<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10239
PLUM CREEK TIMBER COMPANY, L.P.
(Exact name of registrant as specified in its charter)
Delaware 91-1443693
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
999 Third Avenue, Seattle, Washington 98104-4096
Telephone: (206) 467-3600
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> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Third Quarter
--------------------------------
1995 1994
---- ----
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues .................................... $ 152,296 $ 147,387
--------- ---------
Costs and Expenses:
Cost of Goods Sold ................ 99,901 97,188
Selling, General and Administrative 10,013 10,400
--------- ---------
Total Costs and Expenses ........ 109,914 107,588
--------- ---------
Operating Income ............................ 42,382 39,799
Interest Expense ............................ (11,753) (12,002)
Interest Income ............................. 355 190
Other Expense - Net ......................... (600) (913)
--------- ---------
Income before Income Taxes .................. 30,384 27,074
Provision for Income Taxes .................. 211 319
--------- ---------
Net Income .................................. $ 30,173 $ 26,755
General Partner Interest .................... 6,003 4,608
--------- ---------
Net Income Allocable to Unitholders ......... $ 24,170 $ 22,147
========= =========
Net Income per Unit ......................... $ 0.60 $ 0.54
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements
1
<PAGE> 3
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
--------------------------------
1995 1994
---- ----
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues .................................... $ 435,762 $ 425,503
--------- ---------
Costs and Expenses:
Cost of Goods Sold ................ 285,426 273,987
Selling, General and Administrative 30,341 32,349
--------- ---------
Total Costs and Expenses ........ 315,767 306,336
--------- ---------
Operating Income ............................ 119,995 119,167
Interest Expense ............................ (35,507) (34,364)
Interest Income ............................. 976 708
Other Expense - Net ......................... (1,584) (3,682)
--------- ---------
Income before Income Taxes .................. 83,880 81,829
Provision for Income Taxes .................. 781 625
--------- ---------
Net Income .................................. $ 83,099 $ 81,204
General Partner Interest .................... 16,534 11,632
--------- ---------
Net Income Allocable to Unitholders ......... $ 66,565 $ 69,572
========= =========
Net Income per Unit ......................... $ 1.64 $ 1.71
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements
2
<PAGE> 4
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents ............. $ 85,131 $ 60,942
Accounts Receivable ................... 33,994 26,866
Inventories ........................... 43,077 54,685
Timber Contract Deposits .............. 14 2,823
Other Current Assets .................. 7,842 4,013
--------- ---------
170,058 149,329
Timber and Timberlands - Net .................... 475,199 495,462
Property, Plant and Equipment - Net ............. 164,729 162,017
Other Assets .................................... 14,670 16,418
--------- ---------
Total Assets .......................... $ 824,656 $ 823,226
========= =========
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt ..... $ 14,100 $ 13,000
Accounts Payable ...................... 15,315 13,231
Interest Payable ...................... 12,278 7,681
Wages Payable ......................... 5,410 6,430
Taxes Payable ......................... 7,025 6,094
Workers' Compensation Liabilities ..... 1,968 2,610
Other Current Liabilities ............. 6,420 6,778
--------- ---------
62,516 55,824
Long-Term Debt .................................. 419,800 433,900
Lines of Credit ................................. 97,500 97,500
Workers' Compensation Liabilities ............... 8,901 9,367
Other Liabilities ............................... 3,776 3,658
--------- ---------
Total Liabilities ..................... 592,493 600,249
--------- ---------
Commitments and Contingencies
PARTNERS' CAPITAL
Limited Partners' Units ......................... 232,336 223,028
General Partner ................................. (173) (51)
--------- ---------
Total Partners' Capital ............... 232,163 222,977
--------- ---------
Total Liabilities and Partners' Capital $ 824,656 $ 823,226
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements
3
<PAGE> 5
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months
-------------------------------
1995 1994
---- ----
(In Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income ..................................................... $ 83,099 $ 81,204
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization ............. 39,646 39,122
Gain on Asset Dispositions - Net ..................... (2,577) (2,530)
Working Capital Changes:
Accounts Receivable ................................ (7,128) (2,599)
Inventories ........................................ 11,608 1,869
Timber Contract Deposits and Other Current Assets... (1,020) 907
Accounts Payable ................................... 2,084 (32)
Other Accrued Liabilities .......................... 3,508 8,941
Funding of Benefit Plans - Net ....................... 1,290 (9,613)
Other ................................................ (1,753) (31)
--------- ---------
Net Cash Provided By Operating Activities ...................... $ 128,757 $ 117,238
--------- ---------
Cash Flows From Investing Activities:
Additions to Properties .............................. $ (21,012) $ (16,436)
Proceeds from Asset Dispositions ..................... 5,163 3,715
Other ................................................ (1,806)
--------- ---------
Net Cash Used In Investing Activities .......................... $ (17,655) $ (12,721)
--------- ---------
Cash Flows From Financing Activities:
Cash Distributions ................................... $ (73,913) $ (59,732)
Issuance of Long-Term Debt ........................... 150,000
Retirement of Long-Term Debt ......................... (13,000) (13,000)
Borrowings Under the Lines of Credit ................. 297,500 239,345
Repayments Under the Lines of Credit ................. (297,500) (401,845)
--------- ---------
Net Cash Used In Financing Activities .......................... $ (86,913) $ (85,232)
--------- ---------
Increase In Cash and Cash Equivalents .......................... 24,189 19,285
Cash and Cash Equivalents:
Beginning of Period ................................. 60,942 34,025
--------- ---------
End of Period ........................................ $ 85,131 $ 53,310
========= =========
</TABLE>
4
See accompanying Notes to Combined Financial Statements
<PAGE> 6
PLUM CREEK TIMBER COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include all the accounts of Plum
Creek Timber Company, L.P. (the "Partnership") and its combined subsidiaries.
All significant intercompany transactions have been eliminated in the
combination.
The Partnership owns 98 percent of Plum Creek Manufacturing, L.P.
("Manufacturing") and 96 percent of Plum Creek Marketing, Inc. ("Marketing").
Plum Creek Management Company, L.P. (the "General Partner") manages the
businesses of the Partnership, Manufacturing and Marketing and owns the
remaining two percent of Manufacturing and four percent of Marketing. As used
herein, "Company" refers to the combined entities of the Partnership,
Manufacturing and Marketing.
The financial statements included in this Form 10-Q are unaudited and
do not contain all of the information required by generally accepted accounting
principles to be included in a full set of financial statements. The financial
statements in the Partnership's 1994 annual report on Form 10-K include a
summary of significant accounting policies of the Company and should be read in
conjunction with this Form 10-Q. In the opinion of management, all material
adjustments necessary to present fairly the results of operations for such
periods have been included. All such adjustments are of a normal and recurring
nature. The results of operations for any interim period are not necessarily
indicative of the results of operations for the entire year.
The taxable income, deductions, and credits of the Partnership and
Manufacturing are allocated to the Unitholders based on the number of depositary
units representing limited partner interests ("Units") held and the holding
period. Distributions of cash to a Unitholder are considered a non-taxable
return of capital to the extent of the Unitholder's basis in the Units (as such
basis is increased by the allocable share of the Partnership's and
Manufacturing's taxable income). Any such distributions in excess of the
Unitholder's basis in the Units will result in taxable gain. However,
Unitholders will be required to include in their income tax filings their
allocable share of the Partnership's and Manufacturing's income, regardless of
whether cash distributions are made. It is anticipated that 1995 taxable income
allocated to Unitholders will be in excess of 1995 cash distributions. However,
in virtually all cases, a Unitholder's 1995 cash distribution will significantly
exceed the tax liability related to the Unitholder's allocated taxable income
from the Partnership and Manufacturing. For tax exempt entities, such as IRAs,
most of the Partnership's and Manufacturing's taxable income is treated as
Unrelated Business Taxable Income ("UBTI"). To the extent a tax exempt entity
has more than $1,000 of UBTI, it may be required to pay federal income taxes.
Marketing, as a separate taxable corporation, provides for income taxes on a
separate company basis. Marketing provides for deferred taxes in order to
reflect the tax consequences in future years
5
<PAGE> 7
of the difference between the financial statement and tax basis of assets and
liabilities at year-end.
Net Income per Unit is calculated using the weighted average number of
Units outstanding, divided into the combined Company net income, after adjusting
for the General Partner interest. The weighted average number of Units
outstanding was 40,608,300 for the three and nine month periods ended September
30, 1995 and 1994.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials (logs) . . . . . . . . . . $ 14,589 $ 25,908
Work-in-process . . . . . . . . . . . . 5,071 5,349
Export logs . . . . . . . . . . . . . . 982 1,274
Finished goods . . . . . . . . . . . . . 16,348 16,485
--------- ---------
36,990 49,016
Supplies . . . . . . . . . . . . . . . . 6,087 5,669
--------- ---------
Total . . . . . . . . . . . . . . . . $ 43,077 $ 54,685
--------- ---------
</TABLE>
Excluding supplies, which are valued at average cost, the cost of the
LIFO inventories valued at the lower of average cost or market (which
approximates current cost) at September 30, 1995 and December 31, 1994 was $43.4
million and $54.9 million, respectively.
3. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT
Timber and timberlands consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Timber and logging roads - net . . . . . . . . . $ 430,679 $ 450,956
Timberlands . . . . . . . . . . . . . . . . . . . 44,520 44,506
---------- ----------
Timber and Timberlands - net . . . . . . $ 475,199 $ 495,462
---------- ----------
</TABLE>
6
<PAGE> 8
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Land, buildings and improvements . . . . . . . . $ 47,818 $ 47,429
Machinery and equipment . . . . . . . . . . . . . 224,909 208,085
----------- -----------
272,727 255,514
Accumulated depreciation . . . . . . . . . . . . . (107,998) (93,497)
----------- -----------
Property, Plant and Equipment - net . . . . . $ 164,729 $ 162,017
----------- -----------
</TABLE>
4. BORROWINGS
As of September 30, 1995, the Company had $97.5 million of borrowings
under the two revolving lines of credit and letters of credit outstanding in the
amount of $0.8 million. One line of credit allows the Partnership to borrow $100
million through October 31, 2000, of which $82.5 million was outstanding at
September 30, 1995. The other line of credit allows the Partnership to borrow
$35 million through October 28, 1996 (any borrowings outstanding at that time
are payable in quarterly installments, at the option of the Partnership, due
January 1997 through October 1998), of which $15 million was outstanding at
September 30, 1995. As of September 30, 1995, the Company had unused bank lines
of credit totaling $36.7 million. As of October 6, 1995, $91.5 million of
borrowings on the lines of credit were repaid.
5. SUBSEQUENT EVENTS
On October 17, 1995, the Board of Directors of the General Partner
authorized the Partnership to make a distribution of $0.49 per Unit for the
third quarter of 1995. Total distributions will equal approximately $25.9
million (including $6.0 million to the General Partner) and will be paid on
November 29, 1995 to Unitholders of record on November 15, 1995.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Plum Creek Timber Company, L.P. (the "Partnership") owns 98 percent of
Plum Creek Manufacturing, L.P. ("Manufacturing") and 96 percent of Plum Creek
Marketing, Inc. ("Marketing"). Plum Creek Management Company, L.P. (the "General
Partner") manages the businesses of the Partnership, Manufacturing and Marketing
and owns the remaining two percent of Manufacturing and four percent of
Marketing. As used herein, "Company" refers to the combined entities of the
Partnership, Manufacturing, and Marketing. "Resources Segment" refers to the
combined timber and land management businesses of the Partnership, and
"Manufacturing Segment" refers to the combined businesses of Manufacturing and
Marketing.
EVENTS AND TRENDS AFFECTING OPERATING RESULTS
MARKET FORCES. The demand for logs and manufactured wood products
depends upon international and domestic market conditions, the value of the U.S.
dollar in foreign markets, competition, log supply, the use and introduction of
alternative products and other factors. In particular, the demand for logs,
lumber, plywood and medium density fiberboard ("MDF") is affected by residential
and industrial construction, and repair and remodel activity. These activities
are subject to fluctuations from changes in economic conditions, tariffs,
interest rates, population growth and other economic, demographic and
environmental factors.
SEASONALITY. Domestic log sales volumes are typically at their lowest
point in the second quarter of each year during spring break-up, when warming
weather thaws and softens roadbeds, restricting access to logging sites.
Revenues from export log sales are affected in part by variations in inventory,
both domestically and in the countries where such logs are sold as well as by
weather conditions. Winter logging activity in the Pacific Northwest takes place
at lower elevations, where predominantly second growth logs are found,
decreasing the volume of export quality logs sold during this time of the year.
Demand for manufactured products is generally lower in the fall and
winter when activity in the construction, industrial and repair and remodeling
markets is slower, and higher in the spring and summer quarters when these
markets are more active. Working capital varies with seasonal fluctuations. Log
inventories increase during the winter months to prepare for reduced harvest
during spring break-up.
CURRENT MARKET CONDITIONS. Prices for domestic logs in the Cascades
Region increased from levels experienced in the third quarter of 1994 due to
strong pulp and paper markets and the sale of a portion of export quality logs
in the domestic market due to weak export markets. Prices for domestic logs in
the Rockies Region have decreased from levels experienced in the third quarter
of 1994 as a result of weaker lumber markets and aggressive competition from
Canadian lumber
8
<PAGE> 10
producers. The downward pressure on prices was mitigated in part by strong
demand for whole logs for chipping in pulp and paper markets. Pulp log prices
began declining in the third quarter of 1995 in both regions due to the
saturation of logs in the pulp market. Export log prices decreased as compared
to the third quarter of 1994 and the second quarter of 1995 due to a weakened
Japanese economy, a decline in Japanese housing starts, and increased
competition from lower priced substitutes.
Third quarter 1995 industry composite indices for lumber and plywood
commodity prices were 13% lower and 3% higher, respectively, than the third
quarter of 1994, and were 6% and 8% higher than the second quarter of 1995,
respectively. The decrease in lumber prices, as compared to prior year third
quarter, is attributed to the continued relative weakness in the housing market
(where modest improvement was experienced during the third quarter of 1995),
strong production and aggressive pricing by Canadian lumber producers, and
increased competition from substitutes. Overall, plywood markets have remained
strong, although industrial markets were weak in the third quarter as RV and
boat manufacturers slowed production to prepare for model year changes.
Commodity prices for lumber and plywood increased in the third quarter of 1995,
as compared to the second quarter of 1995, due to seasonal increases in housing
construction and the decline in interest rates. MDF prices decreased by 10% in
the third quarter of 1995 as compared to the third quarter of 1994, and
decreased by 13% as compared to the second quarter of 1995. The decrease in
prices was due to a weakening in demand caused by excess inventory levels,
cautious purchasing by distributors and end-users concerned about future price
declines, and reduced repair and remodel activity.
THREATENED AND ENDANGERED SPECIES. In July 1990, the United States Fish
and Wildlife Service ("USFWS") listed the Northern Spotted Owl ("Owl") as a
threatened species throughout its range in Washington, Oregon and California
under the federal Endangered Species Act ("ESA").
At the time of the listing, the USFWS issued suggested guidelines
("Guidelines") to be followed by landowners in order to comply with the ESA's
prohibition against harming or harassing Owls. These Guidelines were rescinded
in response to an industry lawsuit, but continue to serve as the basis for USFWS
enforcement of the ESA. The Guidelines impose several requirements, including
the restriction and preclusion of harvest activities in areas within a 1.8 mile
radius (approximately 6,600 acres) of known nest sites or activity centers for
pairs of Owls or territorial single Owls ("Activity Areas"). Under the
Guidelines, at least 40% in the aggregate of the area within Activity Areas has
to be maintained as suitable Owl habitat. In addition, 70 acres immediately
around nest sites have to be preserved.
On June 9, 1992, the USFWS published its draft recovery plan (the
"Draft Plan") for the Owl. A recovery plan, once final, is not legally binding,
but it may form the basis for future regulation. The Draft Plan recommends that
7.5 million acres of federal land be set aside in designated conservation areas
("DCA's") where timber harvesting and road building would be prohibited.
9
<PAGE> 11
In June 1992, the Washington State Forest Practices Board (the "Board")
adopted temporary regulations related to all forest practice applications
("FPA's") which require that FPA's comply with the Washington State
Environmental Policy Act ("SEPA") for all activities within the 500 acres of
habitat surrounding nest sites or activity centers. In November 1995, the Forest
Practices Board adopted a final Owl rule that will take effect in July 1996.
Until the final rule takes effect, the temporary rule will govern. Under the
final rule, restrictions substantially similar to those contained in the
Guidelines would apply in designated Owl special emphasis areas ("SEAs").
Outside of SEAs, only 70 acres surrounding Activity Areas would be protected
during the breeding season only. As a result, the final rule will result in the
same level of regulation on areas within SEAs and fewer restrictions on the
Partnership's activities in areas outside of SEAs due to the Owl. Approximately
60% of the Partnership's lands in the Cascade Region are within SEAs.
On February 7, 1995, the USFWS announced that it is proposing to draft
a special rule ("Special Rule") to redefine private landowner obligations with
regard to Owls under the ESA. The final Washington state Owl rule is expected to
form the basis for the Special Rule in Washington state.
On July 16, 1993, the Clinton Administration proposed a new forest
policy (the "Forest Plan") that would substantially reduce harvest from public
lands in Owl forests and provide for the conservation of the Owl and numerous
other species. In December 1994, the Forest Plan was approved by a Federal
District Court.
In March 1994, the U.S. Circuit Court of Appeals for the District of
Columbia ruled in Sweet Home Chapter of Communities for a Great Oregon v.
Babbitt, that Congress never intended habitat modifications to be a violation of
the ESA. The court therefore found invalid the regulation that defines "harm" to
a species to include habitat modification. This regulation provides the legal
basis for the Guidelines. On June 29, 1995, the United States Supreme Court
overturned the Circuit Court's decision and upheld the regulation.
IMPACT OF REGULATIONS ON PARTNERSHIP. Under the Guidelines issued by
the USFWS in 1990, approximately 143,000 acres of the 330,000 acres in the
Partnership's Cascade region lie within Activity Areas. Compliance with the ESA
and SEPA is causing delays and in some cases modification of Partnership FPA's
in Owl Activity Areas and may cause denials of future Partnership FPA's.
In October 1995, the Partnership formally applied for a multi-species,
50 year permit under the ESA from the USFWS and the National Marine Fisheries
Service ("NMFS") that would cover the Partnership's forest management on 170,000
acres within SEAs in the Cascade Region (the "Planning Area"). As a part of the
permit application, the Partnership prepared a habitat conservation plan ("HCP")
that would govern the Partnership's management activities in the Planning Area.
The Partnership expects to receive the permit in the first quarter of 1996,
following completion of the public review process. There are, however, no
assurances that the permit will ultimately be issued by the USFWS and NMFS.
10
<PAGE> 12
The permit, if issued, would authorize the incidental take in the
Planning Area of the Owl, Marbled Murrelet, Grizzly Bear and Gray Wolf, which
are currently listed under the ESA, as well as numerous other species should
they become listed during the term of the permit. In addition, as an incentive
to Plum Creek to create additional wildlife habitat in the Planning Area, the
permit may extend for an additional 50 years if wildlife habitat exceeds levels
authorized in the HCP. The permit thus would provide long-term certainty and
predictability to the Partnership's harvest activities. Under the ESA, the
permit may allow impacts on species incidental to normal management activities
in exchange for mitigating measures agreed to by the landowner in the HCP. The
restrictions in the HCP would replace restrictions for Owls under the final
Washington state Owl rule, the Guidelines, the Special Rule, if adopted, and
SEPA.
The ESA also prohibits the federal government from causing jeopardy to
species listed under the ESA or from destroying or adversely modifying their
designated critical habitat. Private landowners are potentially affected by this
restriction if a private activity requires federal action, such as the granting
of access or federal funding. Where there is such a federal connection, the
federal agency involved must consult with the USFWS or NMFS, in the case of
anadromous fish, to determine that the proposed activity would not cause
jeopardy to the listed species or cause direct or indirect adverse modification
of its designated critical habitat. If the landowner's proposed activity does
adversely modify critical habitat, the USFWS or NMFS must propose, where
possible, alternatives or modifications to the proposed activity. The
Partnership's Timberlands are often intermingled with federal land in or near
areas that include the habitats of a number of threatened or endangered species
such as the Owl and the Grizzly Bear. Thus, access across federal lands to
certain of the Partnership's Timberlands in such areas has been, and is likely
to continue to be, delayed by the administrative process and legal challenges
and may be subjected to restriction under the ESA.
The ultimate impact of the Owl listing, as well as listings of
additional species under the ESA, on the Partnership will depend on (i) the
number of Activity Areas actually found on or near Partnership Timberlands, (ii)
the availability and amount of suitable habitat within individual Activity
Areas, (iii) the outcome of the Clinton Administration's forest policy, (iv)
future regulations and restrictions placed on private and public lands, (v)
promulgation, interpretation and application of wildlife regulations by both the
USFWS (including the proposed Special Rule) and the Washington State Department
of Natural Resources, (vi) the outcome of the Partnership's efforts to obtain a
multi-species permit from the USFWS and NMFS, (vii) the impact of reduced
harvests upon stumpage prices, and (viii) the outcome of litigation.
Although the continuing uncertainty surrounding efforts to conserve the
Owl make it difficult to assess the future impact of the Owl listing on the
Partnership, at this time the General Partner does not believe that federal and
state laws and regulations related to the Owl will have a materially adverse
effect on the financial position of the Company, its results of operations or
liquidity. There can be no assurances, however, that (i) future interpretation
or administration of current laws and regulations, (ii) changes in laws or
regulations, (iii) increases in the number of Owls on or near Partnership lands,
or (iv) decreases in suitable habitat adjacent to Partnership lands will not
adversely
11
<PAGE> 13
affect the operations, financial position or liquidity of the Company.
The General Partner anticipates that increasingly strict laws and
regulations relating to the environment, natural resources, forestry operations,
and health and safety matters, as well as increased social concern over
environmental issues, may result in additional restrictions on the Company
causing increased costs, additional capital expenditures and reduced operating
flexibility.
LEGISLATION RESTRICTING LOG EXPORTS. Federal legislation currently
prohibits the sale of unprocessed logs harvested from federal lands located in
the western half of the U.S. if such logs will be exported from the United
States by the purchaser thereof or if such logs will be used by the purchaser
thereof as a substitute for timber from private lands which is exported by such
purchaser. This prohibition does not impact the purchase of timber by the
Partnership from federal lands in the geographic area of the Partnership's
conversion facilities. In addition, federal legislation prohibits the export of
unprocessed logs harvested from certain state lands. As a result, Washington and
Oregon currently prohibit the export of all logs harvested from state lands.
Proposals have also been made from time to time, but to date have been
unsuccessful, to either ban or tax the export of unprocessed logs harvested from
private lands.
LEGAL PROCEEDINGS
On June 7, 1995, the Company received a Compliance Order ("Order") from
the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order
alleges that the installation in 1990 of a boiler at the Company's Pablo sawmill
did not undergo new source performance review. Work on the boiler project
commenced in March of 1989, when the applicable regulation did not require a
review. Prior to final installation of the boiler, however, new rules were
promulgated that required such review. The EPA has taken the position that the
new rules applied, and is seeking compliance with the new source performance
standards which require testing and installation of an emissions monitoring
system. The standards, if applicable, would also require the installation of
emissions control equipment on the boiler. Plum Creek is working with the EPA to
determine whether the new standards were applicable to the boiler and to resolve
other issues arising under the Order.
There is no pending litigation, and to the knowledge of the General
Partner there is no threatened litigation, involving the Company which would
have a material adverse effect on the financial position, the results of
operations or liquidity of the Company.
12
<PAGE> 14
FINANCIAL CONDITION AND LIQUIDITY
During the first nine months of 1995, net cash provided by operating
activities totaled $128.8 million compared to $117.2 million for the same period
in 1994. The increase was primarily due to non-recurring cash advances and
reimbursements made in 1994 to the General Partner to fund the General Partner's
various executive and key employee benefit plans.
The Partnership has two unsecured revolving lines of credit ("Lines of
Credit") with a group of banks that permit the Partnership to borrow up to $135
million for general corporate purposes, including up to $5 million of standby
letters of credit issued on behalf of the Partnership or Manufacturing. The
Lines of Credit bear a floating rate of interest. One line of credit allows the
Partnership to borrow $100 million through October 31, 2000, of which $82.5
million was outstanding at September 30, 1995. The other line of credit allows
the Partnership to borrow $35 million through October 28, 1996 (any borrowings
outstanding at that time are payable in quarterly installments, at the option of
the Partnership, due January 1997 through October 1998), of which $15 million
was outstanding at September 30, 1995. As of September 30, 1995, there were
letters of credit outstanding in the amount of $0.8 million. As of October 6,
1995, $91.5 million of borrowings on the Lines of Credit were repaid.
The Company's borrowing agreements contain certain restrictive
covenants, including limitations on harvest levels, sale of assets, cash
distributions and the amount of future indebtedness. The Company was in
compliance with such covenants as of September 30, 1995.
The Partnership will distribute $0.49 per Unit for the third quarter of
1995. The distribution will equal $25.9 million (including $6.0 million to the
General Partner), and will be paid on November 29, 1995 to Unitholders of record
on November 15, 1995. The computation of cash available for distribution
includes required reserves for the payment of principal and interest, as well as
other reserves established at the discretion of the General Partner for working
capital, capital expenditures, and future cash distributions.
Cash required to meet the Company's quarterly cash distributions,
capital expenditures and principal and interest payments will be significant.
The General Partner expects that all debt service will be funded from current
funds and cash generated from operations. The Partnership expects to make cash
distributions from current funds and cash generated from operations.
The Company is involved in certain environmental and regulatory
proceedings and other related matters. Although it is possible that new
information or future developments could require the Company to reassess its
potential exposure related to these matters, the Company believes, based upon
available information, that the resolution of these issues will not have a
materially adverse effect on its results of operations, financial position or
liquidity.
13
<PAGE> 15
CAPITAL EXPENDITURES
Capital expenditures for the first nine months of 1995 totaled $21.0
million compared to $16.4 million for the same period in 1994. Total 1995
capital expenditures are expected to equal $30 million, compared to $25.8
million expended in 1994. The principal projects in the 1995 plan include a
project in the MDF plant to produce "Super-Refined MDF(2)", a higher quality MDF
product that can be machined and finished more efficiently, adding significant
value to the MDF product line. Planned capital expenditures also include the
purchase and installation of various lumber and plywood value-added projects,
equipment upgrades to meet environmental requirements and road construction and
timberland reforestation. It is anticipated that the planned 1995 capital
expenditures will be funded from current funds and cash generated from
operations.
14
<PAGE> 16
RESULTS OF OPERATIONS
THIRD QUARTER 1995 COMPARED TO THIRD QUARTER 1994
The following table compares operating income by segment for the
quarters ended September 30, 1995 and 1994.
Operating Income by Segment
(Unaudited)
<TABLE>
<CAPTION>
Third Quarter
(In Thousands)
1995 1994
--------- ---------
<S> <C> <C>
Resources Segment . . . . . . . . . . . . . . . . $ 42,784 $ 42,656
Manufacturing Segment . . . . . . . . . . . . . . 9,430 10,339
Other Costs and Eliminations . . . . . . . . . . . (9,832) (13,196)
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . $ 42,382 $ 39,799
========= =========
</TABLE>
Resources Segment revenues were $95.8 million and $89.9 million for the
third quarter of 1995 and 1994, respectively. Revenues were $5.9 million higher
in 1995 primarily due to a $9.5 million increase in revenues from pulpwood and
chip sales offset in part by lower domestic logs prices, which decreased by 8%
from the prior year quarter. The increase in pulpwood and chip revenues was due
to the addition of in-woods chipping operations, which utilize small tops of
trees and small trees from thinning operations, and a significant increase in
pulp log prices and sales volume as compared to the third quarter of 1994 as a
result of strong pulp and paper markets. The decrease in domestic log prices, as
compared to the third quarter of 1994, is attributable entirely to the Rockies
Region and was due to weak lumber markets and aggressive competition from
Canadian lumber producers.
Resources Segment costs and expenses were $53.0 million and $47.2
million for the third quarter of 1995 and 1994, respectively. Costs and expenses
were $5.8 million higher in 1995 primarily due to costs relating to higher
volumes of pulpwood and chip sales.
Manufacturing Segment revenues were $94.1 million and $96.5 million for
the third quarter of 1995 and 1994, respectively. Revenues were $2.4 million
lower in 1995 due to decreased lumber and MDF prices and decreased MDF sales
volume, offset in part by higher residual chip prices. Lumber prices decreased
by 12% as compared to the third quarter of 1994 due to a weaker housing market
as a result of generally slower economic conditions, and increased competition
from both Canadian imports and substitute products. While our lumber prices are
influenced by commodity prices, we are able to maintain sales volume (increased
3% as compared to third quarter 1994) due to our high concentration of sales in
the repair & remodel and industrial markets, which are less impacted by a slow
housing market. MDF prices decreased by 10% as compared to the third quarter of
1994 due to weak demand, additional foreign capacity coming on line, and a high
level of utility
15
<PAGE> 17
grade sales from the start-up production related to our new MDF(2) product. MDF
sales volume decreased by 30% as a result of production downtime associated with
the weak market conditions and issues encountered during the start-up of new
high energy refiners for our new MDF(2) product. Residual chip prices increased
substantially over the third quarter of 1994 due to strong pulp and paper
markets.
Manufacturing Segment costs and expenses were $84.7 million and $86.1
million for the third quarter of 1995 and 1994, respectively. The $1.4 million
of lower costs and expenses was primarily due to the decrease in MDF sales
volume and 17% lower log costs for lumber.
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $3.4 million less in the third quarter of 1995 as
compared to the third quarter of 1994. The variance was primarily due to a
decrease during the third quarter of 1995, as compared to the year earlier
period, in the amount of intercompany profit accumulating in inventory. The
lower intercompany profit accumulation was due to a lower log transfer price as
a result of a weaker domestic log market, and a smaller increase during the
quarter of the logs purchased from internal sources as compared to the third
quarter of 1994. On a combined basis, the Resource Segment's profit on
intercompany log sales is deferred until Manufacturing converts existing log
inventories into finished products and sells them to third parties.
The income allocated to the General Partner was $1.4 million higher in
the third quarter of 1995 as compared to the year earlier period. The increase
was the result of a higher quarterly distribution to Unitholders, which
increased the incentive distribution paid to the General Partner. Net income is
allocated to the General Partner based on 2 percent of the Company's net income
(adjusted for the incentive distribution), plus the incentive distribution. The
incentive distribution is based on a percentage of the quarterly distribution
paid during the quarter, which was $0.49 per Unit in the third quarter of 1995
as compared to $0.43 per Unit during the third quarter of 1994.
16
<PAGE> 18
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994
The following table compares operating income by segment for the nine
months ended September 30, 1995 and 1994.
Operating Income by Segment
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
-----------
(In Thousands)
1995 1994
---------- ----------
<S> <C> <C>
Resources Segment . . . . . . . . . . . . . . . . $ 98,769 $ 106,872
Manufacturing Segment . . . . . . . . . . . . . . 24,565 21,299
Other Costs and Eliminations . . . . . . . . . . . (3,339) (9,004)
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . $ 119,995 $ 119,167
========== ==========
</TABLE>
Resources Segment revenues were $230.7 million and $225.4 million for
the nine month periods ended September 30, 1995 and 1994, respectively. Revenues
were $5.3 million higher in 1995 due to a $12.9 million increase in revenues
from pulpwood and chip sales, an increase in domestic log sales volumes, and a
$1.0 million increase in land sales, offset in part by lower sales volume of
export logs and lower prices for domestic logs. The increase in pulpwood and
chip revenues was due to the addition of in-woods chipping operations, which
utilize small tops of trees and small trees from thinning operations, and a
significant increase in pulp log prices and sales volume, as compared to the
first nine months of 1994, as a result of strong pulp and paper markets.
Domestic log sales volume increased by 8% during the first nine months of 1995,
as compared to the same period in 1994, due to an increase in internal demand
resulting from increased lumber and plywood production and lower production
levels in 1994 due to fire restrictions. Export log sales volume decreased by
14% during the first nine months of 1995 as compared to the same period in 1994
due to a planned reduction in the harvest of export quality logs and shifting
lower quality export logs into the domestic market due to a weak export market.
