25
<PAGE>
SCHEDULE I
LEGAL DESCRIPTION
PARCEL 1
COMMANDER NORTH TRACT
TEHAMA COUNTY, CALIFORNIA
THE LAND REFERRED TO HEREIN IS SITUATED IN THE UNINCORPORATED AREA, STATE OF
CALIFORNIA, COUNTY OF TEHAMA, AND IS DESCRIBED AS FOLLOWS:
TOWNSHIP 24 NORTH, RANGE 8 WEST, M.D.B. & M.:
Section 1: Lots 1, 2, 3 and 4, South 1/2 of North 1/2, North 1/2 of Southwest
1/4, Southeast 1/4
Section 5: Lot 2, Southwest 1/4 of Northeast 1/4, Northwest 1/4 of Southeast
1/4, Northeast 1/4 of Southwest 1/4
Section 11: South 1/2 of North 1/2, East 1/2 of Southwest 1/4, Northwest 1/4 of
Southeast 1/4, South 1/2 of Southeast 1/4
Section 17: Southwest 1/4 of Northwest 1/4, Northwest 1/4 of Southwest 1/4
Section 18: East 1/2 of Southeast 1/4
Section 19: South 1/2 of Northeast 1/4, West 1/2 of Southeast 1/4
Section 30: North 1/2 of Northeast 1/4
Section 32: Southeast 1/4 of Northeast 1/4
Section 33: Southwest 1/4 of Northwest 1/4
TOWNSHIP 24 NORTH, RANGE 9 WEST, M.D.B. & M.:
Section 1: Southwest 1/4 of Northeast 1/4
Section 2: Southeast 1/4 of Northeast 1/4
Section 3: Lot 2 (or fractional Northwest 1/4 of Northeast 1/4), West
1/2 of the South 80 acres of the fractional Northeast 1/4 (or
the Southwest 1/4 of the Northeast 1/4), Lot 4 (or the
fractional Northwest 1/4 of Northwest 1/4), West 1/2 of the
South 80 acres of the fractional Northwest 1/4 (or the
Southwest 1/4 of Northwest 1/4) of fractional section
Section 4: Lot 4 (or fractional Northwest 1/4 of the Northwest 1/4),
the South 80 acres of fractional Northwest 1/4 (or the South
1/2 of the Northwest 1/4) of fractional section
Section 5: Lots 1 and 2 (or the fractional North 1/2 of Northeast 1/4) of
fractional section
Section 14: Northwest 1/4 of Northeast 1/4, West 1/2 of Southeast 1/4
Section 15: Northwest 1/4
Section 16: All
Section 17: East 1/2 of West 1/2, West 1/2 of Southwest 1/4, Northwest 1/4
of Northwest 1/4
1
<PAGE>
Section 18: Northeast 1/4 of Northeast 1/4
(continued)
Section 20: West 1/2, East 1/2 of Southeast 1/4
Section 23: Southeast 1/4, West 1/2 of Northeast 1/4
Section 26: All
Section 29: Northeast 1/4 of Northeast 1/4, West 1/2
Section 32: West 1/2, West 1/2 of East 1/2, East 1/2 of Southeast 1/4,
Southeast 1/4 of Northeast 1/4
Section 33: West 1/2 of Southwest 1/4, North 1/2 of Southeast 1/4, South 1/2
of Northeast 1/4
Section 34: Southwest 1/4, Southwest 1/4 of Northwest 1/4
Excepting one-half interest in and to all oil, gas and other minerals as
conveyed to Assets Corporation, by Deed dated November 7, 1946 and recorded
November 20, 1946 in Book 176 of Tehama County Official Records, at page 432.