Domestic log prices decreased by 9% during the first nine months of 1995 as
compared to the same period in 1994 primarily due to a weaker lumber market.
Resources Segment costs and expenses were $131.9 million and $118.5
million for the first nine months of 1995 and 1994, respectively. Costs and
expenses were $13.4 million higher in 1995 primarily due to costs relating to
higher volumes of pulpwood and chip sales, higher sales volumes of domestic
logs, higher log and haul costs, and higher land sales expenses, offset in part
by lower export log sales volumes. The increase in log and haul costs resulted
from more expensive logging methods required due to ground conditions and sloped
terrain which would not permit the use of traditional logging methods.
Manufacturing Segment revenues were $284.8 million and $277.5 million
during the first nine months of 1995 and 1994, respectively. Revenues were $7.3
million higher in 1995 due to increased
17
<PAGE> 19
plywood, MDF and residual chip prices and increased lumber and plywood sales
volumes. These increases were partially offset by decreases in lumber prices and
MDF sales volumes. Plywood and MDF prices increased by 4% and 7%, respectively,
over the first nine months of 1994. The higher plywood prices were the result of
strong industrial market demand during the first half of the year. The increase
in MDF prices was due to growing demand for MDF throughout 1994 and the first
quarter of 1995. Residual chip prices increased substantially over the first
nine months of 1994 due to strong pulp and paper markets. Lumber and plywood
sales volumes increased by 9% and 4%, respectively, in 1995 as compared to the
year earlier period. The increase in lumber sales volume is primarily due to
increased production as a result of higher recoveries due to improved log
merchandising specifications, additional production shifts and the new lumber
remanufacturing facility which began operations in November 1994. Plywood sales
volume increased due to strong industrial markets and increased production due
to favorable weather and operating conditions. Lumber prices decreased by 13% as
compared to the first nine months of 1994 due to weaker market conditions caused
by a slow housing market and aggressive competition from Canadian lumber
producers. While our lumber prices are influenced by commodity prices, we are
able to maintain sales volume due to our high concentration of sales in the
repair & remodel and industrial markets, which are less impacted by a slow
housing market. MDF sales volume decreased by 18% as a result of deterioration
in demand and production downtime associated with the weak markets and issues
encountered during the start-up of new high energy refiners for our new MDF(2)
product. Demand for MDF deteriorated late in the second quarter and continued
through the third quarter of 1995, primarily due to excess inventories being
carried by end users as a result of a slower than expected spring building
season.
Manufacturing Segment costs and expenses were $260.2 million and $256.2
million for the nine month period ended September 30, 1995 and 1994,
respectively. The $4.0 million of higher costs and expenses was primarily due to
higher sales volumes of lumber and plywood, offset in part by lower MDF sales
volume and lower log costs (14% and 5% lower for lumber and plywood,
respectively).
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $5.7 million less during the nine month period
ended September 30, 1995 as compared to same period in 1994. The variance was
primarily due to lower intercompany profit accumulating in inventory during the
first nine months of 1995, offset in part by a decrease in the intercompany LIFO
elimination. The lower accumulation of intercompany profit was caused by a
larger depletion of log inventories and a lower log transfer price during the
first nine months of 1995 as compared to the first nine months of 1994. The
larger depletion of log inventories was due to higher production and sales
volumes in both lumber and plywood, and the lower log transfer price was due to
a weaker domestic log market. On a combined basis, the Resource Segment's profit
on intercompany log sales is deferred until Manufacturing converts existing log
inventories into finished products and sells them to third parties. The lower
LIFO elimination was due to a lower log transfer price as a result of a weaker
domestic log market. The LIFO elimination offsets Manufacturing's increase in
the LIFO reserve related to intercompany price increases.
18
<PAGE> 20
Net other expense decreased by $2.1 million for the first nine months
of 1995 as compared to the year earlier period primarily due to a charge in 1994
for the write-off of capitalized debt issue costs as a result of the refinancing
of the lines of credit, a decrease in the expense for state taxes payable on
behalf of non-resident Unitholders, and a decrease in fixed asset retirements.
The income allocated to the General Partner was $4.9 million higher
during the first nine months of 1995 as compared to the year earlier period. The
increase was the result of a higher quarterly distribution to Unitholders, which
increased the incentive distribution paid to the General Partner. Net income is
allocated to the General Partner based on 2 percent of the Company's net income
(adjusted for the incentive distribution), plus the incentive distribution. The
incentive distribution is based on a percentage of the quarterly distribution
paid each quarter, which was $1.41 per Unit during the first three quarters of
1995 as compared to $1.19 per Unit during the first three quarters of 1994.
19
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the discussion of legal proceedings under Part I, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Items 2, 3 and 4 of Part II are not applicable and have been omitted.
ITEM 5. OTHER INFORMATION
Pursuant to Section 15.1 of the Amended and Restated Agreement of
Limited Partnership of Plum Creek Timber Company, L.P. (the "Partnership
Agreement"), the General Partner amended and restated the Partnership Agreement
as of October 17, 1995. The amendment maintains the current economic and tax
effects as between Unitholders and the General Partner following certain events
such as the issuance or redemption of Units. Prior to the amendment, the
Partnership Agreement could have resulted in unintended and potentially adverse
consequences to both the General Partner and Unitholders, the magnitude and
nature of which are not determinable. Additional technical amendments were also
made. The Partnership Agreement, as so amended and restated, has been filed
herewith as an exhibit. The Partnership Agreement and all amendments thereto
are maintained at the offices of the General Partner.
20
<PAGE> 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) LIST OF EXHIBITS
Each exhibit set forth below in the Index to Exhibits is filed as a
part of this report. Exhibits not incorporated by reference to a prior filing
are designated by an asterisk ("*"); all exhibits not so designated are
incorporated herein by reference to a prior filing as indicated.
INDEX TO EXHIBITS
Exhibit
Designation Nature of Exhibit
- ----------- -----------------
3A* Amended and Restated Agreement of Limited Partnership of Plum
Creek Timber Company, L.P. dated June 8, 1989, as amended and
restated through October 17, 1995. See attached exhibit.
3B Certificate of Limited Partnership of Plum Creek Timber
Company, L.P., as filed with the Secretary of State of the
state of Delaware on April 12, 1989 (Form S-1, Regis. No.
33-28094, filed May, 1989).
4C.2* Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent
First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc. (Form 10-Q, No. 1- 10239, filed August,
1989). Amendment No. 1, consent and waiver dated January 1,
1991 to Mortgage Note Agreement, dated May 31, 1989, 11 1/8
percent First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form 8
Amendment No. 1, filed April 1991). Amendment No. 2, consent
and waiver dated September 1, 1993 to the Mortgage Note
Agreement (Form 10-K/A, Amendment No. 1, filed April 1994).
Amendment No. 3, Mortgage Note Agreement Amendment dated May
20, 1994 (Form 10-K/A, Amendment No. 1, filed April 1995).
Amendment to Mortgage Note Agreement dated June 15, 1995. See
attached exhibit.
10A.1* $100 million Amended and Restated Credit Agreement by and
between Plum Creek Timber Company, L.P., Bank of America
National Trust and Savings Association as Agent, ABN AMRO Bank
N.V. as Co-agent and the Other Financial Institutions Party
Thereto, dated as of November 15, 1994 (Form 10-K/A, Amendment
No. 1, filed April 1995). First Amendment to Amended and
Restated Credit Agreement, dated as of October 27, 1995. See
attached exhibit.
10A.2* $35 million Credit Agreement by and between Plum Creek Timber
Company, L.P., Bank of America National Trust and Savings
Association as Agent, ABN AMRO Bank N.V. as Co-agent and the
Other Financial Institutions Party Thereto, dated as of
November 15, 1994 (Form 10-K/A, Amendment No. 1, filed April
1995). First Amendment to Credit Agreement, dated as of October
27, 1995. See attached exhibit.
10B.1* Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment
No. 1, filed April 1995). First Amendment to the Plum Creek
Supplemental Benefits Plan. See attached exhibit.
10B.2 Incentive Sharing Plan, Plum Creek Management Company. (Form
10-K, No. 1-10239, filed March, 1990). Amendment number 1,
dated April 1991, Incentive Sharing Plan, Plum Creek Management
Company. (Form 10-Q, No. 1-10239, filed May, 1991).
10B.3 Unit Awards Plan, PCTC, Inc. (Form 10-K, No. 1-10239, filed
March, 1990). Amendment number 1, dated April 1991, to Unit
Awards Plan, PCTC, Inc. (Form 10-Q, No. 1-10239, filed May,
1991).
21
<PAGE> 23
10B.4 Incentive Compensation Plan, Plum Creek Management Company. (Form 8
Amendment No. 1, filed April, 1990). Amendment dated January 1, 1991 to
Incentive Compensation Plan, Plum Creek Management Company. (Form 8
Amendment No. 1, filed April 1991).
10B.5 Retirement Plan for Directors, Plum Creek Management Company. (Form 8
Amendment No. 1, filed April 1991).
10B.6* Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form
10-K/A, Amendment No. 1, filed April 1994). First Amendment to the Plum
Creek Management Company, L.P. Long-Term Incentive Plan. See attached
exhibit.
10B.7 Management Incentive Plan, Plum Creek Management Company, L.P. (Form
10-K/A, Amendment No. 1, filed April 1994).
10B.8 Executive and Key Employee Salary and Incentive Compensation Deferral
Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No.
1, filed April 1995).
10B.9 Deferred Compensation Plan for Directors, PC Advisory Corp. I (Form
10-K/A, Amendment No. 1, filed April 1995).
27* Financial Data Schedule. See attached exhibit.
(b) REPORTS ON FORM 8-K
None.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLUM CREEK TIMBER COMPANY, L.P.
(Registrant)
By: Plum Creek Management Company, L.P.
as General Partner
By: /s/ Diane M. Irvine
-------------------
DIANE M. IRVINE
Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
Date: November 9, 1995
23
<PAGE> 1
EXHIBIT 3A
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
PLUM CREEK TIMBER COMPANY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as of
October 17, 1995, is entered into by and among Plum Creek Management Company,
L.P., as the General Partner, the Limited Partners and the other Persons who
become Partners in the Partnership as provided herein. In consideration of the
covenants, conditions and agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation and Continuation. The Partnership has previously been
formed as a limited partnership pursuant to the provisions of the Delaware Act
and, subject to the provisions of this Agreement, the Partners hereby continue
the Partnership as a limited partnership pursuant to the provisions of the
Delaware Act. The Partners hereby amend and restate in its entirety the Amended
and Restated Agreement of Limited Partnership, dated June 8, 1989 as amended by
Amendment No. 1, dated December 31, 1992, Amendment No. 2, dated December 31,
1992, Amendment No. 3, dated August 14, 1993, Amendment No. 4, dated August 14 ,
1993, Amendment No. 5, dated October 18, 1993, and Amendment No. 6 dated October
17, 1995. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration, dissolution and termination
of the Partnership shall be governed by the Delaware Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
1.2 Name. The name of the Partnership shall be "Plum Creek Timber
Company, L.P." The Partnership's business may be conducted under any other name
or names deemed advisable by the General Partner, including the name of the
General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time and
shall notify the Limited Partners of such change in the next regular
communication to Limited Partners, provided, however, that without the consent
of the holders of 66 2/3% of the outstanding Units, the General Partner shall
not cease to use the name, "Plum Creek".
1.3 Registered Office; Principal Office. The address of the registered
office of the Partnership in the State of Delaware shall be located at The
Corporation Trust Center, 1209 Orange Street, New Castle County, Wilmington,
Delaware 19801, and the registered agent for service of process on the
Partnership in the State of Delaware at such registered office shall be
1
<PAGE> 2
The Corporation Trust Company. The principal office of the Partnership
shall be 999 Third Avenue, Seattle, Washington 98104 or such other place as the
General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
1.4 Power of Attorney. (a) Each Limited Partner and each Assignee
hereby constitutes and appoints each of the General Partner and, if a Liquidator
shall have been selected pursuant to Section 14.3 hereof, the Liquidator
severally (and any successor to either thereof by merger, transfer, assignment,
election or otherwise) and authorized officers and attorneys-in-fact of each,
with full power of substitution, as its true and lawful agent and
attorney-in-fact, with full power and authority in its name, place and stead,
to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate of Limited Partnership and all amendments or restatements
thereof) that the General Partner or the Liquidator deems appropriate
or necessary to form, qualify or continue the existence or
qualification of, the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in
the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all instruments
that the General Partner or the Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement
of this Agreement or the Deposit Agreement in accordance with their
respective terms; (C) all conveyances and other instruments or
documents that the General Partner or the Liquidator deems appropriate
or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (D) all instruments relating
to the admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article XI, XII, XIII or XIV
hereof or the Capital Contribution of any Partner; (E) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class or
series of Units or other securities issued pursuant to Section 4.4
hereof; and (F) all agreements and other instruments (including,
without limitation, a certificate of merger) relating to a merger or
consolidation of the Partnership pursuant to Article XVI hereof;
(ii) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments appropriate or
necessary, in the sole discretion of the General Partner or the
Liquidator, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action which is made or given by
the Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
General Partner or the Liquidator, to effectuate the terms or intent of
this Agreement; provided, that when required by Section 15.3 hereof or
any other provision of this Agreement which establishes a percentage of
the Limited Partners
2
<PAGE> 3
or of the Limited Partners of any class or series required to take any
action, the General Partner or the Liquidator may exercise the power of
attorney made in this subsection (ii) only after the necessary vote,
consent or approval of the Limited Partners or of the Limited Partners
of such class or series; and
(iii) on behalf of the Limited Partners and the Assignees, enter into the
Deposit Agreement and to deposit Certificates in the Deposit Account
pursuant to the Deposit Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article XV hereof or as may be
otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of any Limited Partner or Assignee and the transfer of
all or any portion of such Limited Partner's or Assignee's Partnership Interest
and shall extend to such Limited Partner's or Assignee's heirs, successors,
assigns and personal representatives. Each such Limited Partner or Assignee
hereby agrees to be bound by any representation made by the General Partner or
the Liquidator, acting in good faith pursuant to such power of attorney; and
each such Limited Partner or Assignee hereby waives any and all defenses which
may be available to contest, negate or disaffirm the action of the General
Partner or the Liquidator, taken in good faith under such power of attorney.
Each Limited Partner or Assignee shall execute and deliver to the General
Partner or the Liquidator, within 15 days after receipt of the General Partner's
or the Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator deems
necessary to effectuate this Agreement and the purposes of the Partnership.
1.5 Term. The Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2047, or until
the earlier termination of the Partnership in accordance with the provisions of
Article XIV hereof.
1.6 Possible Restrictions on Transfer. Notwithstanding anything to the
contrary contained herein, in the event of (i) the enactment (or imminent
enactment) of any legislation, (ii) the publication of any temporary or final
regulation by the Treasury Department, (iii) any ruling by the Internal Revenue
Service or (iv) any judicial decision, that, in any such case, in the Opinion of
Counsel, would result in the taxation of the Partnership for federal income tax
purposes as a corporation or as an association taxable as a corporation, then,
either (a) the General Partner may impose such restrictions on the transfer of
Units or Partnership Interests as may be required, in the Opinion of Counsel, to
prevent the taxation of the Partnership for federal income tax purposes as a
corporation or as an association taxable as a corporation, including making any
amendments to this Agreement as the General Partner in its sole discretion may
determine to be necessary or appropriate in order to impose such restrictions,
provided, that any
3
<PAGE> 4
such amendment to this Agreement which would result in the delisting or
suspension of trading of any class of Units on any National Securities Exchange
on which such class of Units is then traded must be approved by the holders of
at least 66 2/3% of the outstanding Units of such class (excluding for purposes
of such determination any Units of such class owned by the General Partner and
its Affiliates) or (b) upon the recommendation of the General Partner and the
approval by the holders of at least 66 2/3% of the outstanding Units (excluding
for purposes of such determination any Units owned by the General Partner and
its Affiliates), the Partnership may be converted into and reconstituted as a
trust or any other type of legal entity (the "New Entity") in the manner and on
other terms so recommended and approved. In such event, the business of the
Partnership shall be continued by the New Entity and the Units shall be
converted into equity interests of the New Entity in the manner and on the terms
so recommended and approved. Notwithstanding the foregoing, no such
reconstitution shall take place unless the Partnership shall have received an
Opinion of Counsel to the effect that the liability of the Limited Partners for
the debts and obligations of the New Entity shall not, unless such Limited
Partners take part in the control of the business of the New Entity, exceed that
which otherwise had been applicable to such Limited Partners as limited partners
of the Partnership under the Delaware Act.
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 12.4 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" shall mean the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership (a) increased
by any amounts which such Partner is obligated to restore under the standards
set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated
to restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5) and
(b) decreased by (i) the amount of all losses and deductions that, as of the end
of such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases pursuant to a minimum gain chargeback pursuant to Sections 5.1(d)(i)
or 5.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation
4
<PAGE> 5
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 4.6(d)(i) or (d)(ii) hereof. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination thereof pursuant to Section 708
of the Code, such property shall thereafter constitute a Contributed Property
until the Carrying Value of such property is further adjusted pursuant to
Section 4.6(d)(i) or (d)(ii) hereof.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, the Person in question. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreed Allocation" shall mean any allocation, other than a Required
Allocation, of an item of income, gain, deduction or loss pursuant to the
provisions of Section 5.1, including a Curative Allocation (if appropriate to
the context in which the term "Agreed Allocations" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Section 4.6(c)(i) hereof. Subject to Section
4.6(c)(i) hereof, the General Partner shall, in its sole discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate Agreed
Value of Contributed Properties contributed to the Partnership in a single or
integrated transaction among each separate property on a basis proportional to
their fair market values.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Units have been transferred in a manner permitted under this Agreement and who
has executed and delivered a Transfer Application as required by this Agreement,
but who has not become a Substituted Limited Partner.
"Available Cash" means, with respect to any calendar quarter, (a) the sum
of:
(i) the Partnership's net income (or net loss) (excluding gain on the sale
of any Capital Asset) for such quarter,
(ii) the amount of depletion, depreciation, amortization and other noncash
charges (less
5
<PAGE> 6
noncash credits) utilized in determining net income of the Partnership for such
quarter,
(iii) the amount of any reduction in reserves of the Partnership of the
types referred to in (b)(v) below,
(iv) proceeds received by the Partnership from the sale of any of the
Designated Acres, and
(v) any Cash from Capital Transactions received by the Partnership during
such quarter in specific contemplation that such Cash from Capital Transactions
will be used to refund or refinance any payment of Debt of the type specified in
clause (b)(i) below which was made in any of the two prior quarters, less (b)
the sum of:
(i) all payments of principal on Debt made by the Partnership in such
quarter (excluding any payments of principal on Debt made with Cash from Capital
Transactions received by the Partnership during such quarter or the immediately
preceding four quarters),
(ii) capital expenditures made by the Partnership during such quarter
(excluding any capital expenditures for such quarter made with Cash from Capital
Transactions received by the Partnership during such quarter or the immediately
preceding four quarters, and capital expenditures which the General Partner
anticipates will be financed with Cash from Capital Transactions to be received
by the Partnership prior to the end of the next succeeding quarter),
(iii) the amount of any capital expenditures, or investments as specified
in clause (b)(iv) below, made by the Partnership in the immediately preceding
quarter which was anticipated would be financed from Cash from Capital
Transactions but which have not been financed from such source prior to the end
of the quarter succeeding the quarter in which any such capital expenditure or
investment was made,
(iv) investments in any Subsidiary, Affiliate or any such other entity to
the extent that such investments are not otherwise included under clauses
(b)(i), (ii) or (iii) above (excluding any such investments made with Cash from
Capital Transactions received by the Partnership during such quarter or the
immediately preceding four quarters, or which the General Partner anticipates
will be made, with Cash from Capital Transactions to be received by the
Partnership prior to the end of the next succeeding quarter);
(v) the amount of any reserves of the Partnership established during such
quarter which are necessary or appropriate (A) to provide funds for the future
payment of items of the types specified in clauses (b)(i) and (b)(ii) above, (B)
to provide additional working capital, (C) to provide funds for cash
distributions with respect to any one or more of the next four quarters or (D)
to provide funds for the future payment of interest in an amount equal to the
interest to be accrued in the next quarter.
provided, however (i) net proceeds to the Partnership from the issuance of SPUs
shall be deemed
6
<PAGE> 7
to be Available Cash, and shall be deemed to be received, for purposes of
determining Available Cash, during the quarter in respect of which such SPUs are
issued, even if such cash is received by the Partnership after the last day of
such quarter, and (ii) any disbursements made of the types described in clauses
(b)(i)-(iii), or reserves established, in accordance with clause (b)(v), within
45 days after the end of any quarter as to which SPUs were purchased in respect
of such quarter in accordance with the Distribution Support Agreement shall be
deemed to be made or established, for purposes of determining Available Cash,
within such quarter if the General Partner so determines, provided that the
aggregate amount of such disbursements made or reserves established which are so
determined as being made within such quarter shall not exceed the aggregate
dollar amount of SPUs purchased in respect of such quarter.
Notwithstanding the foregoing, "Available Cash" shall not take into account
any reductions in reserves or disbursements made or reserves established after
commencement of the dissolution and liquidation of the Partnership. In
determining "Available Cash", (i) all items under clauses (a)(i)-(v) above and
all items under clauses (b)(i)-(v) above shall be calculated on a combined basis
with any Subsidiary of the Partnership whose income is accounted for on a
combined basis with the Partnership and, in accordance therewith, "Available
Cash" shall include a percentage of each such item of each such Subsidiary equal
to the Partnership's percentage ownership interest in such Subsidiary, provided,
however, that the items under clauses (a)(i)-(v) above shall only be included in
Available Cash to the extent that the General Partner determines such amount to
be legally available for dividends or distributions to the Partnership by such
Subsidiary, (ii) the amount of net income and the amount of depletion,
depreciation, amortization and other noncash charges utilized in determining net
income shall be determined, with respect to the Partnership, by the General
Partner in accordance with generally accepted accounting principles and, with
respect to any Subsidiary, by its Board of Directors (or by such other body or
Person which has the ultimate management authority of such Subsidiary) in
accordance with generally accepted accounting principles, (iii) the net income
of any Subsidiary shall be determined on an after-tax basis, (iv) the amount of
any reductions in, or additions to, reserves for purposes of clauses (a)(iii)
and (b)(v) above shall be determined, with respect to the Partnership, by the
General Partner in its sole discretion as it deems appropriate and, with respect
to any Subsidiary, by its Board of Directors (or by such other body or Person
which has the ultimate management authority of such Subsidiary) in its sole
discretion as it deems appropriate and (v) any determination of whether any
capital expenditures or investments are financed, or anticipated to be financed,
with Cash from Capital Transactions for purposes of clauses (b)(ii) and (b)(iv)
above shall be made, with respect to the Partnership, by the General Partner in
its sole discretion as it deems appropriate and, with respect to any Subsidiary,
by its Board of Directors (or by such other body or person which has the
ultimate management authority of such Subsidiary) in its sole discretion as it
deems appropriate.
"Base Quarterly Deficiency" means, with respect to any Unit and as to any
calendar quarter within the Support Period, the excess, if any, of (a) the
Minimum Quarterly Amount, determined with respect to such calendar quarter, over
(b) the amount of any Available Cash, distributed with respect to such calendar
quarter, to the holder of such Unit pursuant to Section 5.4(a) hereof.
7
<PAGE> 8
"Book-Tax Disparity" shall mean with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 4.6 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Burlington" means Burlington Resources Inc., a Delaware corporation.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States or the
State of New York shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner,
Assignee or Special Limited Partner pursuant to Section 4.6 hereof.
"Capital Asset" means any asset on the Partnership's or Facilities
Subsidiary's balance sheet, as the case may be, other than inventory, accounts
receivable or any other current asset and assets disposed of in connection with
normal retirements or replacements.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property which a Partner contributes to the Partnership
pursuant to Section 4.1, 4.3, 4.4, 4.6(c)(i), or 13.3(c) hereof.
"Capital Transactions" means (i) borrowings and sales of debt securities
(other than for working capital purposes and other than for items purchased on
open account in the ordinary course of business) by the Partnership, (ii) sales
of equity interests by the Partnership (other than sales of SPUs) and (iii)
sales or other voluntary or involuntary dispositions of any assets of the
Partnership (other than (x) sales or other dispositions of inventory in the
ordinary course of business, (y) sales or other dispositions of other current
assets including receivables and accounts and (z) sales or other dispositions of
assets as a part of normal retirements or replacements), in each case prior to
the commencement of the dissolution and liquidation of the Partnership provided,
that in determining "Cash from Capital Transactions", items (i)-(iii) above
shall include, with respect to each Subsidiary of the Partnership whose income
is accounted for on a consolidated or combined basis with the Partnership, a
percentage of each such item of such Subsidiary equal to the Partnership's
percentage ownership interest in such Subsidiary.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
depletion (computed as a separate item of deduction), amortization and cost
recovery deductions charged to the Partners' Capital
8
<PAGE> 9
Accounts, and (b) with respect to any other Partnership property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with Sections 4.6(d)(i) and 4.6(d)(ii) hereof, and to reflect
changes, additions or other adjustments to the Carrying Value for dispositions
and acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash from Capital Transactions" means, at any date, such amounts of cash
as are determined by the General Partner to be cash made available to the
Partnership from or by reason of a Capital Transaction.
"Certificate" means a certificate issued by the Partnership evidencing
ownership of one or more Partnership Interests.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 6.2 hereof, as such Certificate may be amended and/or
restated from time to time.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
"Closing Date" means the first date on which Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" for any day means the last sale price on such day, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Units of a class are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal National Securities
Exchange on which the Units of such class are listed or admitted to trading or,
if the Units of a class are not listed or admitted to trading on any National
Securities Exchange, the last quoted price on such day or, if not so quoted, the
average of the high bid and low asked prices on such day in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or, if on any such
day the Units of a class are not quoted by any such organization, the average of
the closing bid and asked prices on such day as furnished by a professional
market maker making a market in the Units of such class selected by the Board of
Directors of the General Partner, or, if on any such day no market maker is
making a market in the Units of such class, the fair value of such Units on such
day as determined reasonably and in good faith by the Board of Directors of the
General Partner using any reasonable method of
9
<PAGE> 10
valuation.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.6(d)(i)
hereof, such property shall no longer constitute a Contributed Property for
purposes of Section 5.1 hereof, but shall be deemed an Adjusted Property for
such purposes.
"Contributing Partner" means each Partner contributing (or deemed to have
contributed on termination and reconstitution of the Partnership pursuant to
Section 708 of the Code or otherwise) a Contributed Property.
"Conversion Date" means with respect to each Deferred Participation
Interest, the date on which such Deferred Participation Interest is converted,
in accordance with the provisions of Section 5.7, into Units.
"Cumulative Base Deficiency" means an amount, attributable to any Unit and
determined with respect to all preceding calendar quarters, which equals the
excess of (a) the sum resulting from adding together the Base Quarterly
Deficiency, if any, as to such Unit for each of such preceding calendar quarters
within the Support Period, over (b) the sum of any distributions made to the
holder of such Unit (or his predecessors) with respect to any preceding calendar
quarters pursuant to Section 5.4(b) hereof.
"Curative Allocation" shall mean any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(d)(xi).
"Current Market Price" shall have the meaning assigned to such term in
Section 17.1(a) hereof.
"Debt" means, as to any Person, as of any date of determination, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (b) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person, (c) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof, (d) lease obligations of
10
<PAGE> 11
such Person which, in accordance with generally accepted accounting principles,
should be capitalized, and (e) such other obligations of such Person as the
General Partner may determine in its sole discretion are appropriate.
"Deferred Participation Interest" means, a Partnership Interest issued
pursuant to Section 4.3(a) which Partnership Interest confers upon the holder
thereof only the rights and obligations specifically provided in Section 5.7 of
this Agreement.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del. C. 17-101, et seq., as it may be amended from time to time, and any
successor to such statute.
"Departing Partner" means a former General Partner, as of the effective
date of any withdrawal or removal of such former General Partner pursuant to
Section 13.1 hereof.
"Deposit Account" means the account established by the Depositary pursuant
to the Deposit Agreement.
"Deposit Agreement" means the Deposit Agreement among the General Partner,
in its capacity both as General Partner and as attorney-in-fact for the Limited
Partners, the Partnership and the Depositary, as it may be amended or restated
from time to time.
"Depositary" means the bank or other institution appointed by the General
Partner in its sole discretion to act as depositary for the Depositary Units
pursuant to the Deposit Agreement, or any successor to it as depositary.
"Depositary Receipt" means a depositary receipt, issued by the Depositary
or agents appointed by the Depositary in accordance with the Deposit Agreement,
evidencing ownership of one or more Depositary Units.
"Depositary Unit" means a depositary unit representing a Unit on deposit
with the Depositary pursuant to the Deposit Agreement.
"Designated Acres" means up to an aggregate of 150,000 acres of property
owned by the Partnership which may be designated by the General Partner at the
time of the sale thereof as constituting Designated Acres (such aggregate number
of acres to be determined over the term of the Partnership).
"Distribution Support Agreement" means the agreement, dated as of the
Closing Date, between Burlington and the Partnership relating to the purchase of
SPUs.
"Economic Risk of Loss" shall have the meaning set forth in Treasury
Regulation Section 1.752-2(a).
11
<PAGE> 12
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which the Partnership does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject the Partnership to a substantial risk of
cancellation or forfeiture of any of their property or any interest therein.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor to such statute.
"Facilities Subsidiary" means Plum Creek Manufacturing, Inc., a Delaware
corporation, 95% of the common stock of which is held by the Partnership on the
Closing Date and 5% of the common stock of which is held by the General Partner
on the Closing Date.
"First Liquidation Target Amount" means an amount, determined with respect
to any Unit, which equals, as of the date of its determination, the sum of (a)
the Unrecovered Capital, if any, attributable to such Unit, plus (b) the
Cumulative Base Deficiency, if any, attributable to such Unit, plus (c) the
First Target Amount, with respect to the calendar quarter as to which such
determination is made.
"First Target Amount" means $0.65 per Unit (or, with respect to the period
commencing on the Closing Date and ending on June 30, 1989, the product of $0.65
multiplied by a fraction the numerator of which is the number of days in such
period and the denominator of which is 91), subject to adjustment in accordance
with Sections 5.6 and 9.6 hereof.
"Fourth Liquidation Target Amount" means an amount, determined with respect
to any Unit, which equals, as of the date of its determination, the sum of (a)
the Third Liquidation Target Amount, if any, attributable to such Unit, plus (b)
the excess, if any, of the Fourth Target Amount over the Third Target Amount,
determined with respect to the calendar quarter as to which such determination
is made.
"Fourth Target Amount" means $0.85 per Unit (or, with respect to the period
commencing on the Closing Date and ending on June 30, 1989, the product of $0.85
multiplied by a fraction the numerator of which is the number of days in such
period and the denominator of which is 91), subject to adjustment in accordance
with Sections 5.6 and 9.6 hereof.
"General Partner" means Plum Creek Management Company, L.P., a Delaware
limited partnership, and its successors as general partner of the Partnership.
"General Partner Equity Value" means, as of any date of determination, the
fair market value of the General Partner's Partnership Interest, as determined
by the General Partner using whatever reasonable method of valuation it may
adopt; provided, however, if any such valuation occurs at a time that the
General Partner or an Affiliate of the General Partner holds Management Units,
Deferred Participation Interests or Units, such Partnership Interests must be
taken into account in determining the General Partner Equity Value.
12
<PAGE> 13
"Incentive Distribution" means any amount of cash distributed to the
General Partner in its capacity as general partner, pursuant to Sections 5.4(e),
5.4(f), 5.4(g) or 5.4(h) which exceeds that amount equal to 2% of the aggregate
amount of cash then being distributed pursuant to such provisions.
"Indemnitee" means the General Partner, any Departing Partner, any Person
who is or was an Affiliate of the General Partner or any Departing Partner, any
Person who is or was an officer, director, employee, agent or trustee of the
General Partner or any Departing Partner or any Affiliate of the General Partner
or Departing Partner, or any Person who is or was serving at the request of the
General Partner or any Departing Partner or any Affiliate of the General Partner
or Departing Partner as a director, officer, employee, agent or trustee of
another Person, including any Subsidiary.
"Initial Limited Partners" means PCTC and the Underwriters upon being
admitted to the Partnership in accordance with Section 4.3 hereof.
"Initial Offering" means the initial offering of Depositary Units to the
public, as described in the Registration Statement.
"Initial Unit Price" means the initial price per Unit at which the
Underwriters will offer the Units to the public for sale as set forth on the
cover page of the prospectus first issued at or after the time the Registration
Statement filed in connection with the sale of Units contemplated by the
Underwriting Agreement first became effective.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, less any sales commission or underwriting discount charged to the
Partnership.
"Limited Partner" means each Initial Limited Partner, each Substituted
Limited Partner, each Additional Limited Partner and any Departing Partner upon
the change of its status from General Partner to Limited Partner pursuant to
Section 13.3 hereof and, solely for purposes of Articles IV, V and VI hereof and
Sections 14.3 and 14.4 hereof, shall include an Assignee and, solely for
purposes of Article VII hereof, shall include a Special Limited Partner and
holders of Deferred Participation Interests.
"Limited Partner Equity Value" means, as of any date of determination, the
amount equal to the product of (a) the total number of Units outstanding
(immediately prior to an issuance of Units or distribution of cash or
Partnership property), other than Units held by the General Partner or an
Affiliate of the General Partner, multiplied by (b) (i) in the case of a
valuation required by Section 4.6(d)(i) (other than valuations caused by sales
of a de minimis quantity of Units) the Issue Price or (ii) in the case of a
valuation required by Section 4.6(d)(ii) (or a valuation required by Section
4.6(d)(i) caused by sales of a de minimis quantity of Units) the Closing Price.
13
<PAGE> 14
"Liquidator" means the General Partner or other Person approved pursuant to
Section 14.3 hereof who performs the functions described therein.
"Management Unit" means a Unit issued pursuant to Section 4.3(a) which Unit
confers upon the holder thereof all of the rights and obligations of a Limited
Partner, provided, however, that such Unit will be subject to the provisions of
Section 4.6(c)(ii) hereof if it also constitutes a Restricted Interest.
"Minimum Gain Attributable to Partner Nonrecourse Debt" means that amount
determined in accordance with the principles of Treasury Regulation Section
1.704-2(i)(2).
"Minimum Quarterly Amount" means $0.60 per Unit per calendar quarter (or,
with respect to the period commencing on the Closing Date and ending on June 30,
1989, the product of $0.60 multiplied by a fraction, the numerator of which is
the number of days in such period and the denominator of which is 91), subject
to adjustment in accordance with Sections 5.6 and 9.6 hereof.
"MQA" means Minimum Quarterly Amount.
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotation System.
"National Securities Exchange" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
"Net Agreed Value" means (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
at the time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon such distribution or to which such
property is subject at the time of distribution as determined under Section 752
of the Code.
"Net Income" shall mean, for any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of loss and deduction (other than those
items attributable to dispositions constituting Termination Capital
Transactions) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with Section 4.6(b) and shall not
include any items specially allocated under Section 5.1(d); provided that the
determination of the items that have been specially allocated under Section
5.1(d) shall be made as if Section 5.1(d) (xiii) were not in the Partnership
Agreement. Once an item of income, gain, loss or deduction that has been
included in the initial computation of Net Income is subjected to a Required
Allocation or a Curative Allocation, Net
14
<PAGE> 15
Income or the resulting Net Loss, whichever the case may be, shall be recomputed
without regard to such item.
"Net Loss" shall mean, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items attributable
to dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital Transactions) for
such taxable period. The items included in the calculation of Net Loss shall be
determined in accordance with Section 4.6(b) and shall not include any items
specially allocated under Section 5.1(d); provided that the determination of the
items that have been specially allocated under Section 5.1(d) shall be made as
if Section 5.1(d) (xiii) were not in the Partnership Agreement. Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to a Required Allocation or a Curative
Allocation, Net Loss or the resulting Net Income, whichever the case may be,
shall be recomputed without regard to such item.
"Net Termination Gain" shall mean, for any taxable period, the sum, if
positive, of all items of income, gain or loss recognized by the Partnership
from Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Gain shall be determined
in accordance with Section 4.6(b) and shall not include any items of income,
gain or loss specially allocated under Section 5.1(d). Once an item of income,
gain or loss that has been included in the initial computation of Net
Termination Gain is subjected to a Required Allocation or a Curative Allocation,
Net Termination Gain or the resulting Net Termination Loss, whichever the case
may be, shall be recomputed without regard to such item.
"Net Termination Loss" shall mean, for any taxable period, the sum, if
negative, of all items of income, gain or loss recognized by the Partnership
from Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Loss shall be determined
in accordance with Section 4.6(b) and shall not include any items of income,
gain or loss specially allocated under Section 5.1(d). Once an item of gain or
loss that has been included in the initial computation of Net Termination Loss
is subjected to a Required Allocation or a Curative Allocation, Net Termination
Loss or the resulting Net Termination Gain, whichever the case may be, shall be
recomputed without regard to such item.
"Non-citizen Assignee" means a Person who the General Partner has
determined in its sole discretion does not constitute an Eligible Citizen and as
to whose Partnership Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 11.5 hereof.
"Nonrecourse Built-in Gain" shall mean with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Sections 5.2(b)(i)(A),
5.2(b)(ii)(A) or 5.2(b)(iv) if such properties were disposed of in a taxable
transaction in full satisfaction of such liabilities and for no other
consideration.
15
<PAGE> 16
"Nonrecourse Deductions" shall mean any and all items of loss, deduction or
expenditures (described in Section 705 (a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b), are
attributable to a Nonrecourse Liability.
"Nonrecourse Liability" shall have the meaning set forth in Treasury
Regulation Section 1.752- 1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 17.1(b) hereof.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or the General Partner) in form and substance
acceptable to the General Partner.
"Organizational Limited Partner" means David D. Leland in his capacity as
the organizational limited partner of the Partnership pursuant to this
Agreement.
"Outstanding" means all Units or other Partnership Securities, including
Deferred Participation Interests, that are issued by the Partnership and
reflected as outstanding on the Partnership's books and records as of the date
of determination.
"Partner" means a General Partner, a Limited Partner or a Special Limited
Partner and solely for purposes of Articles IV, V and VI hereof and Sections
14.3 and 14.4 hereof shall include an Assignee.
"Partner Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" shall mean any and all items of loss,
deduction or expenditure (described in Section 705(a)(2)(B) of the Code) in
accordance with the principles of Treasury Regulation Section 1.704-2(i), are
attributable to a Partner Nonrecourse Debt.
"Partnership" means the limited partnership heretofore formed and continued
pursuant to this Agreement, and any successor thereto.
"Partnership Interest" means the interest of a Partner in the Partnership
which, in the case of a Special Limited Partner, a Limited Partner or Assignee,
shall include Units, SPUs or Deferred Participation Interests, whichever the
case may be.
"Partnership Minimum Gain" shall mean that amount determined in accordance
with the principles of Treasury Regulation Sections 1.704-2(d).
"Partnership Securities" has the meaning assigned to such term in Section
4.4(a) hereof.
16
<PAGE> 17
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"PCTC" means Plum Creek Timber Company, Inc., a Delaware corporation and a
wholly-owned Subsidiary of Burlington.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Public Unitholder.
"Percentage Interest" means, as of the date of such determination, (a) as
to the General Partner in its capacity as such, 2%, (b) as to any Limited
Partner or Assignee holding Units, the product of (i) 98% multiplied by (ii) the
quotient of the number of Units held by such Limited Partner or Assignee divided
by the total number of all Units then outstanding; provided, however, that
following any issuance of additional Units by the Partnership pursuant to
Section 4.4 hereof, proper adjustment shall be made to the Percentage Interest
represented by each Unit to reflect such issuance.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Public Unitholder" means a Person other than the General Partner or any
Affiliate of the General Partner who holds Units.
"Purchase Date" means the date determined by the General Partner as the
date for purchase of all outstanding Units (other than Units owned by the
General Partner and its Affiliates) pursuant to Section 17.1(b) hereof.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the General Partner for
determining (a) the identity of Limited Partners (or Assignees, if applicable)
entitled to notice of, or to vote at, any meeting of Limited Partners or
entitled to vote by ballot or give approval of Partnership action in writing
without a meeting or entitled to exercise rights in respect of any other lawful
action of Limited Partners, or (b) the identity of Record Holders entitled to
receive any report or distribution.
"Record Holder" means the Person in whose name a Unit is registered on the
books of the Transfer Agent, as of the opening of business on a particular
Business Day.
"Redeemable Units" means any Units for which a redemption notice has
17
<PAGE> 18
been given and has not been withdrawn, under Section 11.6 hereof.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 33-28094), as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Securities and
Exchange Commission under the Securities Act to register the offering and sale
of the Units in the Initial Offering.
"Required Allocations" shall mean any allocation (or limitation imposed on
any allocation) of an item of income, gain, deduction or loss pursuant to (a)
the proviso-clauses of Sections 5.1(b)(ii), 5.1(b)(iii) and 5.1(b)(iv) or (b)
Sections 5.1(d)(i), 5.1(d)(ii), 5.1(d)(iv), 5.1(d)(v), 5.1(d)(vi), 5.1(d)(vii)
and 5.1(d)(ix), such allocations (or limitations thereon) being directly or
indirectly required by the Treasury regulations promulgated under Section 704(b)
of the Code.
"Residual Gain" or "Residual Loss" shall mean any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to the first sentence of Sections 5.2(b)(i)(A) or 5.2(b)(ii)(A) to
eliminate Book-Tax Disparities.
"Restricted Interest" means any Management Unit and any Deferred
Participation Interest, prior to its conversion to a Unit pursuant to Section
5.7(b), which is held by a Person who holds both such Management Units and such
Deferred Participation Interests. Once any such Unit is transferred and no
longer held by a Person who holds both such Management Units and such Deferred
Participation Interests, it will no longer constitute a Restricted Interest.
"Second Liquidation Target Amount" means an amount, determined with respect
to any Unit, which equals, as of the date of its determination, the sum of (a)
the First Liquidation Target Amount, if any, attributable to such Unit, plus (b)
the excess, if any, of the Second Target Amount over the First Target Amount,
with respect to the calendar quarter as to which such determination is made.
"Second Target Amount" means $0.70 per Unit (or, with respect to the period
commencing on the Closing Date and ending on June 30, 1989, the product of $0.70
multiplied by a fraction, of which the numerator is equal to the number of days
in such period and of which the denominator is 91), subject to adjustment in
accordance with Sections 5.6 and 9.6 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor to such statute.
"Special Limited Partner" shall mean Burlington or an Affiliate of
Burlington upon being issued SPUs by the Partnership or upon transfer of such
SPUs to Burlington or such Affiliate of Burlington prior to redemption of all
such SPUs issued.
"Special Limited Partner Book Capital" means, as of any date of
determination, the amount
18
<PAGE> 19
equal to the sum of the balances of the Capital Accounts of all Special Limited
Partners, determined pursuant to Section 4.6 (prior to any adjustment pursuant
to Section 4.6(d) arising upon the present event requiring a valuation of the
Partnership's assets).
"SPU" means a Partnership Interest issued pursuant to Section 4.4 hereof
and in accordance with the Distribution Support Agreement, which Partnership
Interest shall confer upon the holder thereof only the rights and obligations
specifically provided in this Agreement with respect to SPUs (and no other
rights otherwise available to holders of a Partnership Interest) and the
Distribution Support Agreement.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person, and, with respect to the Partnership, shall include
the Facilities Subsidiary.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 12.2 hereof in place of and with
all the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"Support Period" means the period commencing on the Closing Date and ending
on the earlier of June 30, 1994 or such earlier date of termination as provided
for in the Distribution Support Agreement.
"Termination Capital Transaction" shall mean any sale, transfer or other
disposition of any Partnership property occurring upon or incident to the
liquidation and winding-up of the Partnership pursuant to Article XIV.
"Third Liquidation Target Amount" means an amount, determined with respect
to any Unit, which equals, as of the date of its determination, the sum of (a)
the Second Liquidation Target Amount, if any, attributable to such Unit, plus
(b) the excess, if any, of the Third Target Amount over the Second Target
Amount, determined with respect to the calendar quarter as to which such
determination is made.
"Third Target Amount" means $0.75 per Unit (or, with respect to the period
commencing on the Closing Date and ending on June 30, 1989, the product of $0.75
multiplied by a fraction, of which the numerator is equal to the number of days
in such period and of which the denominator is 91), subject to adjustment in
accordance with Sections 5.6 and 9.6 hereof.
"Timberlands Conveyance and Assumption Agreement" means the conveyance
agreement between the Partnership and PCTC (or its successors) wherein, among
other things, PCTC is to contribute to the Partnership undivided interests in
certain timberlands and other assets in exchange for a limited partner interest
in the Partnership consisting of 150,000 Management Units and 1,250,000 Deferred
Participation Interests.
19
<PAGE> 20
"Trading Day" has the meaning assigned to such term in Section 17.1(a)
hereof.
"Transfer Agent" means the Depositary or any bank, trust company or other
Person appointed by the Partnership to act as transfer agent for the Units.
"Transfer Application" means an application and agreement for transfer of
Depositary Units in the form set forth on the back of a Depositary Receipt or in
a form substantially to the same effect in a separate instrument.
"Underwriter" means each Person named as an underwriter in the Underwriting
Agreement who purchases Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement among the
Underwriters, the Partnership, the General Partner, the Facilities Subsidiary,
Plum Creek Timber Company, Inc. and Burlington.
"Unit" means a Partnership Interest of a Limited Partner or Assignee in the
Partnership (not including SPUs and, prior to the termination of the Support
Period, not including a Deferred Participation Interest) representing a
fractional part of the Partnership Interests of all Limited Partners and
Assignees; provided, however, that in the event any class or series of Units
issued pursuant to Section 4.4 hereof shall have designations, preferences or
special rights such that a Unit of such class or series shall represent a
greater or lesser part of the Partnership Interests of all Limited Partners or
Assignees than a Unit of any other class or series of Units, the Partnership
Interest represented by such class or series of Units shall be determined in
accordance with such designations, preferences or special rights. Unless
otherwise specifically indicated to the contrary, "Units" includes Depositary
Units.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property (as determined under Section 4.6(d) hereof) as of such
date, over (b) the Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 4.6(d) hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 4.6(d) hereof) as of such date, over (b) the fair market value of such
property (as determined under Section 4.6(d) hereof) as of such date.
"Unrecovered Capital" means, at any time, (a) with respect to a Unit, the
Initial Unit Price, less the sum of all distributions theretofore made in
respect of such Unit constituting, and which for purposes of determining the
priority of such distribution is treated as constituting, Cash from Capital
Transactions, (b) with respect to a SPU, the excess, if any, of (i) the cash
amount of the Capital Contribution made pursuant to Section 4.4 in exchange for
such SPU, over (ii) any
20
<PAGE> 21
amount previously distributed pursuant to Section 5.4(d) or 13.4 towards the
redemption of such SPU and (c) with respect to a Deferred Participation
Interest, prior to its conversion into a Unit pursuant to Section 5.7(b), the
excess, if any, of (i) the Net Agreed Value of the undivided interest in the
Contributed Property conveyed to the Partnership pursuant to Section 4.3(a) in
exchange for such Deferred Participation Interest, over (ii) any amount
previously distributed pursuant to Section 13.4 towards the redemption of such
Deferred Participation Interest.
ARTICLE III
PURPOSE
3.1 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership shall be (i) to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the Delaware
Act, including, without limitation, the acquisition, development, ownership,
management, operation, leasing and disposition of timberlands and the production
and sale of forest products, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership
of interests in any entity engaged in any of the foregoing, including the
ownership of common stock of the Facilities Subsidiary, and (iii) to do anything
necessary or incidental to the foregoing (including, without limitation, the
making of capital contributions or loans to the Facilities Subsidiary).
3.2 Powers. The Partnership shall be empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described herein and for the protection and benefit of the Partnership.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions. In order to form the Partnership under the
Delaware Act, the General Partner has made an initial Capital Contribution to
the Partnership in the amount of $20 and the General Partner has accepted a
Capital Contribution to the Partnership in the amount of $980 from the
Organizational Limited Partner for an interest in the Partnership, and the
Organizational Limited Partner has been admitted as a limited partner of the
Partnership.
4.2 Return of Initial Contribution. As of the Closing Date, after
giving effect to the transactions contemplated by Section 4.3 hereof, the
interest in the Partnership of the Organizational Limited Partner shall be
terminated, the Capital Contribution by the Organizational Limited Partner as an
initial Capital Contribution shall be refunded and the Organizational Limited
Partner shall withdraw as a limited partner of the Partnership. 98% of any
interest or other profit which may have resulted from the investment or other
use of such
21
<PAGE> 22
initial Capital Contributions shall be allocated and distributed to the
Organizational Limited Partner, the balance thereof shall be allocated and
distributed to the General Partner.
4.3 Initial Limited Partners.
(a) Prior to the Closing Date, PCTC shall contribute to the Partnership
undivided interests in those assets described in the Timberlands Conveyance and
Assumption Agreement in exchange for 150,000 Management Units and 1,250,000
Deferred Participation Interests and, as of the Closing Date, PCTC shall be
admitted to the Partnership as an Initial Limited Partner in respect of such
Management Units and Deferred Participation Interests.
(b) On the Closing Date, and as will then be required by the Underwriting
Agreement, each Underwriter shall contribute to the Partnership, in exchange for
the number of Units then specified in the Underwriting Agreement to be purchased
by such Underwriter at such Time of Delivery, an amount in cash equal to the
Issue Price for such Units (as then specified in the Underwriting Agreement)
multiplied by such number of Units being so purchased. Upon receipt of such
Capital Contribution, each Underwriter shall be admitted to the Partnership as
an Initial Limited Partner in respect of the Units so issued to it.
4.4 Issuances of Additional Units and Other Securities.
(a) The General Partner is hereby authorized to cause the Partnership to
issue, in addition to the Units issued pursuant to Section 4.3 hereof, such
additional Units, or classes or series thereof, or options, rights, warrants or
appreciation rights relating thereto, or SPUs or any other type of equity
security that the Partnership may lawfully issue, any unsecured or secured debt
obligations of the Partnership or debt obligations of the Partnership
convertible into any class or series of equity securities of the Partnership
(collectively, "Partnership Securities"), for any Partnership purpose, at any
time or from time to time, to the Partners or to other Persons for such
consideration and on such terms and conditions as shall be established by the
General Partner in its sole discretion, all without the approval of any Limited
Partners. The General Partner shall have sole discretion, subject to the
guidelines set forth in this Section 4.4 and the requirements of the Delaware
Act, in determining the consideration and terms and conditions with respect to
any future issuance of Partnership Securities.
(b) Notwithstanding any provision of this Agreement to the contrary,
additional Partnership Securities to be issued by the Partnership pursuant to
this Section 4.4 shall be issuable from time to time in one or more classes, or
one or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to existing classes and
series of Partnership Securities, all as shall be fixed by the General Partner
in the exercise of its sole and complete discretion, subject to Delaware law,
including, without limitation, (i) the allocations of items of Partnership
income, gain, loss, deduction and credit to each such class or series of
Partnership Securities; (ii) the right of each such class or series of
Partnership Securities to share in
22
<PAGE> 23
Partnership distributions; (iii) the rights of each such class or series of
Partnership Securities upon dissolution and liquidation of the Partnership; (iv)
whether such class or series of additional Partnership Securities is redeemable
by the Partnership and, if so, the price at which, and the terms and conditions
upon which, such class or series of additional Partnership Securities may be
redeemed by the Partnership; (v) whether such class or series of additional
Partnership Securities is issued with the privilege of conversion and, if so,
the rate at which, and the terms and conditions upon which, such class or series
of Partnership Securities may be converted into any other class or series of
Partnership Securities; (vi) the terms and conditions upon which each such class
or series of Partnership Securities will be issued, deposited with the
Depositary, evidenced by Depositary Receipts and assigned or transferred; and
(vii) the right, if any, of each such class or series of Partnership Securities
to vote on Partnership matters, including matters relating to the relative
rights, preferences and privileges of each such class or series.
(c) Notwithstanding the terms of Sections 4.4(a) and 4.4(b) hereof, during
the Support Period, the Partnership shall not issue an aggregate of more than
3,750,000 additional Units (excluding for purposes of such determination Units
issued pursuant to the Underwriter's over-allotment option) or other Partnership
Securities on a parity with the Units with respect to distributions, income,
losses or upon liquidation nor shall the Partnership issue any other Partnership
Securities having rights to distributions or in liquidation ranking prior or
senior to the Units, without the prior approval of a majority of the outstanding
Units (excluding Units held by the General Partner and its Affiliates). After
the Support Period, the Partnership shall not issue any other Partnership
Securities having rights to distributions or in liquidation ranking prior or
senior to the Units, without the prior approval of a majority of the outstanding
Units (excluding Units held by the General Partner and its Affiliates). (d) The
General Partner is hereby authorized and directed to take all actions which it
deems appropriate or necessary in connection with each issuance of Units, SPUs
or other Partnership Securities pursuant to Section 4.4(a) hereof and to amend
this Agreement in any manner which it deems appropriate or necessary to provide
for each such issuance, to admit Additional Limited Partners in connection
therewith and to specify the relative rights, powers and duties of the holders
of the Partnership Securities being so issued.
(e) The General Partner shall do all things necessary to comply with the
Delaware Act and is authorized and directed to do all things it deems to be
necessary or advisable in connection with any future issuance of Partnership
Securities, including compliance with any statute, rule, regulation or guideline
of any federal, state or other governmental agency or any National Securities
Exchange on which the Depositary Units or other Partnership Securities are
listed for trading.
4.5 No Preemptive Rights. No Person shall have any preemptive, preferential
or other similar right with respect to (a) additional Capital Contributions; (b)
issuance or sale of any class or series of Units, SPUs or other Partnership
Securities, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
23
<PAGE> 24
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Units or
Partnership Securities; (d) issuance of any right of subscription to or right to
receive, or any warrant or option for the purchase of, any such Units or
Partnership Securities; or (e) issuance or sale of any other securities that may
be issued or sold by the Partnership.
4.6 Capital Accounts. (a) The Partnership shall maintain for each Partner
owning Units or Deferred Participation Interests a separate Capital Account with
respect to such Units or Deferred Participation Interests, in accordance with
the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account
shall be increased by (i) the amount of all Capital Contributions made to the
Partnership with respect to such Units or Deferred Participation Interests
pursuant to this Agreement and (ii) all items of Partnership income and gain
(including income and gain exempt from tax) computed in accordance with Section
4.6(b) hereof and allocated with respect to such Units or Deferred Participation
Interests pursuant to Section 5.1 hereof, and decreased by (x) the amount of
cash or Net Agreed Value of all actual and deemed distributions of cash or
property made with respect to such Units or Deferred Participation Interests
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 4.6(b) hereof and allocated with respect to
such Units or Deferred Participation Interests pursuant to Section 5.1 hereof.
The Partnership shall maintain for the General Partner a separate Capital
Account with respect to its Partnership Interest, held in its capacity as a
general partner, in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions made to the Partnership with respect to such
Partnership Interest pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 4.6(b) hereof and allocated with respect to such
Partnership Interest pursuant to Section 5.1 hereof, and decreased by (x) the
amount of cash or Net Agreed Value of all actual and deemed distributions of
cash or property made with respect to such Partnership Interest pursuant to this
Agreement and (y) all items of Partnership deduction and loss computed in
accordance with Section 4.6(b) hereof and allocated with respect to such
Partnership Interest pursuant to Section 5.1.
The Partnership shall maintain a separate Capital Account with respect to
SPUs issued to any Special Limited Partner in accordance with the rules of
Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be
increased by (i) all Capital Contributions made to the Partnership by such
Special Limited Partner in exchange for such SPUs and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 4.6(b) hereof and allocated to such Partner pursuant
to Section 5.1 hereof, and decreased by (x) the amount of cash or the Net Agreed
Value of any property distributed by the Partnership to such Special Limited
Partner in redemption of such SPUs, and (y) all items of Partnership deduction
and loss computed in accordance with Section 4.6(b) and allocated to such
Special Limited Partner pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of income, gain,
deduction or loss to
24
<PAGE> 25
be reflected in the Partners' Capital Accounts, the determination, recognition
and classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including any
method of depreciation, cost recovery or amortization used for that purpose),
provided, that:
(i) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be deducted nor
amortized under Section 709 of the Code, if any, shall, for purposes of Capital
Account maintenance, be treated as an item of deduction at the time such fees
and other expenses are incurred and shall be allocated among the Partners
pursuant to Section 5.1 hereof.
(ii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership and, as to those items described in
Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact
that such items are not includable in gross income or are neither currently
deductible nor capitalized for federal income tax purposes.
(iii) Any income, gain or loss attributable to the taxable disposition
of any Partnership property (including any disposition of a timber interest)
shall be determined as if the adjusted basis of such property (or, in the case
of certain timber dispositions, the "adjusted depletion basis" of such timber)
as of such date of disposition were equal in amount to the Partnership's
Carrying Value with respect to such property as of such date. The adjusted basis
or adjusted depletion basis, whichever the case may be, determined upon sales or
other dispositions of timber units included in a timber account shall not, in
the aggregate, exceed the Partnership's total Carrying Value with respect to all
of the timber units included in such timber account.
(iv) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable to
any Contributed Property shall be determined as if the adjusted basis of such
property as of the date it was acquired by the Partnership was equal to the
Agreed Value of such property. Upon an adjustment pursuant to Section 4.6(d)
hereof to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for such
depreciation, cost recovery or amortization attributable to such property shall
be determined (A) as if the adjusted basis of such property were equal to the
Carrying Value of such property immediately following such adjustment and (B)
using a rate of depreciation, cost recovery or amortization derived from the
same method and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the asset
has a zero adjusted basis for federal income tax purposes, depreciation, cost
recovery or amortization deductions shall be determined using any reasonable
method that the General Partner may adopt.
(c)(i) Except as otherwise provided in Sections 4.6(c)(ii) and 4.6(c)(iii),
a transferee of a Partnership Interest shall succeed to a pro rata portion of
the Capital Account of the transferor
25
<PAGE> 26
relating to the Partnership Interest so transferred; provided, however, that, if
the transfer causes a termination of the Partnership under Section 708(b)(1)(B)
of the Code, the Partnership's properties shall be deemed to have been
distributed in liquidation of the Partnership to the Partners (including the
transferee of a Partnership Interest) pursuant to Sections 14.3 and 14.4 and
recontributed by such Partners in reconstitution of the Partnership. In such
event, the Carrying Values of the Partnership properties shall be adjusted
immediately prior to such deemed distribution pursuant to Section 4.6(d)(ii)
hereof and such adjusted Carrying Values shall then constitute the Agreed Values
of such properties upon such deemed contribution to the reconstituted
Partnership. The Capital Accounts of such reconstituted Partnership shall be
maintained in accordance with the principles of this Section 4.6.
(ii) Immediately prior to the sale, exchange or other disposition of a
Restricted Unit by the General Partner or an Affiliate of the General Partner,
the Capital Account maintained with respect to such Restricted Units for such
Person shall be allocated between the Restricted Units transferred and the
Restricted Units retained by such Person in the manner provided herein below:
(A) In the case of a transfer, to either an unaffiliated third party
or an Affiliate, of Deferred Participation Interests which constitute Restricted
Units to the transferor, the Capital Account maintained with respect to the
transferor's Restricted Units will (1) first, be allocated to the Management
Units retained, if any, in an amount equal to the product of (a) the number of
such Management Units retained and (b) the Per Unit Capital Amount, (2) second,
be allocated to the Deferred Participation Interests transferred in an amount
equal to the product of (a) the number of such Deferred Participation Interests
transferred and (b) the Per Unit Capital Amount and (3) third, any remaining
balance in the Capital Account will be allocated to the Deferred Participation
Interests retained. Following any such allocation, the transferor's Capital
Account, if any, will have a balance equal to the sum of the amounts allocated
under clauses (1) and (3) hereinabove, and the transferee's Capital Account
established with respect to the transferred Deferred Participation Interests
will have a balance equal to the amount allocated under clause (2) hereinabove.
(B) In the case of a transfer, to either an unaffiliated third party
or an Affiliate, of Management Units which constitute Restricted Units to the
transferor, the Capital Account maintained with respect to the transferor's
Restricted Units will (1) first, be allocated to the Management Units
transferred in an amount equal to the product of (a) the number of such
Management Units transferred and (b) the Per Unit Capital Amount, and (2)
second, any remaining balance in the Capital Account will be allocated to the
Restricted Units retained. Following any such allocation, the transferor's
Capital Account, if any, will have a balance equal to the amount allocated under
clause (2) hereinabove and the transferee's Capital Account established with
respect to the transferred Management Units will have a balance equal to the
amount allocated under clause (1) hereinabove.
(iii) Immediately prior to the sale, exchange or other disposition of a
Deferred Participation Interest (not otherwise constituting a Restricted Unit)
by the General Partner or an Affiliate of
26
<PAGE> 27
the General Partner, the Capital Account maintained for such Person with respect
to such Units will (1) first, be allocated to the Deferred Participation
Interests transferred in an amount equal to the product of (a) the number of
such Deferred Participation Interests transferred and (b) the Per Unit Capital
Amount, and (2) second, any remaining balance in such Capital Account will be
retained by the transferor, regardless of whether it has retained any Deferred
Participation Interests. Following any such allocation, the transferor's Capital
Account, if any, maintained with respect to the retained Deferred Participation
Interests, if any, will have a balance equal to the amount allocated under
clause (2) hereinabove, and the transferee's Capital Account established with
respect to the transferred Deferred Participation Interests will have a balance
equal to the amount allocated under clause (1) hereinabove.
(d)(i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed
Property or the conversion of the General Partner's Partnership Interest to
Units pursuant to Section 13.3(b), the Capital Accounts of all Partners and the
Carrying Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 5.1 hereof. In determining such
Unrealized Gain or Unrealized Loss the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash equivalents) immediately
prior to the issuance of Partnership Interests shall be determined by the
General Partner using such reasonable method of valuation as it may adopt;
provided, however, the General Partner, in arriving at such valuation, must take
fully into account the Limited Partner Equity Value, the General Partner Equity
Value, and the Special Limited Partner Book Capital, at such time. The General
Partner shall allocate such aggregate value among the assets of the Partnership
(in such manner as it determines in its sole discretion to be reasonable) to
arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of such Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of each such property immediately
prior to such distribution for an amount equal to its fair market value, and had
been allocated to the Partners, at such time, pursuant to Section 5.1 hereof.
Any Unrealized Gain or Unrealized Loss attributable to such property shall be
allocated in the same manner as Net Termination Gain or Net Termination Loss
pursuant to Section 5.1(c) hereof; provided, however, that, in making any such
allocation, Net Termination Gain or Net Termination Loss actually realized shall
be allocated first and; provided, further, that in allocating any Unrealized
Gain upon the constructive termination resulting from the Initial Offering,
Section 5.1(c)(i)(B) will be applied as if it required that 100% of such
Unrealized Gain be allocated among the Limited Partners, in accordance with
their respective Percentage
27
<PAGE> 28
Interests. In determining such Unrealized Gain or Unrealized Loss the aggregate
cash amount and fair market value of all Partnership assets (including cash or
cash equivalents) immediately prior to a distribution shall (A) in the case of
an actual distribution which is not made pursuant to Section 14.3 or 14.4 or in
the case of a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined and allocated in
the manner provided in Section 4.6(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 14.3 or 14.4, be determined and allocated by
the Liquidator using such reasonable methods of valuation as it may adopt.
Notwithstanding anything to the contrary provided herein, the preceding
provisions of this subsection 4.6(d)(ii) shall not be applied to distributions
of cash in redemption or retirement of a Partnership Interest (and no such
adjustment shall be made) unless the adjustment therein described is necessary
to maintain the economic uniformity of the Units within each class of publicly
traded Units.