TOWNSHIP 25 NORTH, RANGE 8 WEST, M.D.B. & M.:
Section 1: All
Section 2: West 1/2 of Southwest 1/4
Section 3: All
Section 5: Lots 1, 2, 3 and 4, South 1/2 of North 1/2
Section 7: Southeast 1/4
Section 9: East 1/2
Section 10: Northeast 1/4
Section 11: All
Section 13: Northeast 1/4, South 1/2
Section 14: North 1/2 of Southeast 1/4, Northeast 1/4 of Southwest 1/4
Section 15: Northeast 1/4
Section 17: North 1/2
Section 21: North 1/2, Southwest 1/4, West 1/2 of Southeast 1/4
Section 23: Southeast 1/4
Section 24: Southeast 1/4, East 1/2 of Southwest 1/4, Southwest 1/4 of
Southwest 1/4, Northeast 1/4 of Northeast 1/4, South 1/2 of
Northeast 1/4
Section 25: North 1/2 of North 1/2, Southeast 1/4 of Northeast 1/4,
Southwest 1/4 of Northwest 1/4, Northwest 1/4 of Southwest
1/4, South 1/2 of South 1/2
Section 27: North 1/2, East 1/2 of Southwest 1/4, Southeast 1/4
Section 28: North 1/2 of Northeast 1/4, Southwest 1/4 of Northeast 1/4
Section 33: Southwest 1/4 of Southeast 1/4
Section 35: All
Section 36: All
2
<PAGE>
TOWNSHIP 26 NORTH, RANGE 8 WEST, M.D.B. & M.:
Section 15: All
Section 19: All
(continued)
Section 23: All
Section 25: All
Section 27: All
Section 31: East 1/2, East 1/2 of Northwest 1/4, Lots 1 and 2
Section 33: All
Section 35: All
3
<PAGE>
PARCEL 2
COMMANDER MIDDLE TRACT
TEHAMA COUNTY, CALIFORNIA
THE LAND REFERRED TO HEREIN IS SITUATED IN THE UNINCORPORATED AREA, STATE OF
CALIFORNIA, COUNTY OF TEHAMA, AND IS DESCRIBED AS FOLLOWS:
TOWNSHIP 23 NORTH, RANGE 7 WEST, M.D.B. & M.:
Section 30: Lots 3 and 4
TOWNSHIP 23 NORTH, RANGE 8 WEST, M.D.B. & M.:
Section 14: East 1/2 of Southeast 1/4
Section 16: Northwest 1/4 of Southwest 1/4
Section 21: Southeast 1/4 of Southwest 1/4
Section 23: East 1/2 of Northeast 1/4, Southeast 1/4 of Southwest 1/4,
Southeast 1/4 of Southeast 1/4
Section 24: Southwest 1/4 of Southwest 1/4
Section 25: West 1/2 of Northwest 1/4, Southeast 1/4 of Northwest 1/4,
Southeast 1/4, East 1/2 of Southwest 1/4, Southwest 1/4 of
Southwest 1/4
Section 26: Northeast 1/4, East 1/2 of Southeast 1/4, North 1/2 of Northwest
1/4
Section 27: Northeast 1/4 of Northeast 1/4, North 1/2 of Northwest 1/4,
Southeast 1/4 of Northwest 1/4
Section 28: North 1/2 of Southwest 1/4, Southwest 1/4 of Southwest 1/4,
Northwest 1/4 of Southeast 1/4, East 1/2 of Northwest 1/4,
Southwest 1/4 of Northwest 1/4, Northeast 1/4 of Northeast 1/4
Section 29: North 1/2 of Southeast 1/4, Southeast 1/4 of Southeast 1/4,
Southwest 1/4 of Northeast 1/4
Section 30: North 1/2 of Northeast 1/4, Southeast 1/4 of Northeast 1/4,
Northeast 1/4 of Southeast 1/4 and fractional North 1/2 of
Northwest 1/4
Section 32: Southeast 1/4 of Northwest 1/4, Northeast 1/4 of Southwest 1/4,
West 1/2 of Southwest 1/4, East 1/2 of Southeast 1/4, Southwest 1/4
of Southeast 1/4
Section 33: Southwest 1/4 of Southwest 1/4
Section 35: East half of the Southeast quarter.
Section 36: All
TOWNSHIP 23 NORTH, RANGE 9 WEST, M.D.B. & M.:
Section 15: South 1/2 of Southwest 1/4, Southwest 1/4 of Southeast 1/4
Section 16: Northwest quarter of Southwest quarter, East half of Southwest
quarter of the Northwest quarter.
Section 22: East 1/2 of Northwest 1/4, Northwest 1/4 of Northeast 1/4
END OF EXHIBIT A
4
<PAGE>
SCHEDULE II
PERMITTED ENCUMBRANCES
Those exceptions set forth in Schedule B that certain mortgage title insurance
policy issued by First American Title Company pursuant to that certain
preliminary title report prepared by Northern California Title Company (Order
Number 27380) dated April 13, 2000.
1
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,880
<SECURITIES> 0
<RECEIVABLES> 2,911
<ALLOWANCES> 0
<INVENTORY> 12,195
<CURRENT-ASSETS> 20,773
<PP&E> 60,212
<DEPRECIATION> 15,853
<TOTAL-ASSETS> 68,290
<CURRENT-LIABILITIES> 3,570
<BONDS> 13,163
0
0
<COMMON> 0
<OTHER-SE> 51,232
<TOTAL-LIABILITY-AND-EQUITY> 68,290
<SALES> 9,369
<TOTAL-REVENUES> 13,449
<CGS> 4,005
<TOTAL-COSTS> 10,973
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 310
<INCOME-PRETAX> 2,257
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<NET-INCOME> 2,367
<EPS-BASIC> .52
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