4.7 Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.8 No Withdrawal. No Partner shall be entitled to withdraw any part of his
Capital Contribution (including with respect to SPUs) or his Capital Account or
to receive any distribution from the Partnership, except as provided in Section
4.2 hereof, and Articles V, XIII and XIV hereof.
4.9 Loans from Partners. Loans by a Partner to the Partnership shall not
constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible only out of the Partnership
assets in accordance with the terms and conditions upon which such advances are
made.
4.10 No Fractional Units. No fractional Units shall be issued by the
Partnership.
4.11 Splits and Combinations. (a) Subject to Section 4.11(d) hereof, the
General Partner may make a pro rata distribution of Units or Partnership
Securities to all Record Holders or may effect a subdivision or combination of
Units or other Partnership Securities; provided, however, that after any such
distribution, subdivision or combination, each Partner shall have the same
Percentage Interest in the Partnership as before such distribution, subdivision
or combination.
(b) Whenever such a distribution, subdivision or combination of Units or
Partnership Securities is declared, the General Partner shall select a Record
Date as of which the distribution, subdivision or combination shall be effective
and shall send notice of the distribution, subdivision or combination at least
20 days prior to such Record Date, to each Record Holder as of the date not less
than 10 days prior to the date of such notice. The General Partner also may
cause a firm of independent public accountants selected by it to calculate the
number of Units to be held by each Record Holder after giving effect to such
distribution, subdivision or
28
<PAGE> 29
combination. The General Partner shall be entitled to rely on any certificate
provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or combination,
the General Partner may cause Depositary Receipts to be issued to the Record
Holders of Units as of the applicable Record Date representing the new number of
Units held by such Record Holders, or the General Partner may adopt such other
procedures as it may deem appropriate to reflect such distribution, subdivision
or combination; provided, however, that in the event any such distribution,
subdivision or combination results in a smaller total number of Units
outstanding, the General Partner shall require, as a condition to the delivery
to a Record Holder of such new Depositary Receipt, the surrender of any
Depositary Receipt held by such Record Holder immediately prior to such Record
Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section 4.10 and this Section 4.11(d), each fractional Unit
shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to
the next higher Unit).
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations For Capital Account Purposes. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.6(b) hereof) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 5.1(d), all items of income, gain, loss and deduction taken
into account in computing Net Income for such taxable period shall be allocated
in the same manner as such Net Income is allocated hereunder:
(i) First, 100% to the General Partner until the aggregate Net
Income allocated to the General Partner pursuant to this Section 5.1(a)(i) for
the current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
5.1(b)(v) for all previous taxable years;
(ii) Second, 100% to Partners holding Deferred Participation
Interests, in the proportion of the number of Deferred Participation Interests
held by each such Partner to the total number of Deferred Participation
Interests then outstanding, until the aggregate Net Income allocated to such
Partners pursuant to this Section 5.1(a)(ii) for the current taxable year and
all previous taxable years is equal to the aggregate Net Losses allocated to
such Partners pursuant to Section 5.1(b)(iv) for all previous taxable years;
29
<PAGE> 30
(iii) Third, 100% to the Special Limited Partners, in the
proportion of the number of SPUs held by each such Partner to the total number
of SPUs then outstanding, until the aggregate Net Income allocated to the
Special Limited Partners pursuant to this Section 5.1(a)(iii) for the current
taxable year and all previous taxable years is equal to the aggregate Net Losses
allocated to the Special Limited Partners pursuant to Section 5.1(b)(iii) for
all previous taxable years;
(iv) Fourth, 100% to the Limited Partners, in accordance with their
respective Percentage Interests, until the aggregate Net Income allocated to the
Limited Partners pursuant to this Section 5.1(a)(iv) for the current taxable
year and all previous taxable years is equal to the aggregate Net Losses
allocated to the Limited Partners pursuant to Section 5.1(b)(ii) for all
previous taxable years; and
(v) Fifth, the balance, if any, 100% to the General Partner and the
Limited Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 5.1(d), all items of income, gain, loss and deduction taken
into account in computing Net Losses for such taxable period shall be allocated
in the same manner as such Net Losses are allocated hereunder:
(i) First, 100% to the General Partner and the Limited Partners, in
accordance with their respective Percentage Interests, until the aggregate Net
Losses allocated pursuant to this Section 5.1(b)(i) for the current taxable year
and all previous taxable years is equal to the aggregate Net Income allocated to
such Partners pursuant to Section 5.1(a)(v) for all previous taxable years;
(ii) Second, 100% to the Limited Partners, in accordance with their
respective Percentage Interests; provided, that Net Losses shall not be
allocated pursuant to this Section 5.1(b)(ii) to the extent that such allocation
would cause any Limited Partner to have a deficit balance in its Adjusted
Capital Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account);
(iii) Third, 100% to the Special Limited Partners, in the
proportion of the number of SPUs held by each such Partner to the total number
of SPUs then outstanding; provided, that Net Losses shall not be allocated
pursuant to this Section 5.1(b)(iii) to the extent that such allocation would
cause any Special Limited Partner to have a deficit balance in its Adjusted
Capital Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account);
(iv) Fourth, if such taxable period ends prior to the conversion of
the last outstanding Deferred Participation Interest, pursuant to Section 5.7(b)
hereof, 100% to the Partners holding Deferred Participation Interests, in the
proportion of the number of Deferred Participation Interests held by each such
Partner to the total number of Deferred Participation Interests then
outstanding; provided, that Net Losses shall not be allocated pursuant to this
Section 5.1(b)(iv) to
30
<PAGE> 31
the extent that such allocation would cause any Partner holding such Deferred
Participation Interests to have a deficit balance in its Adjusted Capital
Account at the end of such taxable year (or increase any existing deficit
balance in its Adjusted Capital Account); and
(v) Fifth, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 5.1(d), all items of gain and loss
taken into account in computing Net Termination Gain or Net Termination Loss for
such taxable period shall be allocated in the same manner as such Net
Termination Gain or Net Termination Loss is allocated hereunder. All allocations
under this Section 5.1(c) shall be made after Capital Account balances have been
adjusted by all other allocations provided under this Section 5.1 and after all
distributions of Available Cash provided under Section 5.4 have been made with
respect to the taxable period ending on the Liquidation Date.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 4.6(d)) from Termination Capital Transactions, such Net
Termination Gain shall be allocated between the General Partner and the Limited
Partners in the following manner (and the Capital Accounts of the Partners shall
be increased by the amount so allocated in each of the following subclauses, in
the order listed, before an allocation is made pursuant to the next succeeding
subclause):
(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion of such deficit balance to the deficit
balances in the Capital Accounts of all Partners, until each such Partner has
been allocated Net Termination Gain equal to any such deficit balance in its
Capital Account;
(B) Second, 98% to the Limited Partners, in accordance with
their respective Percentage Interests, and 2% to the General Partner until each
Limited Partner's Capital Account (determined on a per Unit basis) in respect of
its Units is equal to the sum of (1) the Unrecovered Capital attributable to
each such Unit plus (2) the Cumulative Base Deficiency, if any, attributable to
each such Unit;
(C) Third, 98% to the Limited Partners, in accordance with their
respective Percentage
Interests, and 2% to the General Partner until each Limited Partner's Capital
Account (determined on a per Unit basis) in respect of its Units is equal to the
First Liquidation Target Amount, determined with respect to each such Unit;
(D) Fourth, if such Termination Capital Transaction occurs (or
is deemed to occur) prior to the conversion of the last outstanding Deferred
Participation Interest, pursuant to Section 5.7(b) hereof, 100% to the Partners
holding such Deferred Participation Interests, in the ratio of the number of
Deferred Participation Interests held by each such Partner to the total number
of Deferred Participation Interests then outstanding, in the amount which will
increase
31
<PAGE> 32
the Capital Account balance of each such Partner maintained with respect to such
Deferred Participation Interests to that amount which equals its Unrecovered
Capital attributable to such Deferred Participation Interests, determined for
the taxable year (or portion thereof) to which this allocation of gain relates;
(E) Fifth, if such Termination Capital Transaction occurs (or is
deemed to occur) prior to the redemption of all SPUs then outstanding, 100% to
the Special Limited Partners holding such SPUs, in the proportion of the number
of SPUs held by each such Partner to the total number of SPUs then outstanding,
in the amount which will increase the Capital Account balance of each such
Special Limited Partner maintained with respect to such SPUs to that amount
which equals its Unrecovered Capital attributable to such SPUs, determined for
the taxable year (or portion thereof) to which this allocation of gain relates;
(F) Sixth, 88% to the Limited Partners, in accordance with their
respective Percentage Interests, and 12% to the General Partner until each
Limited Partner's Capital Account (determined on a per Unit basis) is equal to
the Second Liquidation Target Amount, determined with respect to each such Unit;
(G) Seventh, 78% to the Limited Partners, in accordance with
their respective Percentage Interests, and 22% to the General Partner until each
Limited Partner's Capital Account (determined on a per Unit basis) is equal to
the Third Liquidation Target Amount, determined with respect to each such Unit;
(H) Eighth, 68% to the Limited Partners, in accordance with
their respective Percentage Interests, and 32% to the General Partner until each
Limited Partner's Capital Account (determined on a per Unit basis) is equal to
the Fourth Liquidation Target Amount, determined with respect to each such Unit;
and
(I) Finally, the balance if any, 63% to all Limited Partners, in
accordance with their respective Percentage Interests, and 37% to the General
Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 4.6.(d)) from Termination Capital Transactions, such Net
Termination Loss shall be allocated to the Partners in the following manner:
(A) First, 100% to the General Partner and the Limited Partners
in proportion to, and to the extent of, the positive balances in their
respective Capital Accounts;
(B) Second, if such Termination Capital Transaction occurs (or
is deemed to occur) prior to the redemption of all SPUs outstanding, 100% to the
Special Limited Partners, in the proportion of the number of SPUs held by each
such Partner to the total number of SPUs then outstanding, to the extent of the
positive balances in their respective Capital Accounts maintained with respect
to such SPUs;
32
<PAGE> 33
(C) Third, if such Termination Capital Transaction occurs (or is
deemed to occur) prior to the conversion of the last outstanding Deferred
Participation Interest, pursuant to Section 5.7(b) hereof, 100% to the Partners
holding Deferred Participation Interests, in the proportion of the number of
Deferred Participation Interests held by each such Partner to the total number
of Deferred Participation Interests then outstanding, to the extent of the
positive balances in their respective Capital Accounts maintained with respect
to such Deferred Participation Interests; and
(D) Fourth, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 5.1, if there is a net decrease in Partnership Minimum
Gain during any Partnership taxable period, each Partner shall be allocated
items of Partnership income and gain for such period (and, if necessary,
subsequent periods) in the manner and amounts provided in Treasury Regulation
Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor
provision. For purposes of this Section 5.1(d), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 5.1(d) with respect to such taxable period
(other than an allocation pursuant to Sections 5.1(d)(vi) or 5.1(d)(vii)). This
Section 5.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse
Debt. Notwithstanding any other provision of this Section 5.1 (other than
Section 5.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain during any Partnership taxable period, any Partner with a share of Partner
Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor
provisions. For purposes of this Section 5.1(d), each Partner's Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 5.1(d), other than Section 5.1(d)(i) and
other than an allocation pursuant to Sections 5.1(d)(vi) or 5.1(d)(vii), with
respect to such taxable period. This Section 5.1(d)(ii) is intended to comply
with the chargeback of items of income and gain requirement in Treasury
Regulation Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(iii) Priority Allocations. All or a portion of the remaining items
of Partnership gross income or gain for the taxable period, if any, shall be
allocated 100% to the General Partner until the aggregate amount of such items
allocated to the General Partner under this paragraph (iii) for
33
<PAGE> 34
the current taxable period and all previous taxable periods is equal to the
cumulative amount of cash distributed to the General Partner as an Incentive
Distribution from the Closing Date to a date 45 days after the end of the
current taxable period.
(iv) Qualified Income Offset. Except as provided in Sections
5.1(d)(i) and 5.1 (d)(ii), in the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specifically allocated to such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Treasury regulations, the deficit
balance, if any, in its Adjusted Capital Account created by such adjustments,
allocations or distributions as quickly as possible; provided, that an
allocation pursuant to this Section 5.1(d)(iv) shall be made only if and to the
extent that such Partner would have a deficit balance in its Adjusted Capital
Account after all other allocations provided in this Section 5.1 have been
tentatively made as if this Section 5.1(d)(iv) was not in the Agreement.
(v) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership taxable
period that is in excess of the sum of (A) the amount such Partner is obligated
to restore pursuant to any provision of this Agreement and (B) the amount such
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such
Partner shall be specially allocated items of Partnership gross income and gain
in the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 5.1(d)(v) shall be made only if and to the
extent that such Partner would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Section 5.1 have been
tentatively made as if Section 5.1(d)(iv) hereof and this Section 5.1(d)(v) were
not in the Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be allocated in a
different ratio to satisfy the safe harbor requirements of the Treasury
regulations promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the Limited Partners, to revise the prescribed ratio
to the numerically closest ratio which does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the Partner that
bears the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Treasury Regulation Section 1.704-2(i). If more than one Partner bears the
Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner
Nonrecourse Deductions attributable thereto shall be allocated between or among
such Partners in accordance with the ratios in which they share such Economic
Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3),
34
<PAGE> 35
the Partners agree that Nonrecourse Liabilities of the Partnership in excess of
the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount
of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance
with their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis), and such item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury regulations.
(x) Economic Uniformity. At the election of the General Partner
with respect to any taxable period or portion thereof, all or a portion of the
items of Partnership gross income, gain or expense for such taxable period or
portion thereof, if any, shall be allocated 100% to each Partner holding
Deferred Participation Interests during such period or portion thereof, in the
proportion of the number of Deferred Participation Interests held by such
Partner to the total number of Deferred Participation Interests then
outstanding, until each such Partner has been allocated an amount of gross
income, gain or expense which adjusts the Capital Account maintained with
respect to such Interests to an amount equal to the product of (A) the number of
Deferred Participation Interests held by such Partner and (B) the Per Unit
Capital Amount. The purpose of this allocation is to establish uniformity
between the Capital Accounts underlying Deferred Participation Interests and the
Capital Accounts underlying Units held by Public Unitholders. This allocation
method for establishing such economic uniformity will only be available to the
General Partner if the method for allocating the Capital Account maintained with
respect to the Deferred Participation Interests between the transferred and
retained Deferred Participation Interests pursuant to Section 4.6(c)(iii) is not
applicable or does not otherwise provide such economic uniformity to the
Deferred Participation Interests. Notwithstanding anything to the contrary
provided herein, the provisions of this subsection shall be applied to the
General Partner not later than with respect to the taxable period or portion of
period ending on the date of the termination of the Support Period.
(xi) Curative Allocation. (A) Notwithstanding any other provision
of this Section 5.1, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed Allocations so
that, to the extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such items
that would have been allocated to each such Partner under the Agreed Allocations
had the Required Allocations and this Curative Allocation not otherwise been
provided in this Section 5.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be taken into
account except to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into
account except to the extent
35
<PAGE> 36
that there has been a decrease in Minimum Gain Attributable to Partner
Nonrecourse Debts. Allocations pursuant to this Section 5.1(d)(xi)(A) shall only
be made with respect to Required Allocations to the extent the General Partner
reasonably determines that such allocations will otherwise be inconsistent with
the economic agreement among the Partners. Further, allocations pursuant to this
Section 5.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the General Partner reasonably
determines that such allocations are likely to be offset by subsequent Required
Allocations.
(xii) Restorative Allocation. (A) in the event (1) the allocation
described in Section 5.1(d)(x) is made pursuant to such Section; (2) a
Termination Capital Transaction occurs after such allocation, but prior to the
termination of the Support Period; and (3) as a result thereof there is a Net
Termination Gain allocable to periods ending on or prior to the end of the
Support Period, then all or a portion of the items of Partnership gross income
or gain, if any, for the taxable year in which such Termination Capital
Transaction occurs, shall be allocated pro rata to Partners holding Units, until
the allocation of gain or income that would have been made to the General
Partner absent the allocation made pursuant to this Section 5.1(d)(xii)(A) has
instead been made to the holders of Units up to an amount equal to the amount of
the allocation previously made pursuant to Section 5.1(d)(x). If the allocation
of gain or income to Partners holding Units pursuant to the preceding sentence
is less than the amount of the allocation previously made pursuant to Section
5.1(d)(x), then an amount of Partnership loss or deduction for such taxable year
equal to such difference shall be allocated to the General Partner.
(B) In the event (1) the allocation described in Section
5.1(d)(x) is made pursuant to such Section; (2) a Termination Capital
Transaction occurs after such allocation, but prior to the termination of the
Support Period; and (3) as a result thereof there is a Net Termination Loss
allocable to periods ending on or prior to the end of the Support Period, then
all or a portion of the items of Partnership loss or deduction, if any, for the
taxable year in which such Termination Capital Transaction occurs, shall be
allocated to the General Partner, until the allocation of loss or deduction that
would have been made to the Partners holding Units absent the allocation made
pursuant to this Section 5.1(d)(xii)(B) has instead been made to the General
Partner up to an amount equal to the amount of the allocation previously made
pursuant to Section 5.1(d)(x).
(xiii) Notwithstanding the other provisions of this Section 5.1(d)
(other than paragraphs (i) and (ii)) all or a portion of the remaining items of
Partnership gross income or gain for the taxable period, if any, shall be
allocated to each Partner who has received a deemed distribution of Available
Cash pursuant to Section 9.7 hereof until the aggregate amount of such items
allocated to each such Partner under this paragraph (xii) for the current
taxable period and all previous taxable periods is equal to the cumulative
amount of cash deemed distributed to such Partner pursuant to Section 9.7 for
the current taxable period and all previous periods.
(xiv) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event after January 1,
1995, the following rules shall apply:
36
<PAGE> 37
(A) In the case of any allocation of Additional Book
Basis Derivative Items (other than an allocation of
Unrealized Gain or Unrealized Loss under Section
4.6(d) hereof), the General Partner shall allocate
additional items of gross income and gain to the
Limited Partners or additional items of deduction
and loss to the General Partner to the extent that
the Additional Book Basis Derivative Items allocated
to the Limited Partners exceeds their Share of those
Additional Book Basis Derivative Items. For this
purpose, the Limited Partners shall be treated as
being allocated Additional Book Basis Derivative
Items to the extent that such Additional Book Basis
Derivative Items have reduced the amount of income
that would otherwise have been allocated to the
Limited Partners under the Partnership Agreement
(e.g., Additional Book Basis Derivative Items taken
into account in computing cost of goods sold would
reduce the amount of book income otherwise available
for allocation among the Partners). Any allocation
made pursuant to this Section 5.1(d)(xiv)(A) shall
be made after all of the other Agreed Allocations
have been made as if this Section 5.1(d)(xiv) were
not in the Partnership Agreement and, to the extent
necessary, shall require the reallocation of items
that have been allocated pursuant to such other
Agreed Allocations.
(B) In the case of any negative adjustment to the
Capital Accounts of the Partners resulting from a
Book-Down Event, such negative adjustment (1) shall
first be allocated between the General Partner and
the Limited Partners in proportion to and to the
extent of their Remaining Net Positive Adjustments
and (2) any remaining negative adjustment shall be
allocated pursuant to Section 5.1(c) hereof.
(C) In making the allocations required under this
Section 5.1(d)(xiv), the General Partner, in its
sole discretion, may apply whatever conventions or
other methodology it deems reasonable to satisfy the
purposes of this Section 5.1(d)(xiv).
(D) For purposes of this Section 5.1(d)(xiv), the
following definitions shall apply:
37
<PAGE> 38
(1) "Additional Book Basis" means the portion of any
remaining Carrying Value of an Adjusted Property that is attributable
to positive adjustments made to such Carrying Value as a result of
Book-Up Events. For purposes of determining the extent to which
Carrying Value constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying
Value of an Adjusted Property as a result of either a
Book-Down Event or a Book-Up Event shall first be deemed to
offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior
positive adjustments made thereto pursuant to a Book-Up or
Book-Down Event.
(ii) If Carrying Value that constitutes Additional
Book Basis is reduced as a result of a Book-Down Event and
the Carrying Value of other property is increased as a
result of such Book-Down Event, an allocable portion of any
such increase in Carrying Value shall be treated as
Additional Book Basis; provided that the amount treated as
Additional Book Basis pursuant hereto as a result of such
Book-Down Event shall not exceed the amount by which the
Aggregate Remaining Net Positive Adjustments after such
Book-Down Event exceeds the remaining Additional Book Basis
attributable to all of the Partnership's Adjusted Property
after such Book-Down Event (determined without regard to the
application of this Section 5.1(d)(xiv)(D)(1)(ii) to such
Book-Down Event).
(2) "Additional Book Basis Derivative Items" means any Book
Basis Derivative Items that are computed with reference to Additional
Book Basis. To the extent that the Additional Book Basis attributable
to all of the Partnership's Adjusted Property as of the beginning of
any taxable period exceeds the Aggregate Remaining Net Positive
Adjustments as of the beginning of such period (the "Excess Additional
Book Basis"), the Additional Book Basis Derivative Items for such
period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without
regard to this sentence as the Excess Additional Book Basis bears to
the Additional Book Basis as of the beginning of such period.
(3) "Aggregate Remaining Net Positive Adjustments" means as
of the end of any taxable period, the sum of the Remaining Net
Positive Adjustments of all the Partners.
38
<PAGE> 39
(4) "Book Basis Derivative Items" means any item of income,
deduction, gain, or loss included in the determination of Net Income
or Net Loss that is computed with reference to the Carrying Value of
an Adjusted Property (e.g., depreciation, depletion, or gain or loss
with respect to an Adjusted Property).
(5) "Book-Down Event" means an event which triggers a
negative adjustment to the Capital Accounts of the Partners pursuant
to Section 4.6(d) hereof after January 1, 1990.
(6) "Book-Up Event" means an event which triggers a positive
adjustment to the Capital Accounts of the Partners pursuant to Section
4.6(d) hereof after January 1, 1990.
(7) "Net Positive Adjustments" means, with respect to any
Partner, the excess, if any, of the total positive adjustments over
the total negative adjustments made to the Capital Account of such
Partner pursuant to Book-Up and Book-Down Events.
(8) "Remaining Net Positive Adjustments" means as of the end
of any taxable period, (i) with respect to the Limited Partners, as a
class, the excess of (a) the Net Positive Adjustments of the Limited
Partners as of the end of such period over (b) the sum of those
Partners' Share of Additional Book Basis Derivative Items for each
prior taxable period ending after January 1, 1990, and (ii) with
respect to the General Partner, the excess of (a) the Net Positive
Adjustments of the General Partner as of the end of such period over
(b) the sum of the General Partner's Share of Additional Book Basis
Derivative Items for each prior taxable period ending after January 1,
1990.
(9) "Share of Additional Book Basis Derivative Items" means
in connection with any allocation of Additional Book Basis Derivative
Items for any taxable period, (i) with respect to the Limited
Partners, as a class, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Limited Partners'
Remaining Net Positive Adjustments as of the end of such period bears
to the Aggregate Remaining Net Positive Adjustments as of that time,
and (ii) with respect to the General Partner, the amount that bears
the same ratio to such Additional Book Basis Derivative Items as the
General Partner's Remaining Net Positive Adjustments as of the end of
such period bears to the Aggregate Remaining Net Positive Adjustments
as of that time.
(B) The General Partner shall have reasonable discretion, with respect to
each taxable
39
<PAGE> 40
period, to (1) apply the provisions of Section 5.1(d)(xi)(A) hereof in whatever
order is most likely to minimize the economic distortions that might otherwise
result from the Required Allocations, and (2) divide all allocations pursuant to
Section 5.1(d)(xi)(A) hereof among the Partners in a manner that is likely to
minimize such economic distortions.
5.2 Allocations for Tax Purposes. (a) Except as otherwise provided herein,
for federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Partners in the same manner as its correlative item
of "book" income, gain, loss or deduction is allocated pursuant to Section 5.1
hereof.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, depletion and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between the
Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) except as otherwise provided in Section 5.2(b)(iv), any
item of Residual Gain or Residual Loss attributable to a Contributed Property
shall be allocated among the Partners in the same manner as its correlative item
of "book" gain or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the Unrealized
Gain or Unrealized Loss attributable to such property and the allocations
thereof pursuant to Section 4.6(d)(i) or (ii), and (2) second, in the event such
property was originally a Contributed Property, be allocated among the Partners
in a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise
provided in Section 5.2(b)(iv), any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners in
the same manner as its correlative item of "book" gain or loss is allocated
pursuant to Section 5.1.
(iii) Except as otherwise provided in Section 5.2(b)(iv), all other
items of income, gain, loss and deduction shall be allocated among the Partners
in the same manner as their correlative item of "book" gain or loss is allocated
pursuant to Section 5.1.
(iv) Any items of income, gain, loss or deduction otherwise allocable
under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall be subject to
allocation by the General Partner in a manner designed to eliminate, to the
maximum extent possible, Book-Tax Disparities in a Contributed Property or
Adjusted Property otherwise resulting from the application of the "ceiling"
limitation (under Section 704(c) of the Code or Section 704(c) principles) to
the allocations provided under Section 5.2(b)(i)(A) or 5.2(b)(ii)(A).
40
<PAGE> 41
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units (or any class or classes thereof), the
General Partner shall have sole discretion to (i) adopt such conventions as it
deems appropriate in determining the amount of depreciation, amortization and
cost recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including gross income) or deductions; and (iii) amend the
provisions of this Agreement as appropriate (x) to reflect the proposal or
promulgation of Treasury regulations under Section 704(b) or Section 704(c) of
the Code or (y) otherwise to preserve or achieve uniformity of the Units (or any
class or classes thereof). The General Partner may adopt such conventions, make
such allocations and make such amendments to this Agreement as provided in this
Section 5.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Units issued and outstanding or the Partnership, and if such
allocations are consistent with the principles of Section 704 of the Code.
(d) The General Partner in its sole discretion may determine to depreciate
the portion of an adjustment under Section 743(b) of the Code attributable to
unrealized appreciation in any Adjusted Property (to the extent of the
unamortized Book-Tax Disparity) using a predetermined rate derived from the
depreciation method and useful life applied to the Partnership's common basis of
such property, despite the inconsistency of such approach with Proposed Treasury
Regulation Section 1.168-2(n) and Treasury Regulation Section 1.167(c)-1(a)(6).
If the General Partner later determines that such reporting position cannot
reasonably be taken, the General Partner may adopt a depreciation convention
under which all purchasers acquiring Units in the same month would receive
depreciation, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to utilize such aggregate method, the General Partner may use any other
reasonable depreciation convention to preserve the uniformity of the intrinsic
tax characteristics of any Units that would not have a material adverse effect
on the Limited Partners or the Record Holders of any class or classes of Units.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 5.2 be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
41
<PAGE> 42
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest shall, for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the New York Stock Exchange on
the first Business Day of each month; provided, however, that (i) except as
otherwise provided in clause (ii), such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Closing Date
occurs shall be allocated to Partners as of the opening of the New York Stock
Exchange on the first Business Day of the next succeeding month or (ii) if the
Underwriters' over-allotment option is exercised, such items for the period
beginning on the Closing Date and ending on the last day of the month in which
the Second Time of Delivery (as defined in the Underwriting Agreement) occurs
shall be allocated to the Partners as of the opening of the New York Stock
Exchange on the first Business Day of the next succeeding month; and provided,
further, that gain or loss on a sale or other disposition of any assets of the
Partnership other than in the ordinary course of business shall be allocated to
the Partners as of the opening of the New York Stock Exchange on the first
Business Day of the month in which such gain or loss is recognized for federal
income tax purposes. The General Partner may revise, alter or otherwise modify
such methods of allocation as it determines necessary, to the extent permitted
or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article V shall instead be made to the beneficial owner of
Units held by a nominee in any case in which the nominee has furnished the
identity of such owner to the Partnership in accordance with Section 6031(c) of
the Code or any other method acceptable to the General Partner in its sole
discretion.
5.3 Requirement and Characterization of Distributions. Within 60 days
following the end of each calendar quarter (or following the period from the
Closing Date to June 30, 1989) an amount equal to 100% of Available Cash with
respect to such quarter (or period) shall be distributed in accordance with this
Article V by the Partnership to the Partners, as of the Record Date selected by
the General Partner in its reasonable discretion. The foregoing shall not modify
in any respect the provisions of Section 4.2 hereof regarding the distribution
of any interest or other profit on the initial Capital Contributions referred to
therein. The General Partner shall have the right to determine in its sole
discretion whether a particular distribution of cash consists of Available Cash
or Cash From Capital Transactions and the amount of cash in each such category,
except to the extent it is established that such determination is contrary to
any of the express provisions in this Agreement. Except as otherwise provided in
Section 5.5(b), the Partnership shall not be obligated to make distributions of
Cash From Capital Transactions and the General Partner shall have the right to
cause the Partnership to use Cash From Capital Transactions for any purpose the
General Partner deems necessary or desirable, including but not limited to,
purchase of Units in the public market, in privately negotiated transactions or
otherwise (and in no event shall the General Partner be obligated to cause such
purchases to be made on a pro rata basis or to afford every Limited Partner an
equal opportunity to participate in the transactions involved).
42
<PAGE> 43
5.4 Distributions. Available Cash with respect to any calendar quarter
shall be distributed as follows:
(a) First, 98% to the Limited Partners, in accordance with their
respective Percentage Interests, and 2% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
the Minimum Quarterly Amount;
(b) Second, 98% to the Limited Partners, in accordance with their
respective Percentage Interests, and 2% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
any Cumulative Base Deficiency existing as of the end of such quarter;
(c) Third, 98% to the Limited Partners, in accordance with their
respective Percentage Interests, and 2% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
the excess of the First Target Amount over the Minimum Quarterly Amount;
(d) Fourth, 100% to the Special Limited Partners, in proportion to the
Unrecovered Capital balance attributable to the respective SPUs held by them, to
the extent necessary to redeem any and all then outstanding SPUs at a price
equal to the Unrecovered Capital attributable thereto;
(e) Fifth, 88% to the Limited Partners, in accordance with their
respective Percentage Interests, and 12% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
the excess of the Second Target Amount over the First Target Amount;
(f) Sixth, 78% to the Limited Partners, in accordance with their
respective Percentage Interests, and 22% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
the excess of the Third Target Amount over the Second Target Amount;
(g) Seventh, 68% to the Limited Partners, in accordance with their
respective Percentage Interests and 32% to the General Partner until there has
been distributed in respect of each of the outstanding Units an amount equal to
the Fourth Target Amount over the Third Target Amount; and
(h) Finally, the balance, if any, 63% to the Limited Partners, in
accordance with their respective Percentage Interests, and 37% to the General
Partner.
5.5 Distributions of Cash from Capital Transactions. (a) Cash from Capital
Transactions which the General Partner determines in accordance with Section 5.3
to distribute shall be distributed, unless the provisions of Section 5.5(b)
hereof require otherwise, 98% to the Limited Partners, in accordance with their
respective Percentage Interests, and 2% to the General Partner until the Limited
Partners have received, since the Closing Date through such date, distributions
43
<PAGE> 44
of Available Cash that are deemed to be Cash from Capital Transactions in an
aggregate amount equal to the product obtained by multiplying (i) the Initial
Unit Price by (ii) 12,500,000 (increased by the number of Units, if any, issued
pursuant to exercise of the Underwriters' over-allotment option). Thereafter,
any Cash from Capital Transactions shall be distributed in accordance with
Section 5.4.
(b) If one or more Capital Transactions shall occur in any taxable year,
then (except as otherwise provided below) the General Partner shall be required
to make a distribution of Cash from Capital Transactions on or before the April
1st next following the end of the taxable year in which such Capital
Transactions occur in accordance with the following procedures:
(i) The General Partner shall determine the net capital gain and net
ordinary income recognized by the Partnership (without taking account of any
Code Section 743 adjustments) for federal income tax purposes from all Capital
Transactions during such year, and shall then determine the portion of such net
capital gain and net ordinary income allocable to Units purchased by the
Underwriters pursuant to the Underwriting Agreement for federal income tax
purposes. Such portion of any net capital gain or net ordinary income shall then
be divided by the number of Units purchased by the Underwriters pursuant to the
Underwriting Agreement.
(ii) The General Partner shall then cause the Partnership to
distribute to the Partners, in accordance with their respective Percentage
Interests, cash until an amount has been distributed pursuant hereto with
respect to every Unit outstanding on the Record Date established by the General
Partner with respect to such distribution equal to 125% of the federal income
tax liability that would be due with respect to the "net capital gain" and "net
ordinary income" attributed to each outstanding Unit on the Record Date for the
distribution to be made pursuant to the preceding sentence (assuming for such
purpose that the maximum effective federal income tax rates for individuals,
relating to either long-term capital gain or ordinary income, whichever the case
may be, applied to all holders of Units at the time of such recognition without
regard to any recapture of lower rates or alternative minimum tax rate).
(iii) No distribution of Cash from Capital Transactions shall be
required by this Section 5.5(b) with respect to any tax year if the amount
otherwise distributable for such taxable year under this Section 5.5(b) does not
exceed $0.10 per Unit, or if such distribution shall be prohibited by
requirements binding upon the Partnership or any Subsidiary at the time such
distribution would otherwise be required (including but not limited to any such
requirement imposed by any loan agreement then in effect).
5.6 Adjustment of Minimum Quarterly Amount, Unrecovered Capital, Cumulative
Base Deficiency and Target Amounts. (a) The Minimum Quarterly Amount,
Unrecovered Capital, Cumulative Base Deficiency, First Target Amount, Second
Target Amount, Third Target Amount and Fourth Target Amount shall be
proportionately adjusted in the event of any distribution, combination or
subdivision (whether effected by a distribution payable in Units or otherwise)
of Units or Partnership Securities in accordance with Section 4.11 hereof. In
the event
44
<PAGE> 45
of a distribution of Cash from Capital Transactions, the Minimum Quarterly
Amount, First Target Amount, Second Target Amount, Third Target Amount and
Fourth Target Amount shall be adjusted proportionately downward to equal the
product of the otherwise applicable Minimum Quarterly Amount, First Target
Amount, Second Target Amount, Third Target Amount and Fourth Target Amount, as
the case may be, by a fraction, of which the numerator is the Unrecovered
Capital immediately after giving effect to such distribution and of which the
denominator is the Unrecovered Capital immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Amount, First Target Amount, Second Target
Amount, Third Target Amount and Fourth Target Amount shall also be subject to
adjustment pursuant to Section 9.6 hereof.
5.7 Special Provisions Relating to the Deferred Participation Interests.
(a) During the Support Period, the holder of a Deferred Participation Interest
shall not be entitled to any cash distributions and shall only possess the
rights and obligations specifically provided in this Agreement with respect to a
Deferred Participation Interest (and no other rights otherwise available to a
holder of a Partnership Interest).
(b) Immediately upon the expiration of the Support Period, the General
Partner shall take all reasonable steps necessary, based on advice of counsel,
including the application of Sections 4.6(c)(ii), 4.6(c)(iii) and 5.1(d)(x);
provided, however, that no such steps may be taken that would have a material
adverse effect on the Limited Partners or the Record Holders of any class or
classes of Units, to ensure that each Deferred Participation Interest has, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic and federal
income tax characteristics of a Unit then outstanding, and each Deferred
Participation Interest shall, upon the expiration of the Support Period,
automatically convert to a Unit and from that time forward shall constitute a
Unit for all purposes under this Agreement.
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management. (a) The General Partner shall conduct, direct and exercise
full control over all activities of the Partnership. Except as otherwise
expressly provided in this Agreement, all management powers over the business
and affairs of the Partnership shall be exclusively vested in the General
Partner, and no Limited Partner shall have any right of control or management
power over the business and affairs of the Partnership. In addition to the
powers now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner, subject to Section 6.3 hereof,
shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes set forth
in Section 3.1 hereof including,
45
<PAGE> 46
without limitation, (i) the making of any expenditures, the borrowing of money,
the guaranteeing of indebtedness and other liabilities, the issuance of
evidences of indebtedness and the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership; (ii) the making
of tax, regulatory and other filings, or rendering of periodic or other reports
to governmental or other agencies having jurisdiction over the business or
assets of the Partnership; (iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the Partnership or the
merger or other combination of the Partnership with or into another entity (all
of the foregoing subject to any prior approval which may be required by Section
6.3 hereof); (iv) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the Partnership or any Subsidiary,
the lending of funds to other persons (including any Subsidiary) and the
repayment of obligations of the Partnership and any Subsidiary and the making of
capital contributions to any Subsidiary; (v) the negotiation and execution on
any terms deemed desirable in its sole discretion and the performance of any
contracts, conveyances or other instruments that it considers useful or
necessary to the conduct of the Partnership operations or the implementation of
its powers under this Agreement; (vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees and agents (including, without
limitation, employees having titles such as "president", "vice president",
"secretary" and "treasurer") and agents, outside attorneys, accountants,
consultants and contractors and the determination of their compensation and
other terms of employment or hiring; (viii) the maintenance of such insurance
for the benefit of the Partnership and the Partners as it deems necessary or
appropriate; (ix) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships, joint
ventures or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of property
to any Subsidiary from time to time); (x) the control of any matters affecting
the rights and obligations of the Partnership, including the conduct of
litigation and the incurring of legal expense and the settlement of claims and
litigation; (xi) the lending or borrowing of money, the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities, the issuance
of evidences of indebtedness and the securing of same by mortgage, deed of trust
or other lien or encumbrance, the bringing and defending of actions at law or in
equity and the indemnification of any Person against liabilities and
contingencies to the extent permitted by law; (xii) the entering into listing
agreements with the New York Stock Exchange and any other securities exchange
and delisting some or all of the Units from, or requesting that trading be
suspended on, any such exchange (subject to any prior approval which may be
required under Section 1.6 hereof); (xiii) the undertaking of any action in
connection with the Partnership's investment in any Subsidiary (including,
without limitation, the contribution or loan by the Partnership to any
Subsidiary of funds); and (xiv) the undertaking of any action in connection with
the Partnership's direct or indirect investment in any Subsidiary.
(b) Each of the Partners and each other Person who may acquire an interest
in Units hereby approves, ratifies and confirms the execution, delivery and
performance by the parties thereto of the Deposit Agreement, the Underwriting
Agreement, and the other agreements described in the
46
<PAGE> 47
Registration Statement, and agrees that the General Partner is authorized to
execute, deliver and perform the above-mentioned agreements and transactions and
such other agreements described in the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
other Persons who may acquire an interest in Units, notwithstanding any other
provision of this Agreement, the Delaware Act or any applicable law, rule or
regulation. None of the execution, delivery or performance by the General
Partner, the Partnership or any Affiliate of any of them of any agreement
authorized or permitted under this Agreement shall constitute a breach by the
General Partner of any duty that the General Partner may owe the Partnership or
the Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.
6.2 Certificate of Limited Partnership. The General Partner has filed the
Certificate of Limited Partnership with the Secretary of State of the State of
Delaware as required by the Delaware Act and shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware or any other state in
which the Partnership may elect to do business or own property. To the extent
that such action is determined by the General Partner to be reasonable and
necessary or appropriate, the General Partner shall file amendments to and
restatements of the Certificate of Limited Partnership and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
or any other state in which the Partnership may elect to do business or own
property. Subject to the terms of Section 7.5(a) hereof, the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership or any amendment thereto to any Limited
Partner.
6.3 Restrictions on General Partner's Authority. (a) The General Partner
may not, without the written approval of the specific act by all of the Limited
Partners or by other written instrument executed and delivered by all of the
Limited Partners subsequent to the date of this Agreement, take any action in
contravention of this Agreement, including, without limitation, (i) take any act
that would make it impossible to carry on the ordinary business of the
Partnership, except as otherwise provided in this Agreement; (ii) possess
Partnership property, or assign any rights in specific Partnership property, for
other than a Partnership purpose; (iii) admit a person as a Partner, except as
otherwise provided in this Agreement; (iv) amend this Agreement in any manner,
except as otherwise provided in this Agreement; or (v) transfer its interest as
General Partner of the Partnership, except as otherwise provided in this
Agreement.
(b) Except as provided in Article XIV hereof, the General Partner may not
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination with any other
Person) or approve on behalf of the Partnership the sale, exchange or other
disposition of all or substantially all of the assets of the Facilities
Subsidiary, without the approval of at least 66 2/3% of the outstanding Units
(excluding any Units owned by the General
47
<PAGE> 48
Partner and its Affiliates) during the Support Period and thereafter without the
approval of at least a majority of the outstanding Units (excluding any Units
owned by the General Partner and its Affiliates); provided, however, that this
provision shall not preclude or limit the mortgage, pledge, hypothecation or
grant of a security interest in all or substantially all of the Partnership's
assets and shall not apply to any forced sale of any or all of the Partnership's
assets pursuant to the foreclosure of, or other realization upon, any such
encumbrance.
(c) Unless approved by the affirmative vote of the holders of at least 66
2/3% of each class of outstanding Units and the affirmative vote of the holders
of at least a majority of outstanding Units excluding for purposes of such
determination any Units owned by the General Partner and its Affiliates, the
General Partner shall not take any action or refuse to take any reasonable
action the effect of which, if taken or not taken, as the case may be, would be
to cause the Partnership to be treated for federal income tax purposes as an
association taxable as a corporation.
(d) At all times while serving as the general partner of the Partnership,
the General Partner will not make any dividend or distribution on, or repurchase
any stock or take any other action if the effect of such dividend or
distribution, repurchase or other action would be to reduce its net worth below
an amount necessary to receive an Opinion of Counsel that the Partnership will
be treated as a partnership for federal income tax purposes.
6.4 Reimbursement of the General Partner. (a) Except as provided in this
Section 6.4 and elsewhere in this Agreement, the General Partner shall not be
compensated for its services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine in its sole discretion, for (i)
all direct and indirect expenses it incurs or payments it makes on behalf of the
Partnership (including amounts paid to any Person to perform services to or for
the Partnership) and (ii) that portion of the General Partner's or its
Affiliates' legal, accounting, investor communications, utilities, telephone,
secretarial, travel, entertainment, bookkeeping, reporting, data processing,
office rent and other office expenses (including overhead charges), salaries,
fees and other compensation and benefit expenses of employees, officers and
directors, other administrative or overhead expenses and all other expenses, in
each such case, necessary or appropriate to the conduct of the Partnership's
business and allocable to the Partnership or otherwise incurred by the General
Partner in connection with operating the Partnership's business (including,
without limitation, expenses allocated to the General Partner by its
Affiliates). The General Partner shall determine the fees and expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Such reimbursements shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 6.7 hereof.
(c) Subject to Section 4.4(c) hereof, the General Partner in its sole
discretion and without the approval of the Limited Partners may propose and
adopt on behalf of the Partnership, employee benefit plans (including, without
limitation, plans involving the issuance of Units), for the benefit
48
<PAGE> 49
of employees of the General Partner, the Partnership, any Subsidiary or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership or any Subsidiary.
6.5 Outside Activities. (a) After the Closing Date, the General Partner
shall not, for so long as it is the general partner of the Partnership, enter
into or conduct any business nor incur any debts or liabilities except in
connection with or incidental to (i) its performance of the activities required
or authorized by this Agreement or described in or contemplated by the
Registration Statement and (ii) the acquisition, ownership or disposition of the
partnership interest in the Partnership or its equity interest in any
Subsidiary.
(b) Except as described in the Registration Statement or provided in
Section 6.5(a) hereof, no Indemnitee shall be expressly or implicitly restricted
or proscribed pursuant to this Agreement or the partnership relationship
established hereby from engaging in other activities for profit, whether in the
businesses engaged in by the Partnership or anticipated to be engaged in by the
Partnership or otherwise, including, without limitation, those businesses
described in or contemplated by the Registration Statement. Neither the
Partnership, any Limited Partner nor any other Person shall have any rights by
virtue of this Agreement or the partnership relationship established hereby or
thereby in any business ventures of any Indemnitee, and, except as set forth in
the Registration Statement, such Indemnities shall have no obligation to offer
any interest in any such business ventures to the Partnership, any Limited
Partner or any such other Person. The General Partner and any other Persons
affiliated with the General Partner may acquire Units or Partnership Securities,
in addition to those acquired by any of such Persons on the Closing Date, and
shall be entitled to exercise all rights of an Assignee or Limited Partner, as
applicable, relating to such Units or Partnership Securities, as the case may
be.
6.6 Contracts with Affiliates. (a) The Partnership may lend or contribute
to any Subsidiary, and any other Subsidiary may borrow funds, on terms and
conditions established in the sole discretion of the General Partner. The
foregoing authority shall be exercised by the General Partner in its reasonable
discretion and shall not create any right or benefit in favor of any Subsidiary
or any other Person. The Partnership may not lend funds to the General Partner
or any of its Affiliates.
(b) The General Partner may itself, or may enter into an agreement with any
of its Affiliates to, render services to the Partnership. Any services rendered
to the Partnership by the General Partner or any of its Affiliates shall be on
terms that are fair and reasonable to the Partnership. The provisions of Section
6.4 hereof shall apply to the rendering of services described in this Section
6.6(b).
(c) The Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions consistent
with this Agreement and applicable law.
49
<PAGE> 50
(d) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 6.6(d) shall be deemed to be satisfied as to any transactions
described in or contemplated by the Registration Statement.
6.7 Indemnification. (a) To the fullest extent permitted by law but subject
to the limitations expressly provided in this Agreement, each Indemnitee shall
be indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as (x) the General Partner, a Departing Partner or any of their
Affiliates, (y) an employee, partner, agent or trustee of the General Partner,
any Departing Partner or any of their Affiliates or (z) a Person serving at the
request of the Partnership in another entity in a similar capacity, provided
that in each case the Indemnitee acted in good faith and in the manner which
such Indemnitee believed to be in, or not opposed to, the best interests of the
Partnership and, with respect to any criminal proceeding, had no reasonable
cause to believe its conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not, of itself, create a presumption that
the Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 6.7 shall be made only out of the
assets of the Partnership.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise, and shall
continue as to an Indemnitee who has ceased to serve in such capacity.
(d) The Partnership may purchase and maintain insurance, on behalf of the
General Partner and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expense that may be
incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.7, the Partnership shall be deemed to
have requested an
50
<PAGE> 51
Indemnitee to serve as fiduciary of an employee benefit plan whenever the
performance by it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute "fines" within the
meaning of Section 6.7(a); and action taken or omitted by it with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants, and beneficiaries of
the plan shall be deemed to be for a purpose which is in, or not opposed to, the
best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners or the
Special Limited Partners to personal liability by reason of the indemnification
provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 6.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 6.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligation of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 6.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
6.8 Liability of Indemnitees. (a) Notwithstanding anything to the contrary
set forth in this Agreement, no Indemnitee shall be liable for monetary damages
to the Partnership, Limited Partners, Special Limited Partners or to any Persons
who have acquired interests in the Units for losses sustained or liabilities
incurred as a result of any act or omission if such Indemnitee acted in good
faith.
(b) Subject to its obligations and duties as General Partner set forth in
Section 6.1(a) hereof, the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by it in good faith.
(c) Any amendment, modification or repeal of this Section 6.8 or any
provision hereof shall
51
<PAGE> 52
be prospective only and shall not in any way affect the limitations or the
liability to the Partnership, the Limited Partners and the Special Limited
Partners of the General Partner, their directors, officers, partners and
employees under this Section 6.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
6.9 Resolution of Conflicts of Interest. (a) Unless otherwise expressly
provided in this Agreement, whenever a potential conflict of interest exists or
arises between the General Partner or any of its Affiliates, on the one hand,
and the Partnership or any Partner, on the other hand, any resolution or course
of action in respect of such conflict of interest shall be permitted and deemed
approved by all Partners, and shall not constitute a breach of this Agreement,
of any agreement contemplated herein, or of any duty stated or implied by law or
equity, if the resolution or course of action is or, by operation of this
Agreement, is deemed to be fair and reasonable to the Partnership. Any such
resolution or course of action in respect of any conflict of interest shall not
constitute a breach of this Agreement, of any other agreement contemplated
herein, or of any duty stated or implied by law or equity, if such resolution or
course of action is fair and reasonable to the Partnership. The General Partner
shall be authorized in connection with its resolution of any conflict of
interest to consider (i) the relative interests of any party to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (ii) any customary or accepted industry practices; (iii) any
applicable generally accepted accounting practices or principles; and (iv) such
additional factors as the General Partner determines in its sole discretion to
be relevant, reasonable or appropriate under the circumstances. Nothing
contained in this Agreement, however, is intended to nor shall it be construed
to require the General Partner to consider the interests of any Person other
than the Partnership. In the absence of bad faith by the General Partner, the
resolution, action or terms so made, taken or provided by the General Partner
with respect to such matter shall not constitute a breach of this Agreement or
any other agreement contemplated herein or a breach of any standard of care or
duty imposed herein or therein or under the Delaware Act or any other law, rule
or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority or latitude, the General Partner or such Affiliate shall be entitled
to consider only such interests and factors as it desires and shall have no duty
or obligation to give any consideration to any interest of, or factors
affecting, the Partnership or any Limited Partner, or (ii) in "good faith" or
under another express standard, the General Partner or such Affiliate shall act
under such express standard and shall not be subject to any other or different
standards imposed by this Agreement or any other agreement contemplated hereby.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all
52
<PAGE> 53
similar or related transactions.
6.10 Other Matters Concerning the General Partner. (a) The General Partner
may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture, or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
which such General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
6.11 Title to Partnership Assets. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
6.12 Reliance by Third Parties. Notwithstanding anything to the contrary in
this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority to encumber, sell
or otherwise use in any manner any and all assets of the Partnership and to
enter into any contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if it were the Partnership's sole
party in interest, both legally and beneficially. Each Limited Partner hereby
waives any and all defenses or other remedies which may be available against
such Person to contest, negate or disaffirm any action of the General Partner in
connection with any such dealing. In no event shall any Person dealing
53
<PAGE> 54
with the General Partner or its representatives be obligated to ascertain that
the terms of this Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the General Partner or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
7.1 Limitation of Liability. The Limited Partners and the Organizational
Limited Partner shall have no liability under this Agreement except as expressly
provided in this Agreement or the Delaware Act.
7.2 Management of Business. No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner or any of its Affiliates, in
its capacity as such) shall take part in the operation, management or control
(within the meaning of the Delaware Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner or any of its Affiliates, in
its capacity as such, shall not affect, impair or eliminate the limitations on
the liability of the Limited Partners or Assignees under this Agreement.
7.3 Outside Activities. Subject to the provisions of Section 6.5 hereof,
which shall continue to be applicable to the Persons referred to therein,
regardless of whether such Persons shall also be Limited Partners or Assignees,
any Limited Partner shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee.
7.4 Return of Capital. No Limited Partner shall be entitled to the
withdrawal or return of his Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination of the
Partnership as provided herein. Except to the extent provided by Article V
hereof or as otherwise expressly provided in this Agreement, no Limited Partner
or Assignee
54
<PAGE> 55
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contributions or as to profits, losses or distributions.
7.5 Rights of Limited Partners Relating to the Partnership. (a) In addition
to other rights provided by this Agreement or by applicable law, and except as
limited by Section 7.5(b) hereof, each Limited Partner shall have the right, for
a purpose reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon reasonable demand and at such Limited Partner's
own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him, upon notification to the General
Partner, a current list of the name and last known business, residence or
mailing address of each Partner;
(iv) to have furnished to him, upon notification to the General
Partner, a copy of this Agreement and the Certificate of Limited Partnership and
all amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Agreed Value of any other Capital
Contribution by each Partner and which each Partner has agreed to contribute in
the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Section 7.5, the General
Partner may keep confidential from the Limited Partners for such period of time
as the General Partner determines in its sole discretion to be reasonable, any
information that the General Partner reasonably believes to be in the nature of
trade secrets or other information the disclosure of which the General Partner
in good faith believes is not in the best interests of the Partnership or which
the Partnership is required by law or by agreements with unaffiliated third
parties to maintain confidentiality.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
55
<PAGE> 56
8.1 Records and Accounting. The General Partner shall keep or cause to be
kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership's business including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 7.5(a)
hereof. Any records maintained by or on behalf of the Partnership in the regular
course of its business, including the record of the Record Holders and Assignees
of Units, Depositary Units or Partnership Securities, books of account and
records of Partnership proceedings, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles.
8.2 Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.
8.3 Reports. (a) As soon as practicable, but in no event later than 120
days after the close of each Partnership Year, the General Partner shall cause
to be mailed to each Record Holder of a Unit as of a date selected by the
General Partner in its sole discretion, an annual report containing financial
statements of the Partnership for such Partnership Year, presented in accordance
with generally accepted accounting principles, including a balance sheet and
statements of operations, Partners' equity and statement of cash flows, such
statements to be audited by a firm of independent public accountants selected by
the General Partner.
(b) As soon as practicable, but in no event later than 45 days after the
close of each calendar quarter except the last calendar quarter of each year,
the General Partner shall cause to be mailed to each Record Holder of a Unit, as
of a date selected by the General Partner in its sole discretion, a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law, regulation or rule of any
National Securities Exchange on which the Units are listed for trading, or as
the General Partner determines to be appropriate.
ARTICLE IX
TAX MATTERS
9.1 Preparation of Tax Returns. The General Partner shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within 90 days of the close of each taxable year, the tax information reasonably
required by Unitholders for federal and state income tax reporting purposes. The
classification, realization and recognition of income, gain, losses and
deductions and other items shall be on the accrual method of accounting for
federal income tax purposes. The taxable year of the Partnership shall be the
calendar year.
56
<PAGE> 57
9.2 Tax Elections. Except as otherwise provided herein, the General Partner
shall, in its sole discretion, determine whether to make any available election
pursuant to the Code; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, the election under Section 754 of the
Code) upon the General Partner's determination in its sole discretion that such
revocation is in the best interests of the Limited Partners and Assignees. For
purposes of computing the adjustments under Section 743(b) of the Code, the
General Partner shall be authorized (but not required) to adopt a convention
whereby the price paid by a transferee of Units will be deemed to be the lowest
quoted trading price of the Units on any National Securities Exchange on which
such Units are traded during the calendar month in which such transfer is deemed
to occur pursuant to Section 5.2(g) hereof without regard to the actual price
paid by such transferee.
9.3 Tax Controversies. Subject to the provisions hereof, the General
Partner is designated the Tax Matters Partner (as defined in Section 6231 of the
Code), and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Partner or Assignee agrees to cooperate with the
General Partner and to do or refrain from doing any or all things reasonably
required by the General Partner to conduct such proceedings.
9.4 Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
9.5 Withholding. Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines in its sole
discretion to be necessary or appropriate to cause the Partnership to comply
with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections
1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required to withhold and pay over to any taxing authority any amount resulting
from the allocation or distribution of income to any Partner or Assignee
(including by reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash pursuant to Section 5.3 hereof in the amount
of such withholding from such Partner.
9.6 Entity-Level Taxation. If legislation is enacted which causes the
Partnership to become treated as an association taxable as a corporation for
federal income tax purposes, then with respect to any calendar quarter, the
Minimum Quarterly Amount, the First Target Amount, Second Target Amount, Third
Target Amount or Fourth Target Amount, as the case may be, shall be equal to the
product of (i) the amount of such distribution multiplied by (ii) 1 minus the
sum of (x) the highest marginal federal corporate income tax rate for the
Partnership Year in
57
<PAGE> 58
which such quarter occurs (expressed as a percentage) plus (y) the effective
overall state and local income tax rate (expressed as a percentage) applicable
to the Partnership for the calendar year next preceding the calendar year in
which such quarter occurs (after taking into account the benefit of any
deduction allowable for federal income tax purposes with respect to the payment
of state and local income taxes). Such effective overall state and local income
tax rate shall be determined for the calendar year next preceding the first
calendar year during which the Partnership is taxable for federal income tax
purposes as a corporation or as an association taxable as a corporation by
determining such rate as if the Partnership had been subject to such state and
local taxes during such preceding calendar year.
9.7 Entity-Level Deficiency Collections. If the Partnership is required by
applicable law to pay any federal, state or local income tax on behalf of any
Partner or Assignee or any former Partner or Assignee (i) the General Partner
shall pay such tax on behalf of such Partner or Assignee or former Partner or
Assignee from the funds of the Partnership; (ii) any amount so paid on behalf of
any Partner or Assignee shall constitute a distribution of Available Cash to
such Partner or Assignee pursuant to Section 5.3 hereof; and (iii) to the extent
any such Partner or Assignee (but not a former Partner or Assignee) is not then
entitled to such distribution under this Agreement, the General Partner shall be
authorized, without the approval of any Partner or Assignee, to amend this
Agreement insofar as is necessary to maintain the uniformity of intrinsic tax
characteristics as to all Units and to make subsequent adjustments to
distributions in a manner which, in the reasonable judgment of the General
Partner, will make as little alteration in the priority and amount of
distributions otherwise applicable under this Agreement, and will not otherwise
alter the distributions to which Partners and Assignees are entitled under this
Agreement. If the Partnership is permitted (but not required) by applicable law
to pay any such tax on behalf of any Partner or Assignee or former Partner or
Assignee, the General Partner shall be authorized (but not required) to pay such
tax from the funds of the Partnership and to take any action consistent with
this Section 9.7. The General Partner shall be authorized (but not required) to
take all necessary or appropriate actions to collect all or any portion of a
deficiency in the payment of any such tax which relates to prior periods which
is attributable to Persons who were Limited Partners or Assignees when such
deficiencies arose, from such Persons.
9.8 Opinions of Counsel. Notwithstanding any other provision of this
Agreement, if the Partnership is taxable for federal income tax purposes as a
corporation or an association taxable as a corporation at any time and, pursuant
to the provisions hereof, an Opinion of Counsel would otherwise be required at
that time to the effect that an action will not cause the Partnership to become
so taxable as a corporation or to be treated as an association taxable as a
corporation, such requirement for an Opinion of Counsel shall be deemed
automatically waived.
ARTICLE X
CERTIFICATES AND DEPOSITARY RECEIPTS
10.1 Certificates and Depositary Receipts. (a) Upon the issuance of Units
by the Partnership
58
<PAGE> 59
to the Initial Limited Partners or any other Person, the Partnership shall issue
one or more Certificates in the name of the Initial Limited Partners or such
Person evidencing the number of such Units being so issued. Certificates shall
be executed on behalf of the Partnership by the General Partner.
(b) The General Partner (i) may cause the deposit of some or all of the
Certificates in the Deposit Account pursuant to the Deposit Agreement; (ii) with
respect to those Certificates deposited in the Deposit Account, shall receive
from the Depositary Receipts registered in the name of the Person(s) to whom
such Units have been issued, evidencing the same number of Depositary Units, as
the case may be, as the number of Units represented by the Certificates so
deposited; and (iii) shall cause the distribution of such Depositary Receipts to
such Person(s).
10.2 Registration of Transfer and Exchange. (a) The General Partner shall
cause to be kept on behalf of the Partnership a register (the "Unit Register")
in which, subject to such reasonable regulations as it may prescribe and subject
to the provisions of Section 10.2(b) hereof, the General Partner will provide
for the registration of Units and the transfer of such Units. The Depositary is
hereby appointed Transfer Agent and registrar for the purpose of registering
Units and transfers of such Units as herein provided. The Partnership shall not
recognize transfers of Certificates representing Units which have been deposited
pursuant to Section 10.1(a) hereof and not withdrawn or interests therein except
by transfers of Depositary Units in the manner described in this Section 10.2
and in the Deposit Agreement. Upon surrender for registration of transfer of any
Depositary Units evidenced by a Depositary Receipt and, subject to the
provisions of Section 10.2(b) hereof, the General Partner on behalf of the
Partnership will execute, and the Transfer Agent will countersign and deliver,
in the name of the holder or the designated transferee or transferees, as
required pursuant to the holder's instructions, one or more new Depositary
Receipts evidencing the same aggregate number of Depositary Units as was
evidenced by the Depositary Receipt so surrendered.
(b) The Partnership shall not recognize any transfer of Depositary Units
until the Depositary Receipts evidencing such Depositary Units are surrendered
for registration of transfer and such Depositary Receipts are accompanied by a
Transfer Application duly executed by the transferee (or the transferee's
attorney-in-fact duly authorized in writing). No charge shall be imposed by the
Partnership for such transfer, provided that, as a condition to the issuance of
any new Depositary Receipt under this Section 10.2, the General Partner may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed with respect thereto.
10.3 Mutilated, Destroyed, Lost or Stolen Depositary Receipts. (a) If any
mutilated Depositary is surrendered to the Transfer Agent, the Depositary shall
execute, and the Transfer Agent shall countersign and deliver in exchange
therefor, a new Depositary Receipt evidencing the same number of Depositary
Units, as the case may be, as the Depositary Receipt so surrendered.
59
<PAGE> 60
(b) If there shall be delivered to the General Partner and the Transfer
Agent (i) evidence (including, without limitation, proof by affidavit if
requested by the General Partner in form and substance satisfactory to the
General Partner) to their satisfaction of the destruction, loss or theft of any
Depositary Receipt and (ii) such security or indemnity as may be required by
them to indemnify and hold each of them and any of their agents harmless, then,
in the absence of notice to the General Partner or the Transfer Agent that such
Depositary Receipt has been acquired by a bona fide purchaser, the General
Partner on behalf of the Partnership shall execute and, upon its request, the
Transfer Agent shall countersign and deliver, in exchange for and in lieu of any
such destroyed, lost or stolen Depositary Receipt, a new Depositary Receipt
evidencing the same number of Depositary Units, as the Depositary Receipt so
destroyed, lost or stolen.
(c) As a condition to the issuance of any new Depositary Receipt under this
Section 10.3, the General Partner may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) connected therewith.
10.4 Registered Owner. In accordance with Section 10.2(b) hereof, the
Partnership shall be entitled to recognize the Record Holder as the Limited
Partner or Assignee with respect to any Units and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such Units on
the part of any other Person, whether or not the Partnership shall have actual
or other notice thereof, except as otherwise provided by law or any applicable
rule, regulation, guideline or requirement of any National Securities Exchange
on which the Units are listed for trading. Without limiting the foregoing, when
a Person (such as a broker, dealer, bank, trust company or clearing corporation
or an agent of any of the foregoing) is acting as nominee, agent or in some
other representative capacity for another Person in acquiring and/or holding
Units, as between the Partnership on the one hand and such other Persons on the
other hand, such representative Person (a) shall be the Limited Partner or
Assignee (as the case may be) of record and beneficially, (b) must execute and
deliver a Transfer Application and (c) shall be bound by this Agreement and
shall have the rights and obligations of a Limited Partner or Assignee (as the
case may be) hereunder and as provided for herein.
10.5 Withdrawal of Units from and Redeposit of Units in Depositary Account.
Any Units may be withdrawn from the Depositary Account by surrender of the
Depositary Receipts evidencing the corresponding Depositary Units duly executed
by the Record Holder thereof (or his attorney-in-fact duly authorized in
writing), provided that such Record Holder is then reflected on the books and
records of the Partnership as the Limited Partner in respect of the Units for
which such withdrawal is requested. Upon any such withdrawal, the General
Partner shall cause the Partnership to issue a Certificate evidencing such
Units. Any such withdrawn Units, or Units which have not previously been so
deposited, may be redeposited or deposited (as the case may be) in the Deposit
Account by the surrender of the Certificate evidencing such withdrawn Units or
non-deposited Units to the Depositary and payment to the Depositary of such fee
and upon such terms as may be required therefor pursuant to the Deposit
Agreement. Upon any such redeposit or deposit, the Depositary shall issue a
Depositary Receipt evidencing the
60
<PAGE> 61
same number of Units as was evidenced by the Certificate so redeposited or
deposited.
10.6 Amendment of Deposit Agreement. Subject to its fiduciary obligations,
the General Partner may amend or modify any provision of the Deposit Agreement
in any respect it reasonably determines to be necessary or appropriate,
provided, however, that the General Partner shall not amend or modify the
Deposit Agreement if the effect of any such amendment or modification would be
to impair the right of Limited Partners to withdraw their Units from deposit
thereunder.
ARTICLE XI
TRANSFER OF INTERESTS
11.1 Transfer. (a) The term "transfer," when used in this Article XI with
respect to a Partnership Interest, shall be deemed to refer to an appropriate
transaction by which the General Partner assigns its Partnership Interest as
General Partner to another Person or by which the holder of a Unit assigns such
Unit to another Person who is or becomes an Assignee and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article XI.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article XI shall be null and void.
11.2 Transfer of General Partner's Partnership Interest. (a) The General
Partner may transfer all, but not less than all, of its Partnership Interest as
the General Partner to a single transferee if, but only if, (i) the holders of
at least 66 2/3% of the outstanding Units (excluding for purposes of such
determination any Units owned by the General Partner and its Affiliates)
approves of such transfer and of the admission of such transferee as General
Partner, (ii) the transferee agrees to assume and be bound by the provisions of
this Agreement and (iii) the Partnership receives an Opinion of Counsel that
such transfer would not result in the loss of limited liability of any Limited
Partner or the taxation of the Partnership as a corporation or as an association
taxable as a corporation for federal income tax purposes.
(b) Neither Section 11.2(a) hereof nor any other provision of this
Agreement shall be construed to prevent (and all Partners do hereby consent to)
the transfer by the General Partner of all of its Partnership Interest (i) to an
Affiliate of Burlington or (ii) upon its merger, consolidation or other
combination into any other entity or the transfer by it of all or substantially
all of its assets to another entity (provided that such entity assumes all of
the rights and duties of the General Partner), to the transferee or successor
entity; provided that, such entity furnishes to the Partnership an Opinion of
Counsel that such merger, consolidation, combination, transfer or assumption
will not result in a loss of limited liability of any Limited Partner or result
in the Partnership being treated as an association taxable as a corporation for
federal income tax
61
<PAGE> 62
purposes. In the case of a transfer pursuant to this Section 11.2(b), the
transferee or successor (as the case may be) shall be admitted to the
Partnership as the General Partner immediately prior to the transfer of the
Partnership Interest, and the business of the Partnership shall continue without
dissolution.
11.3 Transfer of Units. (a) Any Units which have been deposited in the
Deposit Account may be transferred, but only in the manner described in Section
10.2 hereof. Units with respect to which no such deposit has been made or which
have been withdrawn from the Deposit Account and not redeposited are not
transferable except upon death or by operation of law, by transfer to the
General Partner for the account of the Partnership or otherwise in accordance
with this Agreement. The transfer of any Units and the admission of any new
Partner shall not constitute an amendment to this Agreement.
(b) Until admitted as a Substituted Limited Partner pursuant to Article
XII, the Record Holder of a Depositary Unit shall constitute an Assignee in
respect of such Unit.
(c) Each distribution in respect of Units shall be paid by the Partnership,
directly or through the Transfer Agent or through any other Person or agent,
only to the Record Holders thereof as of the Record Date set for the
distribution. Such payment shall constitute full payment and satisfaction of the
Partnership's liability in respect of such payment, regardless of any claim of
any Person who may have an interest in such payment by reason of an assignment
or otherwise.
11.4 Restrictions on Transfers. Notwithstanding the other provisions of
this Article XI, no transfer of any Unit or interest therein of any Limited
Partner in the Partnership shall be made if such transfer (i) would violate the
then applicable federal or state securities laws or rules and regulations of the
Securities and Exchange Commission, any state securities commission or any other
governmental authorities with jurisdiction over such transfer, (ii) would result
in the taxation of the Partnership as a corporation or as an association taxable
as a corporation for federal income tax purposes or (iii) would affect the
Partnership's existence or qualification as a limited partnership under the
Delaware Act.
11.5 Citizenship Certification; Non-citizen Assignees. (a) In the event
that, because of the nationality (or any other status) of a Limited Partner or
Assignee, the Partnership is or becomes subject to federal, state or local laws
or regulations the effect of which would, in the reasonable determination of the
General Partner, cause cancellation or forfeiture of any property in which the
Partnership has an interest, the General Partner may request any such Limited
Partner or Assignee to furnish to the General Partner or, with respect to
Depositary Units, to the Depositary within 30 days after receipt of such request
an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other status (or, if the Limited Partner or Assignee
is a nominee holding for the account of another Person, the nationality,
citizenship or other status of such Person) as the General Partner may request.
If a Limited Partner or Assignee fails to furnish such Citizenship Certification
or other information as may be requested, or if upon receipt of such Citizenship
Certification or other information the General Partner
62
<PAGE> 63
determines, with the advice of counsel, that a Limited Partner or an Assignee is
not an Eligible Citizen, the Units owned by such Limited Partner or Assignee
shall be subject to redemption in accordance with the provisions of Section 11.6
hereof. In addition to becoming subject to redemption, the General Partner may
require that the status of any such Limited Partner or Assignee be changed to
that of a Non-citizen Assignee, and, thereupon, the General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect of
his Units.
(b) The General Partner shall, in exercising voting rights in respect of
Units held by it on behalf of Non-citizen Assignees, distribute the votes in the
same ratios as the votes of Limited Partners in respect of Units other than
those of Non-citizen Assignees are cast, either for, against or abstaining as to
the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 14.4 hereof but
shall be entitled to the cash equivalent thereof, and the General Partner shall
provide cash in exchange for an assignment of the Non-citizen Assignee's share
of the distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the General Partner from the Non-citizen
Assignee of his Partnership Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Partnership Interest of such Non-citizen Assignee not redeemed pursuant to
Section 11.6 hereof, and upon his admission pursuant to Section 12.2 hereof the
General Partner shall cease to be deemed to be the Limited Partner in respect of
the Non-citizen Assignee's Units.
11.6 Redemption of Interests. (a) If at any time a Limited Partner or
Assignee fails to furnish a Citizenship Certification or other information
requested within the 30-day period specified in Section 11.5(a) hereof, or if
upon receipt of such Citizenship Certification or other information the General
Partner determines, with the advice of counsel, that a Limited Partner or
Assignee is not an Eligible Citizen, the Partnership may, unless the Limited
Partner or Assignee establishes to the satisfaction of the General Partner
that such Limited Partner or Assignee is an Eligible Citizen or has
transferred his Units to a person who furnishes a Citizenship Certification to
the General Partner prior to the date fixed for redemption as provided below,
redeem the Partnership Interest of such Limited Partner or Assignee as follows:
(i) The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited Partner or
Assignee, at his last address designated on the records of the Partnership or
the Depositary, by registered or certified mail, postage prepaid. The notice
shall be deemed to have been given when so mailed. The notice shall specify the
Redeemable Units, the date fixed for redemption, the place of payment, that
payment of the redemption price will be made upon surrender of the Depositary
Receipt or the Certificate
63
<PAGE> 64
evidencing the Redeemable Units and that on and after the date fixed for
redemption no further allocations or distributions to which the Limited Partner
or Assignee would otherwise be entitled in respect of the Redeemable Units will
accrue or be made.
(ii) The aggregate redemption price for Redeemable Units shall be an
amount equal to the Current Market Price (as defined in Section 17.1) (the date
of determination of which shall be the date fixed for redemption) of Units of
the class to be so redeemed multiplied by the number of Units of each such class
included among the Redeemable Units. The redemption price shall be paid, in the
sole discretion of the General Partner, in cash or by delivery of a promissory
note of the Partnership in the principal amount of the redemption price, bearing
interest at the rate of 10% annually and payable in three equal annual
installments of principal, together with accrued interest, commencing one year
after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the Depositary
Receipt or the Certificate evidencing the Redeemable Units, duly endorsed in
blank or accompanied by an assignment duly executed in blank, the Limited
Partner or Assignee or his duly authorized representative shall be entitled to
receive the payment therefor.
(iv) After the redemption date, Redeemable Units shall no longer
constitute issued and outstanding Units.
(b) The provisions of this Section 11.6 shall be applicable to Units held
by a Limited Partner or Assignee as nominee of a Person determined to be other
than an Eligible Citizen.
(c) Nothing in this Section 11.6 shall prevent the recipient of a notice of
redemption from transferring his Units before the redemption date if such
transfer is otherwise permitted under this Agreement. Upon receipt of notice of
such a transfer, the General Partner shall withdraw the notice of redemption;
provided, the transferee of such Units or Depositary Units certifies in the
Transfer Application that he is an Eligible Citizen. If the transferee fails to
make such certification, such redemption shall be effected from the transferee
on the original redemption date.
(d) If the Partnership or the General Partner determines that because of
the nationality (or other status) of the General Partner, whether or not in its
capacity as such, the Partnership is or becomes subject to federal, state or
local regulations the effect of which would, in the reasonable determination of
the General Partner, cause cancellation or forfeiture of any property in which
the Partnership has an interest, the Partnership may, unless the General Partner
has furnished a Citizenship Certification or transferred his Partnership
Interest or Units to a Person who furnishes a Citizenship Certification prior to
the date fixed for redemption, redeem the Partnership Interest or Interests of
the General Partner in the Partnership as provided in Section 11.6(a) hereof.
The redemption price shall be paid in cash.
64
<PAGE> 65
11.7 Transfer of Deferred Participation Interests. (a) The holders of
Deferred Participation Interests may transfer their Deferred Participation
Interests to any Person or Persons and such Person or Persons shall have the
right to deposit with the Depositary such Deferred Participation Interests if,
but only if, either (i) such Deferred Participation Interests so transferred are
identified and registered as a trading class separate and distinguishable from
the Units then outstanding or (ii) such Deferred Participation Interests so
proposed to be transferred have been converted to Units pursuant to Section
5.7(b) of this Agreement; provided, however, the foregoing restriction shall not
apply to a transfer of all, but not less than all, of the Deferred Participation
Interests held by the transferor to an Affiliate of such transferor; provided
further, that no holder of a Deferred Participation Interest shall have the
right to transfer the Deferred Participation Interest during the Support Period
to other than an Affiliate of such holder; provided, further, that,
notwithstanding anything to the contrary set forth above, the holder of the
Deferred Participation Interests may transfer the Deferred Participation
Interests to DPI Intermediate Holdings, L.P., a Delaware limited partnership,
and PC Advisory II, L.P., a Delaware limited partnership.
(b) Notwithstanding Section 11.7(a) above, no such restrictions shall apply
with respect to the transfer of Deferred Participation Interests after the
Conversion Date with respect to such Interests.
(c) The holders of Deferred Participation Interests will receive
certificates evidencing such interests. Subject to Section 11.7(a), such
certificates may be exchanged by the holders for Certificates of limited partner
interests and then deposited and transferred in accordance with Articles X and
XI hereof.
11.8 Transfer of Management Units. The holders of Management Units may
transfer their Management Units to any Person or Persons and such Person or
Persons shall have the right to deposit with the Depositary such Management
Units if, but only if, the General Partner determines, based on advice of
counsel, that such Management Units so proposed to be transferred have, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic and federal
income tax characteristics of the Units then outstanding.
ARTICLE XII
ADMISSION OF PARTNERS
12.1 Admission of Initial Limited Partners and Underwriters. Upon the
issuance of Units by the Partnership to the Initial Limited Partners (as
described in Section 4.3 hereof), the General Partner shall admit to the
Partnership the Initial Limited Partners as Limited Partners in respect of the
Units. Each such party shall execute a Transfer Application and thereby agree to
be bound by the terms hereof as a Limited Partner.
12.2 Admission of Substituted Limited Partners. By transfer of a Depositary
Unit in
65
<PAGE> 66
accordance with Article XI hereof, the transferor shall be deemed to have given
the transferee the right to seek admission as a Substituted Limited Partner
subject to the conditions of, and in the manner permitted under, this Agreement.
A transferor of a Depositary Receipt shall, however, only have the authority to
convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (i) the right to negotiate such Depositary Receipt to a
purchaser or other transferee and (ii) the right to transfer the right to
request admission as a Substituted Limited Partner to such purchaser or other
transferee in respect of the transferred Depositary Units. Each transferee of a
Depositary Unit (including any nominee holder or an agent acquiring such
Depositary Unit for the account of another Person) who executes a Transfer
Application shall be an Assignee and shall be deemed to have applied to become a
Substituted Limited Partner with respect to the Depositary Units so transferred
to such Person by virtue of executing and delivering such Transfer Application.
Such Assignee shall become a Substituted Limited Partner at such time as the
General Partner consents thereto, which consent may be given or withheld in the
General Partner's sole discretion, and when any such admission is shown on the
books and records of the Partnership. If such consent is withheld, such
transferee shall be an Assignee. An Assignee shall have an interest in the
Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Units that are held by Assignees, the
General Partner shall be deemed to be the Limited Partner with respect thereto
and shall, in exercising the voting rights in respect of such Units on any
matter, vote such Units at the written direction of the Assignee who is the
Record Holder of such Units. If no such written direction is received, such
Units will not be voted. An Assignee shall have no other rights of a Limited
Partner.
12.3 Admission of Successor General Partner. A successor General Partner
approved pursuant to Section 13.1 hereof or the transferee of or successor to
all of the General Partner's Partnership Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective immediately prior
to the withdrawal or removal of the General Partner pursuant to Section 13.1
hereof or the transfer pursuant to Section 11.2; provided, however, that no such
successor shall be admitted to the Partnership until the terms of Section 11.2
hereof have been complied with. Any such successor shall carry on the business
of the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission.
12.4 Admission of Additional Limited Partners. (a) A Person (other than an
Initial Limited Partner, an Underwriter or a Substituted Limited Partner) who
makes a Capital Contribution to the Partnership in accordance with this
Agreement (other than by the purchase of SPUs) shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 1.4 hereof and (ii) such
other documents or instruments as may be required in the
66
<PAGE> 67
discretion of the General Partner in order to effect such Person's admission as
an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 12.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the consent of
the General Partner to such admission.
12.5 Amendment of Agreement and Certificate of Limited Partnership. For the
admission to the Partnership of any Partner, the General Partner shall take all
steps necessary and appropriate under the Delaware Act to amend the records of
the Partnership and, if necessary, to prepare as soon as practical an amendment
of this Agreement and, if required by law, shall prepare and file an amendment
to the Certificate of Limited Partnership and may for this purpose exercise the
power of attorney granted pursuant to Section 1.4 hereof.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS
13.1 Withdrawal of the General Partner. (a) The General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "Event of
Withdrawal"):
(i) the General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners;
(ii) the General Partner transfers all of its rights as General
Partner pursuant to Section 11.2 hereof;
(iii) the General Partner is removed pursuant to Section 13.2 hereof;
(iv) the General Partner
(A) makes a general assignment for the benefit of creditors;
(B) files a voluntary bankruptcy petition;
(C) files a petition or answer seeking for itself a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any law;
(D) files an answer or other pleading admitting or failing to
contest the material
67
<PAGE> 68
allegations of a petition filed against the General Partner in a proceeding of
the type described in paragraphs (A)-(C) of this subsection; or
(E) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of its properties;
(v) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in
effect; or
(vi) a certificate of dissolution or its equivalent is filed for the
General Partner, or 90 days expire after the date of notice to the General
Partner of revocation of its charter without a reinstatement of its charter,
under the laws of its state of incorporation. If an Event of Withdrawal
specified in paragraphs (iv), (v) or (vi) occurs, the withdrawing General
Partner shall give written notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 13.1 shall result in withdrawal of the General Partner
from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal will not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
ending on December 31, 1999, the General Partner voluntarily withdraws by giving
at least 90 days' advance written notice of its intention to withdraw to the
Limited Partners, provided that, prior to the effective date of such withdrawal,
the Limited Partners approve such withdrawal by the vote of at least 66 2/3% of
the outstanding Units (excluding for purposes of such determination any Units
owned by the General Partner and its Affiliates); (ii) at any time after
December 31, 1999, the General Partner voluntarily withdraws by giving at least
90 days' advance written notice to the Limited Partners, such withdrawal to take
effect on the date specified in such notice; (iii) at any time that the General
Partner ceases to be a General Partner pursuant to Section 13.1(a)(ii) hereof or
is removed pursuant to Section 13.1(a)(iii) hereof; or (iv) notwithstanding
clause (i) above, at any time that the General Partner voluntarily withdraws by
giving at least 90 days' advance written notice of its intention to withdraw to
the Limited Partners, such withdrawal to take effect on the date specified in
the notice, if at the time such notice is given more than 50% of the outstanding
Units held by Persons other than by the General Partner and its Affiliates are
owned beneficially or of record or controlled at any time by one Person or its
Affiliates. If the General Partner gives a notice of withdrawal pursuant to
Section 13.1(a)(i) hereof or if the General Partner is removed pursuant to
Section 13.2 hereof, holders of at least a majority of the outstanding Units
(excluding for purposes of such determination Units owned by the General Partner
and its Affiliates) may, prior to the effective date of such withdrawal, elect a
successor General Partner. If, prior to the effective date of the General
Partner's withdrawal, a successor is not selected by the Limited Partners as
provided herein or the Partnership does not receive an Opinion of Counsel that
such withdrawal (following the selection of the successor General Partner) would
not result in the loss
68
<PAGE> 69
of the limited liability of the holders of Units or cause the Partnership to be
taxable as a corporation or to be treated as an association taxable as a
corporation for federal income tax purposes, the Partnership shall be dissolved
in accordance with Section 14.1 hereof. If a successor General Partner is
elected and the Opinion of Counsel rendered as provided herein, such successor
shall be admitted (subject to Section 12.3 hereof) immediately prior to the
effective time of the withdrawal of the Departing Partner and shall continue the
business of the Partnership without dissolution.
13.2 Removal of the General Partner. The General Partner may be removed
during the Support Period only if such removal is approved by the written
consent or affirmative vote of Limited Partners holding at least 90% of the
outstanding Units (excluding for purposes of such determination any Units owned
by the General Partner and its Affiliates) and, thereafter, only if such removal
is approved by the written consent or affirmative vote of Limited Partners
owning at least 66 2/3% of the outstanding Units (excluding for purposes of such
determination any Units owned by the General Partner and its Affiliates). Any
such action by the Limited Partners for removal of the General Partner must also
provide for the election and succession of a new General Partner. Such removal
shall be effective immediately following the admission of the successor General
Partner pursuant to Article XII. The right of the Limited Partners to remove the
General Partner shall not exist or be exercised unless the Partnership has
received an Opinion of Counsel that the removal of the General Partner and the
selection of a successor General Partner will not result in (i) the loss of
limited liability of the Partnership or any Limited Partner in the Partnership
or (ii) the taxation of the Partnership as a corporation or the treatment of the
Partnership as an association taxable as a corporation for federal income tax
purposes.
13.3 Interest of Departing Partner and Successor General Partner. (a) In
the event of (i) withdrawal of the General Partner under circumstances where
such withdrawal does not violate this Agreement or (ii) removal of the General
Partner by the Limited Partners under circumstances where "cause" does not
exist, the Departing Partner shall, at its option exercisable prior to the
effective date of the departure of such Departing Partner, promptly receive from
its successor in exchange for its Partnership Interest as General Partner an
amount in cash equal to the fair market value of the Departing Partner's
Partnership Interest as General Partner, such amount to be determined and
payable as of the effective date of its departure. If the General Partner is
removed by the Limited Partners under circumstances where "cause" exists or if
the General Partner withdraws under circumstances where such withdrawal violates
this Agreement, its successor shall have the option described in the immediately
preceding sentence, and the Departing Partner shall not have such option. In
either event, the Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 6.4, including any
employee-related liabilities, including severance liabilities, incurred in
connection with the termination of any employees employed by the Departing
Partner for the benefit of the Partnership. Subject to Section 13.3(b) hereof,
the Departing Partner shall, as of the effective date of its departure, cease to
share in any allocations or distributions with respect to its Partnership
Interest as the General Partner and Partnership income, gain, loss, deduction
and credit will be prorated and allocated as set forth in Section 5.1(d) hereof.
For purposes of this
69
<PAGE> 70
Section 13.3, "cause" means that a court of competent jurisdiction has entered a
final non-appealable judgment finding the General Partner liable for actual
fraud, gross negligence or wilful or wanton misconduct in its capacity as
General Partner of the Partnership.
For purposes of this Section 13.3(a), the fair market value of the
Departing Partner's Partnership Interest as the General Partner herein shall be
determined by agreement between the Departing Partner and its successor or,
failing agreement within 30 days after the effective date of such Departing
Partner's departure, by an independent investment banking firm or other
independent expert selected by the Departing Partner and its successor, which,
in turn, may rely on other experts and the determination of which shall be
conclusive as to such matter. If such parties cannot agree upon one independent
investment banking firm or other independent expert within 45 days after the
effective date of such departure, then such firm shall be designated by the
independent investment banking firm or other independent expert selected by each
of the Departing Partner and its successor. In making its determination, such
independent investment banking firm or other independent expert shall consider
the then current trading price of Units on any National Securities Exchange on
which Units are then listed, the value of the Partnership's assets, the rights
and obligations of the General Partner and other factors it may deem relevant.
(b) If the Partnership Interest is not acquired in the manner set forth in
Section 13.3(a) hereof, the Departing Partner shall become a Limited Partner and
its Partnership Interest shall be converted into Units pursuant to a valuation
made by an investment banking firm or other independent expert selected pursuant
to Section 13.3(a) hereof, without reduction in such Partnership Interest (but
subject to proportionate dilution by reason of the admission of its successor).
Any successor General Partner shall indemnify the Departing Partner as to all
debts and liabilities of the Partnership arising on or after the date on which
the Departing Partner becomes a Limited Partner. For purposes of this Agreement,
the General Partner's conversion of its Partnership Interest to Units will be
characterized as if the General Partner contributed its Partnership Interest to
the Partnership in exchange for the newly-issued Units.
(c) If the option described in Section 13.3(a) hereof is not exercised by
the party entitled to do so, the successor General Partner shall, at the
effective date of its admission to the Partnership, contribute to the capital of
the Partnership cash in an amount such that its Capital Account, after giving
effect to such contribution and any adjustments made to the Capital Accounts of
all Partners pursuant to Section 4.6(d)(i), shall be equal to that percentage of
the Capital Accounts of all Partners that is equal to its Percentage Interest as
the General Partner. In such event, each successor General Partner shall,
subject to the following sentence, be entitled to such Percentage Interest of
all Partnership allocations and distributions and any other allocations and
distributions to which the Departing Partner was entitled. In addition, such
successor General Partner shall cause this Agreement to be amended to reflect
that, from and after the date of such successor General Partner's admission, the
successor General Partner's interest in all Partnership distributions and
allocations shall be 2%, and that of the Unitholders shall be 98%.
13.4 Redemption of SPUs and Deferred Participation Interests. In the event
that Plum Creek
70
<PAGE> 71
Management Company (or any Affiliate of Burlington which is a successor to Plum
Creek Management Company as General Partner of the Partnership) withdraws as
General Partner under circumstances where such withdrawal does not violate this
Agreement or is removed by the Limited Partners under circumstances where
"cause" does not exist, (i) in the case of SPUs, Burlington or its Affiliate
shall have the right to require the Partnership within 30 days of the effective
date of such withdrawal or removal to redeem any SPUs which are then outstanding
at a price equal to the Unrecovered Capital attributable thereto or (ii) in the
case of Deferred Participation Interests, Plum Creek Timber Company, Inc. (or
its successor) or its Affiliate, shall have the right to require the Partnership
within 30 days of the effective date of such withdrawal or removal to redeem any
Deferred Participation Interests which are then outstanding, and not yet
converted into Units pursuant to Section 5.7(b), at a price equal to the
Unrecovered Capital attributable thereto.
13.5 Withdrawal of Limited Partners. Except as provided in Section 13.4, no
Limited Partner shall have any right to withdraw from the Partnership; provided,
however, that when a transferee of a Limited Partner's Units becomes a Record
Holder, such transferring Limited Partner shall cease to be a Limited Partner
with respect to the Units so transferred.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
14.1 Dissolution. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of this
Agreement. Upon the removal or withdrawal of the General Partner any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 1.5 hereof;
(b) an Event of Withdrawal of the General Partner as provided in
Section 13.1(a) hereof, unless a successor is named as provided in Section
13.1(b) hereof;
(c) an election to dissolve the Partnership by the General Partner
that is approved by the affirmative vote of the holders of at least 66 2/3% of
outstanding Units, excluding for purposes of such determination Units owned by
the General Partner and its Affiliates, (and all Limited Partners hereby
expressly consent that such approval may be effected upon written consent of the
holders of at least 66 2/3% of outstanding Units);
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties
of the Partnership.
71
<PAGE> 72
14.2 Continuation of the Business of the Partnership after Dissolution.
Upon (i) dissolution of the Partnership caused by the withdrawal or removal of
the General Partner and following a failure of all Partners, within 90 days
after the withdrawal or removal of the General Partner, to agree to continue the
business of the Partnership and appoint a successor General Partner, then within
an additional 90 days or (ii) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 13.1(a)(iv) hereof,
then within 180 days thereafter, at least 66 2/3% of the outstanding Units may
elect to reconstitute the Partnership and continue its business on the same
terms and conditions set forth in this Agreement by forming a new limited
partnership on terms identical to those set forth in this Agreement and having
as a general partner a Person approved by the holders of at least 66 2/3% of the
outstanding Units. Upon any such election by the holders of at least 66 2/3% of
the outstanding Units, all Partners shall be bound thereby and shall be deemed
to have approved thereof. Unless such an election is made within the applicable
time period as set forth above, the Partnership shall conduct only activities
necessary to wind up its affairs. If such an election is so made, then:
(a) the reconstituted Partnership shall continue until the end of the
term set forth in Section 1.5 hereof unless earlier dissolved in accordance with
this Article XIV;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
thenceforth as the interests of a Limited Partner and converted into Units in
the manner provided in Section 13.3(b) hereof; and
(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary, to
file a new partnership agreement and certificate of limited partnership, and the
successor general partner may for this purpose exercise the powers of attorney
granted the General Partner pursuant to Section 1.4 hereof; provided, that the
right of the holders of at least 66 2/3% of outstanding Units to approve a
successor general partner and to reconstitute and to continue the business of
the Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would not
result in the loss of limited liability of any Limited Partner and (y) neither
the Partnership nor the reconstituted limited partnership would become taxable
as a corporation or treated as an association taxable as a corporation for
federal income tax purposes upon the exercise of such right to continue.
14.3 Liquidation. Upon dissolution of the Partnership, unless the
Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 14.2 hereof, the General Partner, or in the
event the General Partner has been dissolved or removed, become bankrupt as set
forth in Section 13.1 or withdrawn from the Partnership, a liquidator or
liquidating committee approved by the holders of at least 66 2/3% of the
outstanding Units, shall be the Liquidator. The Liquidator (if other than the
General Partner) shall be entitled to receive such compensation for its services
as may be approved by the holders of at least 66 2/3% of the outstanding Units.
The Liquidator shall agree not to resign at any time without 15 days' prior
written notice and (if other than the General Partner) may be removed at any
time, with or
72
<PAGE> 73
without cause by notice of removal approved by at least 66 2/3% of the
outstanding Units. Upon dissolution, removal or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all rights,
powers and duties of the original Liquidator) shall within 30 days thereafter be
approved by the holders of at least 66 2/3% of the outstanding Units. The right
to approve a successor or substitute Liquidator in the manner provided herein
shall be deemed to refer also to any such successor or substitute Liquidator
approved in the manner herein provided. Except as expressly provided in this
Article XIV, the Liquidator approved in the manner provided herein shall have
and may exercise, without further authorization or consent of any of the parties
hereto, all of the powers conferred upon the General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sale set forth in Section 6.3(b) hereof) to the extent necessary or desirable in
the good faith judgment of the Liquidator to carry out the duties and functions
of the Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to complete the
winding-up and liquidation of the Partnership as provided for herein. The
Liquidator shall liquidate the assets of the Partnership, and apply and
distribute the proceeds of such liquidation in the following order of priority,
unless otherwise required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including Partners
who are creditors, in order of priority provided by law; and the creation of a
reserve of cash or other assets of the Partnership for contingent liabilities in
an amount, if any, determined by the Liquidator to be appropriate for such
purposes; and
(b) to all Partners and Special Limited Partners in accordance with
the positive balances in their respective Capital Accounts after taking into
account adjustments to such Capital Accounts pursuant to Section 5.1(c) hereof.
14.4 Distributions in Kind. Notwithstanding the provisions of Section 14.3
hereof, which require the liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including those to Partners as
creditors) and/or distribute to the Partners or to specific classes of Partners,
in lieu of cash, as tenants in common and in accordance with the provisions of
Section 14.3 hereof, undivided interests in such Partnership assets as the
Liquidator deems not suitable for liquidation. Any such distributions in kind
shall be made only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interest of the Limited Partners, and
shall be subject to such conditions relating to the disposition and management
of such properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.
73
<PAGE> 74
14.5 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership cash and property as provided in
Sections 14.3 and 14.4 hereof, the Partnership shall be terminated and the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership in jurisdictions other than the State of Delaware
shall be cancelled and such other actions as may be necessary to terminate the
Partnership shall be taken.
14.6 Reasonable Time for Winding-Up. A reasonable time shall be allowed for
the orderly winding-up of the business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 14.3 hereof, in order to minimize
any losses otherwise attendant upon such winding-up and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
14.7 Return of Capital. The General Partner shall not be personally liable
for the return of the Capital Contributions of the Limited Partners, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Partnership assets.
14.8 No Capital Account Restoration. No Partner shall have any obligation
to restore any negative balance in its Capital Account upon liquidation of the
Partnership.
14.9 Waiver of Partition. Each Partner hereby waives any right to partition
of the Partnership property.
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
15.1 Amendment to be Adopted Solely by General Partner. Each Limited
Partner agrees that the General Partner (pursuant to its powers of attorney from
the Limited Partners and Assignees), without the approval of any Limited Partner
or Assignee, may amend any provision of this Agreement, and execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent or the
registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
reasonable and necessary or appropriate to qualify or continue the qualification
of the Partnership as a limited partnership or a partnership in which the
limited partners have limited liability under the laws of any state or that is
necessary or advisable in the opinion of the General Partner to ensure that the
Partnership
74
<PAGE> 75
will not be taxable as a corporation or treated as an association taxable as a
corporation for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General Partner,
does not adversely affect the Limited Partners in any material respect, (ii)
that is necessary or desirable to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation of
any federal or state agency or judicial authority or contained in any federal or
state statute (including, without limitation, the Delaware Act) or that is
necessary or desirable to facilitate the trading of the Depositary Units
(including, without limitation, the division of outstanding Units into different
classes in order to facilitate uniformity of tax consequences within such
classes of Units) or comply with any rule, regulation, guideline or requirement
of any National Securities Exchange on which the Depositary Units are or will be
listed for trading, compliance with any of which the General Partner determines
in its sole discretion to be in the best interests of the Partnership and the
Limited Partners or (iii) that is required to effect the intent of the
provisions of this Agreement or is otherwise contemplated by this Agreement;
(e) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership or the General Partner or its directors or officers from
in any manner being subjected to the provisions of the Investment Company Act of
1940, as amended, the Investment Advisers Act of 1940, as amended, or "plan
asset" regulations adopted under the Employee Retirement Income Security Act of
1974, as amended, whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
(f) subject to the terms of Section 4.4 hereof, an amendment that the
General Partner determines in its sole discretion to be necessary or desirable
in connection with the authorization for issuance of any class or series of
Units pursuant to Section 4.4 hereof;
(g) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(h) any amendment made after the Support Period, the effect of which
is to separate into a security separate and apart from the Units, the rights of
holders of the Units to receive any Cumulative Base Deficiency in respect of the
Support Period;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 16.3 hereof; or
(j) any other amendments similar to the foregoing.
15.2 Amendment Procedures. Except as provided in Sections 15.1 and 15.3
hereof, all amendments to this Agreement shall be made in accordance with the
following requirements: If an amendment is proposed, the General Partner shall
seek the written approval of the requisite
75
<PAGE> 76
Percentage Interests or call a meeting of the Limited Partners to consider and
vote on such proposed amendment. Each such proposal to the Limited Partners
shall contain the text of the proposed amendment. A proposed amendment shall be
effective upon its approval by at least 66 2/3% of the outstanding Units unless
a greater or different percentage is required under this Agreement. The General
Partner shall notify all Record Holders upon final adoption of any proposed
amendment.
15.3 Amendment Requirements. (a) Amendments to this Agreement may be
proposed solely by the General Partner. Notwithstanding the provisions of
Sections 15.1 and 15.2 hereof, no provision of this Agreement which establishes
a Percentage Interest required to take any action shall be amended, altered,
changed, repealed or rescinded in any respect which would have the effect of
reducing such voting requirement unless such amendment is approved by the
written consent or the affirmative vote of Partners whose aggregate Percentage
Interests constitute not less than the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 15.1 and 15.2 hereof, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner, (ii) modify the compensation payable to the General Partner or any of
its Affiliates by the Partnership, (iii) change Section 14.1(a) or (c) hereof,
(iv) restrict in any way any action by or rights of the General Partner as set
forth in this Agreement or (v) except as set forth in Section 14.1(c) hereof,
give any person the right to dissolve the Partnership.
(c) Except as otherwise provided, the General Partner may amend the
Partnership Agreement without the approval of the Limited Partners, except that
any amendment that would have a material adverse effect on the holders of any
class of outstanding Units must be approved by the holders of not less than 66
2/3% of the outstanding Units of such class.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Sections 6.3 or 15.1 hereof, no amendment shall become
effective without the approval of the Record Holders of all Units unless the
Partnership obtains an Opinion of Counsel to the effect that (i) such amendment
will not cause the Partnership to become taxable as a corporation or treated as
an association taxable as a corporation for federal income tax purposes and (ii)
such amendment will not affect the limited liability of any Limited Partner in
the Partnership under applicable law.
(e) This Section 15.3 shall only be amended with the approval by written
consent or affirmative vote of the holders of not less than 95% of the
outstanding Units.
15.4 Meetings. All acts of Limited Partners to be taken hereunder shall be
taken in the manner provided in this Article XV. Meetings of the Limited
Partners may be called by the General Partner or by Limited Partners owning 20%
or more of the outstanding Units of the class for which a meeting is proposed.
Limited Partners shall call a meeting by delivering to the General Partner one
or more requests in writing stating that the signing Limited Partners wish to
76
<PAGE> 77
call a meeting and indicating the general or specific purposes for which the
meeting is to be called. Within 60 days after receipt of such a call from
Limited Partners or within such greater time as may be reasonably necessary for
the Partnership to comply with any statutes, rules, regulations, listing
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the General Partner shall
send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A meeting shall be held at a time and
place determined by the General Partner on a date not more than 60 days after
the mailing of notice of the meeting. Limited Partners shall not vote on matters
that would cause the Limited Partners to be deemed to be taking part in the
management and control of the business and affairs of the Partnership so as to
jeopardize the Limited Partners' limited liability under the Delaware Act or the
law of any other state in which the Partnership is qualified to do business.
15.5 Notice of a Meeting. Notice of a meeting called pursuant to Section
15.4 hereof shall be given to the Record Holders in writing by mail or other
means of written communication in accordance with Section 17.1 hereof. The
notice shall be deemed to have been given at the time when deposited in the mail
or sent by other means of written communication.
15.6 Record Date. For purposes of determining the Limited Partners entitled
to notice of or to vote at a meeting of the Limited Partners or to give
approvals without a meeting as provided in Section 15.11 hereof, the General
Partner may set a Record Date, which shall not be less than 10 nor more than 60
days before (a) the date of the meeting (unless such requirement conflicts with
any rule, regulation, guideline or requirement of any National Securities
Exchange on which the Units are listed for trading, in which case the rule,
regulation, guideline or requirement of such exchange shall govern) or (b) in
the event that approvals are sought without a meeting, the date on which Limited
Partners are requested in writing by the General Partner to give such approvals.
15.7 Adjournment. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting and a new Record Date need not
be fixed, if the time and place thereof are announced at the meeting at which
the adjournment is taken, unless such adjournment shall be for more than 45
days. At the adjourned meeting, the Partnership may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 45 days or if a new Record Date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given in accordance with this Article
XV.
15.8 Waiver of Notice; Approval of Meeting; Approval of Minutes. The
transactions of any meeting of Limited Partners, however called and noticed, and
whenever held, shall be as valid as if had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the Limited Partners entitled to
vote, present in person or by proxy, signs a written waiver of notice or an
approval of the holding of the meeting or an approval of the minutes thereof.
All waivers and approvals shall be filed with the Partnership records or made a
part of the minutes of the meeting. Attendance of a
77
<PAGE> 78
Limited Partner at a meeting shall constitute a waiver of notice of the meeting,
except when the Limited Partner does not approve, at the beginning of the
meeting, of the transaction of any business because the meeting is not lawfully
called or convened; and except that attendance at a meeting is not a waiver of
any right to disapprove the consideration of matters required to be included in
the notice of the meeting, but not so included, if the disapproval is expressly
made at the meeting.
15.9 Quorum. 66 2/3% of the outstanding Units of the class for which a
meeting has been called represented in person or by proxy shall constitute a
quorum at a meeting of Limited Partners of such class unless any such action by
the Limited Partners requires approval by holders of a majority in interest of
the Units, in which case, the quorum shall be a majority. At any meeting of the
Limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of Limited Partners whose Percentage Interests
represent at least 66 2/3% of the Percentage Interests entitled to vote and be
present in person or by proxy at such meeting shall be deemed to constitute the
act of all Limited Partners, unless a different percentage is required with
respect to such action under the provisions of this Agreement, in which case the
act of the Limited Partners owning such different percentage shall be required.
The Limited Partners present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment, notwithstanding
the withdrawal of enough Limited Partners to leave less than a quorum, if any
action taken (other than adjournment) is approved by the required Percentage
Interests of the Limited Partners specified in this Agreement. In the absence of
a quorum, any meeting of Limited Partners may be adjourned from time to time by
the affirmative vote of a majority of the Percentage Interests represented
either in person or by proxy, but no other business may be transacted, except as
provided in Section 15.7 hereof.
15.10 Conduct of Meeting. The General Partner shall have full power and
authority concerning the manner of conducting any meeting of the Limited
Partners or solicitation of approvals in writing, including, without limitation,
the determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 15.4 hereof, the conduct of voting,
the validity and effect of any proxies and the determination of any
controversies, votes or challenges arising in connection with or during the
meeting or voting. The General Partner shall designate a Person to serve as
chairman of any meeting and shall further designate a Person to take the minutes
of any meeting, in either case including, without limitation, a Partner or a
director or officer of the General Partner. All minutes shall be kept with the
records of the Partnership maintained by the General Partner. The General
Partner may make such other regulations consistent with applicable law and this
Agreement as it may deem advisable concerning the conduct of any meeting of the
Limited Partners or solicitation of approvals in writing, including regulations
in regard to the appointment of proxies, the appointment and duties of
inspectors of votes and approvals, the submission and examination of proxies and
other evidence of the right to vote, and the revocation of approvals in writing.
15.11 Action Without a Meeting. Any action that may be taken at a meeting
of the Limited
78
<PAGE> 79
Partners may be taken without a meeting if an approval in writing setting forth
the action so taken is signed by Limited Partners owning not less than the
minimum Percentage Interests that would be necessary to authorize or take such
action at a meeting at which all the Limited Partners were present and voted.
Prompt notice of the taking of action without a meeting shall be given to the
Limited Partners who have not approved in writing. The General Partner may
specify that any written ballot submitted to Limited Partners for the purpose of
taking any action without a meeting shall be returned to the Partnership within
the time period, which shall be not less than 20 days, specified by the General
Partner. If a ballot returned to the Partnership does not vote all of the Units
held by the Limited Partner, the Partnership shall be deemed to have failed to
receive a ballot for the Units which were not voted. If approval of the taking
of any action by the Limited Partners is solicited by any Person other than by
or on behalf of the General Partner, the written approvals shall have no force
and effect unless and until (a) they are deposited with the Partnership in care
of the General Partner, (b) approvals sufficient to take the action proposed are
dated as of a date not more than 90 days prior to the date sufficient approvals
are deposited with the Partnership and (c) an Opinion of Counsel is delivered to
the General Partner to the effect that the exercise of such right and the action
proposed to be taken with respect to any particular matter (i) will not cause
the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners' limited liability, (ii) will not jeopardize the status of the
Partnership as a partnership under applicable tax laws and regulations and (iii)
is otherwise permissible under the state statutes then governing the rights,
duties and liabilities of the Partnership and the Partners.
15.12 Voting and Other Rights. (a) Only those Record Holders of Units on
the Record Date set pursuant to Section 15.6 hereof shall be entitled to notice
of, and to vote at, a meeting of Limited Partners or to act with respect to
matters as to which approvals are solicited.
(b) With respect to Units that are held for a Person's account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation,
or an agent of any of the foregoing), in whose name such Units are registered,
such broker, dealer or other agent shall, in exercising the voting rights in
respect of such Units on any matter, and unless the arrangement between such
Persons provides otherwise, vote such Units in favor of, and at the direction
of, the Person who is the beneficial owner, and the Partnership shall be
entitled to assume it is so acting without further inquiry. The provisions of
this Section 15.12(b) (as well as all other provisions of this Agreement) are
subject to the provisions of Section 10.4 hereof.
ARTICLE XVI
MERGER
16.1 Authority. The Partnership may merge or consolidate with one or more
corporations, business trusts or associations, real estate investment trusts,
common law trusts or unincorporated businesses, including, without limitation, a
general partnership or limited
79
<PAGE> 80
partnership, formed under the laws of the State of Delaware or any other state
of the United States of America pursuant to a written agreement of merger or
consolidation ("Merger Agreement") in accordance with this Article.
16.2 Procedure for Merger or Consolidation. Merger or consolidation of the
Partnership pursuant to this Article requires the prior approval of the General
Partner. If the General Partner shall determine, in the exercise of its sole
discretion, to consent to the merger or consolidation, the General Partner shall
approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(hereafter designated as the "Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partnership interests, rights, securities or obligations of
the Surviving Business Entity; and (i) if any general or limited partnership
interests, securities or rights of any constituent business entity are not to be
exchanged or converted solely for, or into, cash, property or general or limited
partnership interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partnership interests,
rights, securities or obligations of any limited partnership, corporation, trust
or other entity (other than the Surviving Business Entity) which the holders of
such general or limited partnership interests are to receive in exchange for, or
upon conversion of, their securities or rights, and (ii) in the case of
securities represented by certificates, upon the surrender of such certificates,
which cash, property or general or limited partnership interests, rights,
securities or obligations of the Surviving Business Entity or any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity), or evidences thereof are to be delivered;
(e) A statement of any changes in the constituent documents (the
articles or certificate of incorporation, articles of trust, declaration of
trust, certificate or agreement of limited partnership or other similar charter
or governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 16.4 hereof or a later
date specified in or determinable in accordance with the Merger Agreement
(provided that if the effective time of the merger is to be later than the date
of the filing of the certificate of merger, it shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and
80
<PAGE> 81
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or desirable.
16.3 Approval by Limited Partners of Merger or Consolidation. (a) The
General Partner of the Partnership, upon its approval of the Merger Agreement,
shall direct that the Merger Agreement be submitted to a vote of Limited
Partners whether at a meeting or by written consent, in either case in
accordance with the requirements of Article XV hereof. A copy or a summary of
the Merger Agreement shall be included in or enclosed with the notice of a
meeting or the written consent.
(b) The Merger Agreement shall be approved upon receiving the affirmative
vote or consent of the holders of at least 66 2/3% of the outstanding Units of
each class unless the Merger Agreement contains any provision which, if
contained in an amendment to the Agreement, the
provisions of this Agreement or the Delaware Act would require the vote or
consent of a greater percentage of the Percentage Interests of the Limited
Partners or of any class of Limited Partners, in which case such greater
percentage vote or consent shall be required for approval of the Merger
Agreement.
(c) After such approval by vote or consent of the Limited Partners, and at
any time prior to the filing of the certificate of merger pursuant to Section
16.4 hereof, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
16.4 Certificate of Merger. Upon the required approval by the General
Partner and Limited Partners of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.
16.5 Effect of Merger. (a) Upon the effective date of the certificate of
merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal and
mixed, and all debts due to any of those business entities and all other things
and causes of action belonging to each of those business entities shall be
vested in the Surviving Business Entity and after the merger or consolidation
shall be the property of the Surviving Business Entity to the extent they were
of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any way
impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be preserved
unimpaired; and
81
<PAGE> 82
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity, and may be enforced
against it to the same extent as if the debts, liabilities and duties had been
incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another having occurred.
ARTICLE XVII
RIGHT TO ACQUIRE UNITS
17.1 Right to Acquire Units. (a) Notwithstanding the provisions of Section
13.1(a) hereof or any other provision of this Agreement (i) in the event that at
any time after the Support Period less than 10% of the total Units outstanding
are held by Persons other than the General Partner and its Affiliates, the
General Partner shall then have the right, which right it may assign and
transfer to the Partnership or any Affiliate of the General Partner, exercisable
in its sole discretion, to purchase all, but not less than all, of the Units
outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date the notice
described in Section 17.1(b) hereof is mailed, (y) the Initial Unit Price or (z)
the highest cash price paid by the General Partner for any Unit purchased during
the 90-day period preceding the date that the notice described in Section
17.1(b) hereof is mailed. As used herein, (i) "Current Market Price" of any
class of Units listed or admitted to trading on any National Securities Exchange
means the average of the daily Closing Prices (as hereinafter defined) per Unit
of such class for the 20 consecutive Trading Days (as hereinafter defined)
immediately prior to such date and (ii) "Trading Day" means a day on which the
principal National Securities Exchange on which the Units of any class are
listed or admitted to trading is open for the transaction of business or, if
Units of a class are not listed or admitted to trading on any National
Securities Exchange, a day on which banking institutions in New York City
generally are open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise either right to purchase Units granted pursuant
to Section 17.1(a) hereof, the General Partner shall deliver to the Transfer
Agent written notice of such election to purchase (hereinafter in this Section
17.1 called the "Notice of Election to Purchase") and shall cause the Transfer
Agent to mail a copy of such Notice of Election to Purchase to the Record
Holders of Units (as of a Record Date selected by the General Partner) at least
10, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be published in daily newspapers of general
circulation printed in the English language and published in the Borough of
Manhattan, New York. The Notice of Election to Purchase shall specify the
Purchase Date and the price (determined in accordance with Section 17.1(a)
hereof) at which Units will be purchased and state that the General Partner, its
Affiliate or the Partnership, as the case may be, elects to purchase such Units,
upon surrender of Depositary Receipts with respect to such Units in exchange for
payment, at such office or offices of the Transfer Agent as the Transfer Agent
82
<PAGE> 83
may specify, or as may be required by any National Securities Exchange on which
the Units are listed or admitted to trading. Any such Notice of Election to
Purchase mailed to a Record Holder of Units at his address as reflected in the
records of the Transfer Agent shall be conclusively presumed to have been given
whether or not the owner receives such notice. On or prior to the Purchase Date,
the General Partner, its Affiliate or the Partnership, as the case may be, shall
deposit with the Transfer Agent cash in an amount sufficient to pay the
aggregate purchase price of all of the Units to be purchased in accordance with
this Section 17.1. If the Notice of Election to Purchase shall have been duly
given as aforesaid at least 10 days prior to the Purchase Date, and if on or
prior to the Purchase Date the deposit described in the preceding sentence has
been made for the benefit of the holders of Units subject to purchase as
provided herein, then from and after the Purchase Date, notwithstanding that any
Depositary Receipt shall not have been surrendered for purchase, all rights of
the holders of such Units (including, without limitation, any rights pursuant to
Articles IV, V and XIV hereof) shall thereupon cease, except the right to
receive the purchase price (determined in accordance with Section 17.1(a)
hereof) for Units therefor, without interest, upon surrender to the Transfer
Agent of the Depositary Receipts representing such Units, and such Units shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the General Partner or any Affiliate of the General
Partner, or the Partnership, as the case may be, shall be deemed to be the owner
of all such Units from and after the Purchase Date and shall have all rights as
the owner of such Units (including, without limitation, all rights as owner of
such Units pursuant to Articles IV, V and XIV hereof).
(c) At any time from and after the Purchase Date, a holder of an
outstanding Unit subject to purchase as provided in this Section 17.1 may
surrender his Depositary Receipt or Certificate, as the case may be, evidencing
such Unit to the Transfer Agent in exchange for payment of the amount described
in Section 17.1(a) therefor without interest thereon.
ARTICLE XVIII
GENERAL PROVISIONS
18.1 Addresses and Notices. Any notice, demand, request or report required
or permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first-class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Unit at his address as shown on the records of the
Transfer Agent or as otherwise shown on the records of the Partnership,
regardless of any claim of any Person who may have an interest in such Unit or
the Partnership Interest of a General Partner by reason of an assignment or
otherwise. An affidavit or certificate of making of any notice, payment or
report in accordance with the provisions of this
83
<PAGE> 84
Section 18.1 executed by the General Partner, the Transfer Agent or the mailing
organization shall be prima facie evidence of the giving or making of such
notice, payment or report. If any notice, payment or report addressed to a
Record Holder at the address of such Record Holder appearing on the books and
records of the Transfer Agent or the Partnership is returned by the United
States Post Office marked to indicate that the United States Postal Service is
unable to deliver it, such notice, payment or report and any subsequent notices,
payments and reports shall be deemed to have been duly given or made without
further mailing (until such time as such Record Holder or another Person
notifies the Transfer Agent or the Partnership of a change in his address) if
they are available for the Partner or Assignee at the principal office of the
Partnership for a period of one year from the date of the giving or making of
such notice, payment or report to the other Partners and Assignees. Any notice
to the Partnership shall be deemed given if received by the General Partner at
the principal office of the Partnership designated pursuant to Section 1.3
hereof. The Partnership and the General Partner may rely and shall be protected
in relying on any notice or other document from a Partner or other Person if
believed by them to be genuine.
18.2 Titles and Captions. All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
18.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
18.4 Further Action. The parties shall execute and deliver all documents,
provide all information and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
18.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
18.6 Integration. This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
18.7 Creditors. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
18.8 Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
84
<PAGE> 85
18.9 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto or, in the case of a Person acquiring a Unit,
upon executing and delivering a Transfer Application as herein described,
independently of the signature of any other party.
18.10 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
18.11 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
Plum Creek Management Company, L.P.
By: /s/ James A. Kraft
Title: VP Law
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as limited partners of the
Partnership, pursuant to Powers of Attorney now and hereafter executed in favor
of, and granted and delivered to, the General Partner.
By: Plum Creek Management Company, L.P.
General Partner, as attorney-in-fact for all Limited
Partners pursuant to the Powers of Attorney
granted pursuant to Section 1.4 hereof.
By: /s/ James A. Kraft
Title: VP Law
85
<PAGE> 1
EXHIBIT 4C.2
AMENDMENT TO MORTGAGE NOTE AGREEMENT
PLUM CREEK MANUFACTURING, L.P.
999 THIRD AVENUE
SEATTLE, WASHINGTON 98104
Dated as of June 15, 1995
To each of the Purchasers
listed on the attached
Purchaser Schedule
Dear Noteholder:
Plum Creek Manufacturing, L.P., a Delaware limited partnership (the
"Company"), and Plum Creek Timber Company, L.P., a Delaware limited partnership
(the "Partnership"), hereby agree with you as follows:
SECTION 1. AUTHORIZATION OF NOTES
The Company issued and sold $160,000,000 aggregate principal amount of its
111/8% First Mortgage Notes due June 8, 2007 (the "Notes"), pursuant to separate
Mortgage Note Agreements, each dated as of May 31, 1989 (as the same has been
and may from time to time be amended, the "Note Agreements"), between the
Company and you and the other Purchasers. The payment of the Notes is guaranteed
by the Partnership pursuant to Paragraph 7 of the Note Agreements. Capitalized
terms used herein without definition have the respected meanings specified in
the Note Agreements.
SECTION 2. AMENDMENTS TO THE NOTE AGREEMENTS
Upon execution and delivery of this Amendment to Mortgage Note Agreement
(this "Amendment Agreement") by the holders of at least a majority in aggregate
principal amount of the Notes, all the Note Agreements shall thereupon be
amended as follows:
2.1 PARAGRAPH 5A OF THE NOTE AGREEMENTS
Paragraph 5A of the Note Agreements is amended by deleting the word "and"
following the semicolon appearing at the end of clause (iv) thereof, changing
clause
<PAGE> 2
"(v)" thereof to clause "(vi)" and by adding the following new clause "(v)"
immediately preceding such clause "(vi"):
"(v) within three (3) Business Days after the same shall have been
provided to the Trustee, a copy of the certificate and accompanying
exhibits specified in Section 20(i) of the Trust Agreement with
respect to a release permitted by paragraph 6B(5)(vi); and"
Paragraph 5a of the Note Agreements is further amended by adding to the
twelfth line in the first full paragraph after cause(vi) of said paragraph 5a,
immediately after the word "thereto" appearing in such line and immediately
before the period, the following words:
", together with a copy of any certificates and accompanying
exhibits specified in Section 20(i) of the Trust Agreement with
respect to any releases permitted by paragraph 6b(5)(v) that were
delivered to the Trustee during such accounting period".
2.2 EXHIBIT D TO THE NOTE AGREEMENTS
Exhibit D attached to the Note Agreements is further amended by appending
thereto the form of the Second Amendment to Trust Agreement in the form attached
hereto as Appendix A and accordingly the Trustee is hereby authorized to execute
and deliver such Second Amendment to Trust Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you that:
3.1 AUTHORIZATION
This Amendment Agreement has been duly authorized, executed and delivered
by all necessary action on the part of the Company.
3.2 NO DEFAULTS
No Event of Default or Default exists on the date hereof.
3.3 CHANGES, ETC.
Except as contemplated by this Amendment Agreement, since March 31, 1995,
the date of the most recent consolidated financial statements of the
Partnership, (i) neither the Company nor the Partnership has incurred any
material liabilities or
-2-
<PAGE> 3
obligations, direct or contingent, or entered into any material transactions not
in the ordinary course of business, and (ii) there has not been any material
adverse change in the financial condition or operations of the Company or the
Partnership.
3.4 ACTIONS PENDING
There is no action, suit, investigation or proceeding pending or, to the
knowledge of the Company, threatened against the Company, or any properties or
rights of the Company, by or before any court, arbitrator or administrative or
governmental body which questions the validity of this Amendment Agreement, or
any action taken or to be taken pursuant to this Amendment Agreement, which
would be reasonably likely to result in any material adverse change in the
business, properties or assets, condition (financial or otherwise) or operations
of the Company, or in the inability of the Company to perform its obligations
under this Amendment Agreement, the Note Agreements or the Notes, following the
effectuation of the transactions described herein.
3.5 COMPLIANCE WITH OTHER INSTRUMENTS, ETC.
The Company is not in violation of any provision of the Partnership
Agreement or of any term of any agreement or instrument to which it is a party
or by which it or any of its properties is bound or any term of any applicable
law, ordinance, rule or regulation of any governmental authority or any term of
any applicable order, judgment or decree of any court, arbitrator or
governmental authority (collectively, "term"), the consequences of which
violation would be reasonably likely to have a material adverse effect on its
business, properties or assets, condition (financial or otherwise) or operations
or on the ability of the Company to perform its obligations under this Amendment
Agreement, or, after giving effect to the transactions contemplated hereby, the
performance of the Note Agreements or the Notes, and the execution, delivery and
performance by the Company of this Amendment Agreement, or, after giving effect
to the transactions contemplated hereby, the Note Agreements or the Notes will
not result in any violation of or be in conflict with or constitute a default
under any such term or result in the creation of (or impose any obligation on
the Company to create) any Lien upon any of the properties or assets of the
Company, pursuant to any such term except for Liens permitted by paragraph 6B(1)
of the Note Agreements; and there is no such term which materially adversely
affects or in the future would be likely to materially adversely affect the
business, properties or assets, condition or operations of the Company or the
ability of the Company to perform its obligations under this Amendment
Agreement, or, after giving effect to the transactions contemplated hereby, the
Note Agreements or the Notes.
-3-
<PAGE> 4
3.6 GOVERNMENTAL AND OTHER CONSENTS
No consent, approval or authorization of, or declaration or filing with,
any governmental authority, and no consent, approval, waiver or similar action
by any holder of Debt or other creditor of the Company or the Partnership is
required for the valid execution, delivery and performance by the Company of
this Amendment Agreement, or, after giving effect to the transactions
contemplated hereby, the Note Agreements or the Notes other than those which
have been obtained on or prior to the Effective Time.
3.7 AUTHORIZATION; ENFORCEABILITY
This Amendment Agreement has been duly authorized by all requisite action
and duly executed and delivered by authorized officers of the Company and the
General Partner, and the Note Agreements, as amended by this Amendment
Agreement, are valid obligations of the Company, legally binding upon and
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization or
other similar law affecting the enforcement of creditors' rights generally and
(ii) general principles of equity (regardless of whether such enforceability is
considered in proceeding in equity or at law).
3.8 DISCLOSURE
Neither this Amendment Agreement nor any other document, certificate or
statement furnished to you by or on behalf of the Company in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading. There is no fact peculiar to the Company which materially adversely
affects or in the future may (so far as the Company can now reasonably foresee)
materially adversely affect the businesses, property or assets, condition
(financial or otherwise) or results of operations of the Company and which has
not been set forth in this Amendment Agreement, or in the other documents,
certificates and statements furnished to you by or on behalf of the Company,
prior to the date hereof in connection with the transactions contemplated
hereby.
SECTION 4. AFFIRMATION OF GUARANTEE
The Partnership hereby agrees that its Guarantee in respect of the Notes,
as set forth in Paragraph 7 of the Note Agreements, shall continue in full force
and effect from and after the Effective Time.
-4-
<PAGE> 5
SECTION 5. RATIFICATION AND CONDITIONS PRECEDENT
All of the terms and provisions of the Note Agreements, as amended as set
forth in Section 2 hereof, are in all respects ratified and confirmed by the
Company.
If you are in agreement with the amendments to the Note Agreements set
forth in Section 2 of this Amendment Agreement, please sign the form of
acceptance on the enclosed counterpart of this Amendment Agreement and return
the same to the undersigned.
The effectiveness of this Amendment Agreement is conditioned upon the
satisfaction by July 15, 1995 of the following conditions precedent: (a) the
prior due authorization, execution and delivery by the Company of this Amendment
Agreement and the Second Amendment to Trust Agreement (in the form attached
hereto as Appendix a) and (b) the Company's obtaining the prior written consent
to so amend the Trust Agreement and the Note Agreements from a majority in
aggregate principal amount of all the Notes.
SECTION 6. MISCELLANEOUS
All representations and warranties contained herein shall survive the
execution and delivery of this Amendment Agreement, the consummation of the
transactions contemplated hereby and the transfer of any Note by a holder of
Notes. Such representations and warranties may be relied upon by any transferee
of a Note from a holder of Notes.
All covenants and agreements in this Amendment Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
The descriptive headings of the several paragraphs of this Amendment
Agreement are inserted for convenience only and do not constitute a part of this
Amendment Agreement.
-5-
<PAGE> 6
This Amendment Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
Very truly yours,
PLUM CREEK MANUFACTURING, L.P.
By PLUM CREEK MANAGEMENT
COMPANY, L.P., its general partner
By: /s/ Diane M. Irvine
--------------------------------
Name: Diane M. Irvine
------------------------------
Title: Vice President and
-----------------------------
Chief Financial Officer
PLUM CREEK MARKETING, INC.
By: /s/ Diane M. Irvine
--------------------------------
Name: Diane M. Irvine
------------------------------
Title: Vice President and
-----------------------------
Chief Financial Officer
PLUM CREEK TIMBER COMPANY, L.P.
By PLUM CREEK MANAGEMENT
COMPANY, L.P., its general partner
By: /s/ Diane M. Irvine
--------------------------------
Name: Diane M. Irvine
------------------------------
Title: Vice President and
-----------------------------
Chief Financial Officer
-6-
<PAGE> 7
Accepted and Agreed to
this 14 day of July, 1995:
---- -----
CENTURY LIFE OF AMERICA
By: /s/ Atwell & Co.
-------------------------
Name: Freddy Marinez
-----------------------
Title:
----------------------
-7-
<PAGE> 8
Accepted and Agreed to
this 30th day of June, 1995:
------ -----
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Karen L. Cornell
--------------------------
Name: Karen L. Cornell
------------------------
Title: Second Vice President
-----------------------
-7-
<PAGE> 9
Accepted and Agreed to
this 10th day of July, 1995:
---- -----
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF
AMERICA
By: /s/ AB Kyle
------------------------------------------
Name: Angela Brock-Kyle
----------------------------------------
Title: Associate Director-Private Placements
---------------------------------------
-7-
<PAGE> 10
SECOND AMENDMENT TO TRUST AGREEMENT
THIS SECOND AMENDMENT TO TRUST AGREEMENT, dated as of June 15, 1995, is
made by PLUM CREEK MARKETING, INC., a Delaware corporation (the "Company")
(formerly Plum Creek Manufacturing, Inc.), PLUM CREEK MANUFACTURING, L.P., a
Delaware limited partnership (the "Operations Partnership"), and FIRST
INTERSTATE BANK OF WASHINGTON, N.A., a national banking association, as trustee
(the "Trustee") under the Trust Agreement, dated as of June 8, 1989, as amended
by that certain Amendment to Trust Agreement, dated as of January 1, 1991 (as
amended, the "Trust Agreement"), among the Company, the Operations Partnership
and the Trustee. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Trust Agreement.
RECITALS
WHEREAS, the Trustee and the Company entered into that certain Trust
Agreement dated as of June 8, 1989;
WHEREAS, as of January 1, 1991, the Trustee, the Company and the Operations
Partnership entered into that certain Amendment to Trust Agreement pursuant to
which, among other things, the Operations Partnership became a party to the
Trust Agreement;
WHEREAS, the Trustee is, under the Trust Agreement, the trustee for holders
of the Notes and the Parity Debt, if any, of the Operations Partnership. As
such, the Trustee is the mortgagee or beneficiary under the Security Documents
that secure the Notes and the Parity Debt;
WHEREAS, the Operations Partnership owns or has rights to, or interests in,
certain real property that the Operations Partnership is permitted to sell
pursuant to the terms of the Mortgage Note Agreements, dated as of May 31, 1989,
as amended, among the Operations Partnership, Plum Creek Timber Company, L.P.
and the Purchasers of the Notes (the "Mortgage Note Agreements"). From time to
time the Operations Partnership may wish to dispose of certain portions of such
real property as permitted by the Mortgage Note Agreements (the "Property");
WHEREAS, the Property is subject to liens created by the Security Documents
and accordingly the release of the liens created by the Security Documents on
the Property is necessary to effect a release or transfer of the Property; and
<PAGE> 11
WHEREAS, the Trustee is willing, upon the terms and conditions stated
below, to release from time to time the liens of the relevant Security Documents
applicable to the Property;
NOW, THEREFORE, the parties agree that the Trust Agreement is hereby
amended as follows:
1. Addition of Section 20. The Trust Agreement is amended by inserting the
following as Section 20 of the Trust Agreement immediately after Section 19 of
the Trust Agreement:
"20. Release of Security by Trustee. The Operations Partnership may
from time to time request the Trustee to release its lien under a Security
Document with respect to rights to or interests in certain real property
that the Company or Operations Partnership is permitted to transfer or
otherwise dispose of under the Note Agreements (the "Property") and that
the Operations Partnership proposes to release or transfer. Such request
shall be accompanied by:
(i) a certificate in the form of Exhibit A attached hereto, complete
with exhibits, duly authorized and executed by the Operations Partnership;
(ii) a Partial Release of Mortgage (the "Mortgage Release")
substantially in the form of Exhibit B attached hereto or a Request for
Partial Reconveyance of Deed of Trust (the "Request for Deed of Trust
Release") substantially in the form of Exhibit C attached hereto (the "Deed
of Trust Release");
(iii) a copy of the release, partial release, conveyance, assignment
or other instrument executed by the Company or Operations Partnership that
releases or transfers the Property; and
(iv) in the case of the sale or other transfer of Property, the
proceeds of which are required by paragraph 6B(5)(vi) of the Note
Agreements to be escrowed in a security account with the Trustee for the
benefit of the holders of the Notes, a copy of the letter from the Company
irrevocably directing payment of such proceeds directly into such security
account.
Unless, in the case of a release permitted by paragraph 6b(5)(vi) of the
Note Agreements, (a) within 20 days after the Trustee
-2-
<PAGE> 12
receives the materials set forth in clauses (i), (ii), (iii) and (iv)
above, the Trustee shall have received written notice from either (x) the
holders of more than 25% of the aggregate amount of the Notes then
outstanding or (y) the holders of more than 25% of the aggregate amount of
the Parity Debt then outstanding, that such release by the Trustee is not
permitted under the Note Agreements, or (b) the Trustee has knowledge of a
Material Default, the Trustee shall, upon expiration of such 20-day period,
execute the Mortgage Release or the Request for Deed of Trust Release and
have the same acknowledged and returned to the requesting party. In the
case of a release permitted by paragraph 6b(5)(v) of the Note Agreements,
unless the Trustee has knowledge of an Event of Default or Potential Event
of Default, and provided that all conditions precedent pursuant to
paragraph 6b(5)(v) of the Note Agreements have been satisfied, the Trustee
shall promptly execute the Mortgage Release or the Request for Deed of
Trust Release and have the same acknowledged and returned to the requesting
party."
2. Ratification. Except as herein expressly modified, the terms of the
Trust Agreement are hereby confirmed and ratified and remain in full force and
effect.
[This space intentionally left blank.]
-3-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives hereunto duly
authorized as of the date first written.
PLUM CREEK MANUFACTURING, L.P.
By PLUM CREEK MANAGEMENT
COMPANY, L.P., its general partner
By: /s/ Diane M. Irvine
-----------------------------
Name: Diane M. Irvine
---------------------------
Title: Vice President &
--------------------------
Chief Financial Officer
PLUM CREEK MARKETING, INC.
By: /s/ Diane M. Irvine
-----------------------------
Name: Diane M. Irvine
---------------------------
Title: Vice President &
--------------------------
Chief Financial Officer
FIRST INTERSTATE BANK OF
WASHINGTON, N.A., as Trustee
By: /s/ Pamela A. Jorgensen
-----------------------------
Name: Pamela A. Jorgensen
---------------------------
Title: Assistant Vice President
--------------------------
-4-
<PAGE> 14
EXHIBIT A
CERTIFICATE
Plum Creek Manufacturing, L.P. (the "Operations Partnership"), certifies to
[First Interstate Bank of Washington, N.A. or ____________________], as trustee
(the "Trustee") under the Trust Agreement, as amended, dated as of June 8, 1989,
among the Operations Partnership, Plum Creek Marketing, Inc. and the Trustee, as
follows:
1. Attached hereto is a copy of a [Partial Release of Mortgage (the
"Mortgage Release")] [Request for Partial Reconveyance of Deed of Trust (the
"Deed of Trust Release")], which is prepared for execution by the Trustee. An
original of the [Mortgage Release][Deed of Trust Release] is being delivered to
you concurrently herewith.
2. Attached hereto is a copy of an executed [partial release, release,
conveyance, assignment or other] instrument (the "Operations Partnership
Release"), which releases or transfers the Operations Partnership's rights to or
interest in the property covered by the [Mortgage Release/Deed of Trust
Release].
3. No Material Default (as defined in the Mortgage Note Agreements, as
amended, dated as of May 31, 1989, among the Operations Partnership, Plum Creek
Timber Company, L.P. and the institutional investors named therein (the
"Mortgage Note Agreements")) or similar event with respect to the Parity Debt,
if any, exists and is continuing, or will exist upon the consummation of the
transactions contemplated by this Certificate.
4. The real property described in the Operations Partnership Release and
the [Mortgage Release/Deed of Trust Release] is [description of nature, location
and approximate acreage of property] (the "Property"). The disposition of the
Property complies with the provisions of the Mortgage Note Agreements, and, if
the provisions of paragraph 6b(5)(vi) of the Mortgage Note Agreements are
applicable, all net proceeds received from the release or transfer of the
Property shall be applied in accordance therewith. [Indicate use of proceeds, if
then known.] In the case of dispositions made under paragraph 6b(5) (v) or (vi)
of the Mortgage Note Agreements, the consideration received for the release or
transfer of the Property is at least equal to its fair value.
5. The Operations Partnership has caused a copy of this Certificate to be
sent to each holder of a Note under and as defined in the Mortgage Note
Agreements
A-1
<PAGE> 15
and, if any Parity Debt is then outstanding, to each holder of Parity Debt, and
each such holder shall be entitled to rely hereon.
PLUM CREEK MANUFACTURING, L.P.
By PLUM CREEK MANAGEMENT
COMPANY, L.P., its general partner
By:______________________________
Name:____________________________
Title:___________________________
A-2
<PAGE> 16
EXHIBIT B
PARTIAL RELEASE OF MORTGAGE
WHEREAS, [First Interstate Bank of Washington, N.A., a national banking
association] or ____________________, acts as trustee (the "Trustee") under the
Trust Agreement, (the "Trust Agreement"), dated as of June 8, 1989, as amended,
among Plum Creek Marketing, Inc., a Delaware corporation (the "Company")
(formerly Plum Creek Manufacturing, Inc.), Plum Creek Manufacturing, L.P., a
Delaware limited partnership (the "Operations Partnership"), and Trustee;
WHEREAS, the Company executed a Mortgage, Security Agreement and Fixture
Filing (the "Mortgage"), dated as of June 8, 1989, which is recorded in the
records of __________ County, Montana, under volume ___, page ___, in favor of
the Trustee; and
WHEREAS, the Operations Partnership and the Company have requested a
partial release of the lien of the Mortgage pursuant to the terms of the Trust
Agreement;
NOW, THEREFORE, the Trustee, for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and pursuant to the terms of the Trust
Agreement, does hereby release and discharge from the lien of the Mortgage the
real property described on Schedule A attached hereto (the "Released Property").
This instrument is a partial release only, and it is expressly agreed that the
lien of the Mortgage shall not be affected except as to the Released Property,
and the Mortgage and the liens created thereby shall remain in full force and
effect as to all the remaining property not specifically released herein or
previously released.
FIRST INTERSTATE BANK OF
WASHINGTON, N.A., as Trustee
By:______________________________
Name:____________________________
Title:___________________________
B-1
<PAGE> 17
STATE OF___________________)
) ss.
COUNTY OF__________________)
On this _______ day of __________________, in the year ___________, before me,
__________________________________________________, personally appeared
_______________________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person who executed the within
and foregoing instrument as ______________________ on behalf of FIRST INTERSTATE
BANK OF WASHINGTON, N.A., a national banking association, and acknowledged to me
that ______________ executed it in its capacity as trustee, as described
therein.
__________________________ (Notary Seal)
Signature of Notary
B-2
<PAGE> 18
EXHIBIT C
REQUEST FOR PARTIAL RECONVEYANCE
TO: COMMONWEALTH LAND TITLE INSURANCE COMPANY
WHEREAS, [First Interstate Bank of Washington, N.A., a national banking
association] or ____________________, acts as trustee (the "Trustee") under the
Trust Agreement, (the "Trust Agreement"), dated as of June 8, 1989, as amended,
among Plum Creek Marketing, Inc., a Delaware corporation (the "Company")
(formerly Plum Creek Manufacturing, Inc.), and Plum Creek Manufacturing, L.P., a
Delaware limited partnership (the "Operations Partnership"), and the Trustee;
and
WHEREAS, the Company executed a Deed of Trust, Security Agreement and
Fixture Filing (the "Deed of Trust") dated as of June 8, 1989, and recorded in
the records of __________ County, Washington under Auditor's File Number
________, in favor of the Trustee, as beneficiary, and Commonwealth Land Title
Insurance Company, as deed of trust trustee; and
WHEREAS, the Operations Partnership requested a partial reconveyance of the
lien of the Deed of Trust pursuant to the terms of the Trust Agreement;
NOW, THEREFORE, in accordance with the terms of the Trust Agreement, you
are hereby requested and directed, on payment to you of any sums owing to you
under the terms of the Deed of Trust, to convey, without warranty, to Plum Creek
Manufacturing, L.P. the real property described on Schedule A attached hereto
(the "Released Property"). This instrument is a request for a partial
reconveyance only, and it is expressly agreed that the lien of the Deed of Trust
shall not be affected except as to the Released Property, and the Deed of Trust
and the liens created
C-1
<PAGE> 19
thereby shall remain in full force and effect as to all the remaining property
not specifically released hereby or previously released.
DATED this _____ day of ____________________, 19____.
FIRST INTERSTATE BANK OF
WASHINGTON, N.A., as Beneficiary
By:______________________________
Name:____________________________
Title:___________________________
Mail reconveyance to: Plum Creek Manufacturing, L.P.
999 Third Avenue, Suite 2300
Seattle, Washington 98104
Attn: Susanna N. Duke, Esq.
C-2
<PAGE> 1
EXHIBIT 10A.1
FIRST AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "First
Amendment"), dated as of October 27, 1995, is entered into by and among Plum
Creek Timber Company, L.P. (the "Company"), the several financial institutions
from time to time party to the Credit Agreement referred to below
(collectively, the "Banks"), and Bank of America National Trust and Savings
Association, as agent for the Banks (in such capacity, the "Agent").
R E C I T A L S
A. The Company, the Banks and the Agent are parties to an Amended
and Restated Credit Agreement dated as of November 15, 1994 (the "Amended and
Restated Credit Agreement"), pursuant to which the Banks and the Agent have
extended certain credit facilities to the Company.
B. The Company has requested that the Banks agree to certain
amendments to the Amended and Restated Credit Agreement.
C. The Banks are willing to amend the Amended and Restated Credit
Agreement, subject to the terms and conditions of this First Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Amended and
Restated Credit Agreement.
2. Amendments to Amended and Restated Credit Agreement.
(a) Section 1.01 of the Amended and Restated Credit
Agreement shall be amended as follows:
(i) The definition of "Applicable Margin" shall
be amended by:
(1) deleting the percentage numbers in
the table and replacing them such
that the table in its
entirety reads as follows:
1
<PAGE> 2
<TABLE>
<CAPTION>
FIXED CHARGE COVERAGE RATIO
AT END OF FISCAL QUARTER APPLICABLE MARGIN
OFFSHORE RATE CD RATE BASE RATE
<S> <C> <C> <C>
Greater than or equal to 3:25 to 1:00 0.4000% 0.5250% 0.0000%
Less than 3:25 to 1:00 but greater than or equal to 0.4500% 0.5750% 0.0000%
2:75 to 1:00
Less than 2:75 to 1:00 but greater than or equal to 0.5500% 0.6750% 0.0000%
2:00 to 1:00
Less than 2:00 to 1:00 0.8750% 1.0000% 0.0000%
</TABLE>
(2) deleting all percentage numbers in the
sentence starting with the words "If the Company
fails to deliver" and by inserting in their stead the
numbers "0.4500%," "0.5750%," "0.0000%," "0.5500%,"
"0.6750%," and "0.0000%," such that the second half
of the sentence reads as follows:
"thus if the Applicable Margin had
previously been 0.4500% for Offshore Rate
Committed Loans and 0.5750% for CD Rate
Committed Loans and 0.0000% for Base Rate
Committed Loans, a failure to deliver
quarterly financials by the first day of the
next fiscal quarter would cause the
Applicable Margin to be 0.5500%, 0.6750% and
0.0000%, respectively, for the duration of
that quarter."
(ii) The definition of "Commitment Fee Percentage"
shall be amended by deleting the table and replacing it in its
entirety to read as follows:
<TABLE>
<CAPTION>
FIXED CHARGE COVERAGE RATIO
AT END OF FISCAL QUARTER COMMITMENT FEE
<S> <C>
Greater than or equal to 3:25 to 1:00 .1500%
Less than 3:25 to 1:00 but greater than or equal to 2:75 to 1:00 .1750%
Less than 2:75 to 1:00 but greater than or equal to 2:00 to 1:00 .2000%
Less than 2:00 to 1:00 .2250%
</TABLE>
(iii) The definition of "Maturity Date" shall be
amended by deleting the date "October 31, 1999" and by
inserting in its stead the date "October 31, 2000."
(iv) The definition of "Permitted Business" shall
be amended by:
2
<PAGE> 3
(1) adding immediately after the words
"Closing Date," the words "pulp and
paper manufacturing"; and
(2) deleting the words ", which shall
not include pulp or paper
manufacturing".
(b) Subsection 8.02(c)(iii) of the Amended and Restated
Credit Agreement shall be amended by adding after the words "Permitted
Business" as they appear at the end of such subsection, the following:
"provided that, after giving effect on a pro forma basis to such merger or
consolidation, the gross revenue contribution of pulp and paper manufacturing
activities of the Company and its Subsidiaries on a combined basis for the 12
months preceding such merger or consolidation does not exceed 33% of the total
revenues of the Company and its Subsidiaries on a combined basis."
(c) Subsection 8.02(d)(ii)(z) of the Amended and Restated
Credit Agreement shall be amended by adding after the words "Permitted
Business" as they appear at the end of such subsection the following: "provided
that, after giving effect on a pro forma basis to such merger or consolidation,
the gross revenue contribution of pulp and paper manufacturing activities of
the merged or consolidated entity and its Subsidiaries on a combined basis for
the 12 months preceding such merger or consolidation does not exceed 33% of
total revenues of such merged or consolidated entity and its Subsidiaries on a
combined basis."
(d) Subsection 8.04(i) of the Amended and Restated Credit
Agreement shall be amended in its entirety to read as follows:
"make Investments not otherwise permitted by this
Section 8.04 in entities engaged solely in a Permitted
Business, provided that (x) the aggregate cumulative amount of
such Investments, to the extent that such Investments are
attributable to pulp and paper manufacturing (as
proportionately attributed by multiplying the amount of an
Investment by the percentage of revenues of the Person in whom
such Investment is made during the 12 months preceding such
Investment that are contributed by pulp and paper
manufacturing), does not exceed the sum of $50,000,000
(without giving effect to any write-down of such Investments),
and (y) the cumulative aggregate amount of all such
Investments including those subject to clause (x) at original
cost (including the principal amount of any obligations
guaranteed to the extent such guarantees are not otherwise
permitted by this Section 8.04) made pursuant to this
subsection (i) between the closing date of the Note Agreements
and any date thereafter shall not exceed the greater of
$30,000,000 or 60% of the average annual Pro Forma Free Cash
Flow for the two fiscal years preceding such date".
3. Representations and Warranties. The Company hereby represents
and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
3
<PAGE> 4
(b) The execution, delivery and performance by the
Company of this First Amendment have been duly authorized by all necessary
partnership and corporate and other action and do not and will not require any
registration with, consent or approval of, notice to or action by, any Person
(including any Governmental Authority) in order to be effective and
enforceable. The Amended and Restated Credit Agreement as amended by this
First Amendment constitutes the legal, valid and binding obligations of the
Company, enforceable against it in accordance with its respective terms,
without defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Amended and Restated Credit Agreement are true and correct as
though made on and as of the date hereof (except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true and correct as of such earlier date).
(d) The Company is entering into this First Amendment on
the basis of its own investigation and for its own reasons, without reliance
upon the Agent and the Banks or any other Person.
4. Effective Date. This First Amendment will become effective on
October 30, 1995 (the "Effective Date"), provided that each of the following
conditions precedent is satisfied:
(a) the Agent has received from the Company and each of
the Banks a duly executed original (or, if elected by the
Agent, an executed facsimile copy) of this First Amendment;
and
(b) the Agent has received, with sufficient copies for
each of the Banks, an opinion of James A. Kraft, Vice
President, Law, of the Company, addressed to the Agent and the
Banks, as to the due authorization of the execution, delivery
and performance of this First Amendment.
5. Reservation of Rights. The Company acknowledges and agrees
that the execution and delivery by the Agent and the Banks of this First
Amendment shall not be deemed to create a course of dealing or otherwise
obligate the Agent or the Banks to forbear or execute similar amendments under
the same or similar circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended by this First
Amendment, all terms, covenants and provisions of the Amended and Restated
Credit Agreement are and shall remain in full force and effect and all
references therein and in the other Loan Documents to such Amended and Restated
Credit Agreement shall henceforth refer to the Amended and Restated Credit
Agreement as amended by this First Amendment. This First Amendment shall be
deemed incorporated into, and a part of, the Amended and Restated Credit
Agreement.
(b) This First Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
First Amendment.
4
<PAGE> 5
(c) This First Amendment shall be governed by and
construed in accordance with the law of the State of California (without regard
to principles of conflicts of laws).
(d) This First Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, and
all such counterparts taken together shall be deemed to constitute but one and
the same instrument.
(e) This First Amendment, together with the Amended and
Restated Credit Agreement, contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein and therein.
This First Amendment supersedes all prior drafts and communications with
respect thereto. This First Amendment may not be amended except in accordance
with the provisions of Section 11.01 of the Amended and Restated Credit
Agreement.
(f) If any term or provision of this First Amendment
shall be deemed prohibited by or invalid under any applicable law, such
provision shall be invalidated without affecting the remaining provisions of
this First Amendment or the Amended and Restated Credit Agreement,
respectively.
(g) The Company covenants to pay to or reimburse the
Agent within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred in connection with the development,
preparation, negotiation, execution and delivery of this First Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their duly authorized officers
as of the date first above written.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company,L.P.,
its general partner
By: /s/ Diane M. Irvine
------------------------------
Title: Vice President & CFO
----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as a Bank and as an Issuing Bank
By: /s/ Michael J. Balok
------------------------------------
Title: Managing Director
---------------------------------
5
<PAGE> 6
ABN AMRO BANK N.V.,
as a Bank and as an Issuing Bank
By: /s/ David McGinnis
-------------------------------------
Title: Vice President
---------------------------------
By: /s/ Leif H. Olsson
------------------------------------
Title: Group Vice President
---------------------------------
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Richard Peccie
------------------------------------
Title: Sr. Vice President
---------------------------------
U. S. BANK OF WASHINGTON, N.A.
By: /s/ Wade Black
------------------------------------
Title: Assistant Vice President
---------------------------------
WELLS FARGO BANK, N.A.
By: /s/ John Huber
------------------------------------
Title: Vice President
---------------------------------
SEATTLE FIRST NATIONAL BANK
By: /s/ John Wilson
------------------------------------
Title: Vice President
---------------------------------
6
<PAGE> 7
THE BANK OF TOKYO, LTD.
By: /s/ Stanley Lance
------------------------------------
Title: Vice President
---------------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ Kevin F. Sullivan
------------------------------------
Title: Vice President
---------------------------------
Acknowledged by:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ Ivo Bakovic
---------------------------------
Ivo Bakovic
Vice President
7
<PAGE> 1
EXHIBIT 10A.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as of
October 27, 1995, is entered into by and among Plum Creek Timber Company, L.P.
(the "Company"), the several financial institutions from time to time party to
the Credit Agreement referred to below (collectively, the "Banks"), and Bank of
America National Trust and Savings Association, as agent for the Banks (in such
capacity, the "Agent").
R E C I T A L S
A. The Company, the Banks and the Agent are parties to a Credit
Agreement dated as of November 15, 1994 (the "Credit Agreement"), pursuant to
which the Banks and the Agent have extended certain credit facilities to the
Company.
B. The Company has requested that the Banks agree to certain
amendments to the Credit Agreement.
C. The Banks are willing to amend the Credit Agreement, subject
to the terms and conditions of this First Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended as
follows:
(i) The definition of "Applicable Margin" shall be
amended by:
(1) deleting the percentage numbers in the
table and replacing them such that the table in its entirety
reads as follows:
1
<PAGE> 2
<TABLE>
<CAPTION>
FIXED CHARGE COVERAGE RATIO
AT END OF FISCAL QUARTER APPLICABLE MARGIN
OFFSHORE RATE CD RATE BASE RATE
<S> <C> <C> <C>
Greater than or equal to 3:25 to 1:00 0.4000% 0.5250% 0.0000%
Less than 3:25 to 1:00 but greater than or equal to 2:75 0.4500% 0.5750% 0.0000%
to 1:00
Less than 2:75 to 1:00 but greater than or equal to 2:00 0.5500% 0.6750% 0.0000%
to 1:00
Less than 2:00 to 1:00 0.8750% 1.0000% 0.0000%
</TABLE>
(2) deleting all percentage numbers in the
sentence starting with the words "If the Company
fails to deliver" and by inserting in their stead
the numbers "0.4500%," "0.5750%," "0.0000%,"
"0.5500%," "0.6750%," and "0.0000%," such that the
second half of the sentence reads as follows:
"thus if the Applicable Margin had
previously been 0.4500% for Offshore Rate
Committed Loans and 0.5750% for CD Rate
Committed Loans and 0.0000% for Base Rate
Committed Loans, a failure to deliver
quarterly financials by the first day of
the next fiscal quarter would cause the
Applicable Margin to be 0.5500%, 0.6750%
and 0.0000%, respectively, for the duration
of that quarter."
(ii) The definition of "Commitment Fee
Percentage" shall be amended by deleting the table and
replacing it in its entirety to read as follows:
<TABLE>
<CAPTION>
FIXED CHARGE COVERAGE RATIO
AT END OF FISCAL QUARTER COMMITMENT FEE
<S> <C>
Greater than or equal to 3:25 to 1:00 .1000%
Less than 3:25 to 1:00 but greater than or equal to 2:75 to 1:00 .1250%
Less than 2:75 to 1:00 but greater than or equal to 2:00 to 1:00 .1500%
Less than 2:00 to 1:00 .1750%
</TABLE>
(iii) The definition of "Permitted Business"
shall be amended by:
(1) adding immediately after the words
"Closing Date," the words "pulp and
paper manufacturing"; and
2
<PAGE> 3
(2) deleting the words ", which shall
not include pulp or paper
manufacturing."
(iv) The definition of "Revolving Termination
Date" shall be amended by deleting the date "October 30,
1995" and by inserting in its stead the date "October 28,
1996."
(b) Subsection 8.02(c)(iii) of the Credit Agreement
shall be amended by adding after the words "Permitted Business" as they appear
at the end of such subsection, the following: "provided that, after giving
effect on a pro forma basis to such merger or consolidation, the gross revenue
contribution of pulp and paper manufacturing activities of the Company and its
Subsidiaries on a combined basis for the 12 months preceding such merger or
consolidation does not exceed 33% of the total revenues of the Company and its
Subsidiaries on a combined basis."
(c) Subsection 8.02(d)(ii)(z) of the Credit Agreement
shall be amended by adding after the words "Permitted Business" as they appear
at the end of such subsection, the following:"provided that, after giving
effect on a pro forma basis to such merger or consolidation, the gross revenue
contribution of pulp and paper manufacturing activities of the merged or
consolidated entity and its Subsidiaries on a combined basis for the 12 months
preceding such merger or consolidation does not exceed 33% of total revenues of
such merged or consolidated entity and its Subsidiaries on a combined basis."
(d) Subsection 8.04(i) of the Credit Agreement shall be
amended in its entirety to read as follows:
(i) "make Investments not otherwise permitted by this
Section 8.04 in entities engaged solely in a Permitted
Business, provided that (x) the aggregate cumulative amount
of such Investments, to the extent that such Investments are
attributable to pulp and paper manufacturing (as
proportionately attributed by multiplying the amount of an
Investment by the percentage of revenues of the Person in
whom such Investment is made during the 12 months preceding
such Investment that are contributed by pulp and paper
manufacturing), does not exceed the sum of $50,000,000
(without giving effect to any write-down of such
Investments), and (y) the cumulative aggregate amount of all
such Investments including those subject to clause (x) at
original cost (including the principal amount of any
obligations guaranteed to the extent such guarantees are not
otherwise permitted by this Section 8.04) made pursuant to
this subsection (i) between the closing date of the Note
Agreements and any date thereafter shall not exceed the
greater of $30,000,000 or 60% of the average annual Pro Forma
Free Cash Flow for the two fiscal years preceding such date".
3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
3
<PAGE> 4
(b) The execution, delivery and performance by the
Company of this First Amendment have been duly authorized by all necessary
partnership and corporate and other action and do not and will not require any
registration with, consent or approval of, notice to or action by, any Person
(including any Governmental Authority) in order to be effective and
enforceable. The Credit Agreement as amended by this First Amendment
constitutes the legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective terms, without
defense, counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Credit Agreement are true and correct as though made on and as
of the date hereof (except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true and
correct as of such earlier date).
(d) The Company is entering into this First Amendment on
the basis of its own investigation and for its own reasons, without reliance
upon the Agent and the Banks or any other Person.
4. Effective Date. This First Amendment will become effective
on October 30, 1995 (the "Effective Date"), provided that each of the following
conditions precedent is satisfied:
(a) the Agent has received from the Company and each of
the Banks a duly executed original (or, if elected by the
Agent, an executed facsimile copy) of this First Amendment;
and
(b) the Agent has received, with sufficient copies for
each of the Banks, an opinion of James A. Kraft, Vice
President, Law, of the Company, addressed to the Agent and the
Banks, as to the due authorization of the execution, delivery
and performance of this First Amendment.
5. Reservation of Rights. The Company acknowledges and agrees
that the execution and delivery by the Agent and the Banks of this First
Amendment shall not be deemed to create a course of dealing or otherwise
obligate the Agent or the Banks to forbear or execute similar amendments under
the same or similar circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended by this First
Amendment, all terms, covenants and provisions of the Credit Agreement are and
shall remain in full force and effect and all references therein and in the
other Loan Documents to such Credit Agreement shall henceforth refer to the
Credit Agreement as amended by this First Amendment. This First Amendment
shall be deemed incorporated into, and a part of, the Credit Agreement.
(b) This First Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
First Amendment.
4
<PAGE> 5
(c) This First Amendment shall be governed by and
construed in accordance with the law of the State of California (without regard
to principles of conflicts of laws).
(d) This First Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed an original,
and all such counterparts taken together shall be deemed to constitute but one
and the same instrument.
(e) This First Amendment, together with the Credit
Agreement, contains the entire and exclusive agreement of the parties hereto
with reference to the matters discussed herein and therein. This First
Amendment supersedes all prior drafts and communications with respect thereto.
This First Amendment may not be amended except in accordance with the
provisions of Section 11.01 of the Credit Agreement.
(f) If any term or provision of this First Amendment
shall be deemed prohibited by or invalid under any applicable law, such
provision shall be invalidated without affecting the remaining provisions of
this First Amendment or the Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the
Agent within five Business Days after demand for all costs and expenses
(including Attorney Costs) incurred in connection with the development,
preparation, negotiation, execution and delivery of this First Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed and delivered by their duly authorized officers
as of the date first above written.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company, L.P.,
its general partner
By: /s/ Diane M. Irvine
---------------------------------
Title: Vice President & CFO
------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as a Bank and as an Issuing Bank
By: /s/ Michael J. Balok
--------------------------------------
Title: Managing Director
-----------------------------------
5
<PAGE> 6
ABN AMRO BANK N.V.,
as a Bank and as an Issuing Bank
By: /s/ David McGinnis
--------------------------------------
Title: Vice President
-----------------------------------
By: /s/ Leif H. Olsson
--------------------------------------
Title: Group Vice President
-----------------------------------
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Richard Peccie
--------------------------------------
Title: Sr. Vice President
-----------------------------------
U. S. BANK OF WASHINGTON, N.A.
By: /s/ Wade Black
--------------------------------------
Title: Assistant Vice President
-----------------------------------
WELLS FARGO BANK, N.A.
By: /s/ John Huber
--------------------------------------
Title: Vice President
-----------------------------------
SEATTLE FIRST NATIONAL BANK
By: /s/ John Wilson
--------------------------------------
Title: Vice President
-----------------------------------
6
<PAGE> 7
THE BANK OF TOKYO, LTD.
By: /s/ Stanley Lance
--------------------------------------
Title: Vice President
-----------------------------------
THE BANK OF CALIFORNIA, N.A.
By: /s/ Kevin F. Sullivan
--------------------------------------
Title: Vice President
-----------------------------------
Acknowledged by:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ Ivo Bakovic
-----------------------------------
Ivo Bakovic
Vice President
7
<PAGE> 1
EXHIBIT 10B.1
FIRST AMENDMENT TO THE PLUM CREEK SUPPLEMENTAL BENEFITS PLAN
The Plum Creek Supplemental Benefits Plan (the "Plan"), adopted and
effective as of January 1, 1993, is hereby amended as follows pursuant to
Section 5.7 of the Plan, said Amendment to be effective July 20, 1995.
1. Section 1.2 of the Plan is hereby amended to read as follows:
"Board" means the Board of Directors or the Compensation
Committee of the Board of Directors of PC Advisory Corp. I, the general partner
of PC Advisory Partners I, L.P., which serves as the general partner of Plum
Creek Management Company, L.P. which serves as the general partner of Plum Creek
Timber Company, L.P.
2. Section 1.4 of the Plan is hereby amended to read as follows:
"Company" means Plum Creek Timber Management Company, L.P., a
Delaware limited partnership or Plum Creek Timber Company, L.P., a Delaware
limited partnership.
3. Section 1.12 of the Plan is hereby amended to read as follows:
"Plan Administrator" shall be the Vice President, Law of the
Company.
4. Section 4.1 of the Plan is hereby amended to add a subsection
4.1(a)(4) as follows:
(4) by taking into account any award granted to the
Participant under the Plum Creek Management Company, L.P. Management Incentive
Plan (the "MIP") including both cash and units.
5. Except as amended above, the Plan as in effect prior to this
First Amendment shall remain in full force and effect and shall remain
unchanged.
IN WITNESS WHEREOF, Plum Creek Timber Company, L.P. has caused this
First Amendment to be duly executed on this 21st day of July, 1995.
---- ----
PLUM CREEK TIMBER
COMPANY, L.P.
Witness: By: Plum Creek Management Company,
L.P., General Partner
/s/ Susanna N. Duke By: /s/ James A. Kraft
- ------------------- --------------------------------
Title: VP Law
<PAGE> 1
EXHIBIT 10B.6
FIRST AMENDMENT TO THE
PLUM CREEK MANAGEMENT COMPANY, L.P. LONG-TERM INCENTIVE PLAN
The Plum Creek Management Company, L.P. Long-Term Incentive Plan (the
"Plan"), adopted January 28, 1994 and effective as of October 1, 1993, is hereby
amended as follows pursuant to Section 15 of the Plan, such Amendment to be
effective July 20, 1995.
1. Section 2.1(d) of the Plan is hereby amended to read as
follows:
"Board" means the Board of Directors of PC Advisory Corp. I or
the Compensation Committee of the Board of Directors of PC Advisory Corp. I, the
general partner of PC Advisory Partners I, L.P., which serves as the general
partner of Plum Creek Management Company, L.P.
2. The Plan is hereby amended by adding the following Section
6.3:
Participant Consent to Cancellation. A Participant may
consent to cancellation of Unit Appreciation Rights previously granted,
including cancellation in connection with the re-granting of Unit Appreciation
Rights under new terms.
3. Except as amended above, the Plan as in effect prior to this
First Amendment shall remain in full force and effect and shall remain
unchanged.
IN WITNESS WHEREOF, Plum Creek Management Company, L.P. has caused this
First Amendment to be duly executed on this 21st day of July, 1995.
---- ----
Witness: PLUM CREEK MANAGEMENT
COMPANY, L.P.
/s/ Susanna N. Duke By: /s/ James A. Kraft
- -------------------- -------------------------------
Title: VP Law
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Combined Financial
Statements of Plum Creek Timber Company, L.P. for the nine months ended
September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 85,131
<SECURITIES> 0
<RECEIVABLES> 35,218
<ALLOWANCES> 1,224
<INVENTORY> 43,077
<CURRENT-ASSETS> 170,058
<PP&E> 747,926
<DEPRECIATION> 107,998
<TOTAL-ASSETS> 824,656
<CURRENT-LIABILITIES> 62,516
<BONDS> 517,300
<COMMON> 0
0
0
<OTHER-SE> 232,163
<TOTAL-LIABILITY-AND-EQUITY> 824,656
<SALES> 435,762
<TOTAL-REVENUES> 435,762
<CGS> 285,426
<TOTAL-COSTS> 315,767
<OTHER-EXPENSES> 1,584
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,507
<INCOME-PRETAX> 83,880
<INCOME-TAX> 781
<INCOME-CONTINUING> 83,099
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,099
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 0
</TABLE>
