<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 June 30, 1996
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>
Quarter Ended June 30,
-------------------------------
1996 1995
---- ----
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues ................................................ $ 138,744 $ 139,372
--------- ----------
Costs and Expenses:
Cost of Goods Sold .................................. 98,002 93,692
Selling, General and Administrative ................. 7,992 9,025
--------- ----------
Total Costs and Expenses .......................... 105,994 102,717
--------- ----------
Operating Income ........................................ 32,750 36,655
Interest Expense ........................................ (11,541) (11,804)
Interest Income ......................................... 192 277
Other Expense - Net ..................................... (59) (381)
--------- ----------
Income before Income Taxes .............................. 21,342 24,747
Provision for Income Taxes .............................. 365 213
--------- ----------
Net Income .............................................. $ 20,977 $ 24,534
General Partner Interest ................................ 5,819 5,890
--------- ----------
Net Income Allocable to Unitholders ..................... $ 15,158 $ 18,644
========= ==========
Net Income per Unit ..................................... $ 0.37 $ 0.46
========= ==========
</TABLE>
See accompanying Notes to Combined Financial Statements.
1
<PAGE> 3
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------
1996 1995
---- ----
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues ................................................ $ 266,438 $ 283,466
--------- ---------
Costs and Expenses:
Cost of Goods Sold .................................. 190,903 187,912
Selling, General and Administrative ................. 15,387 17,941
--------- ---------
Total Costs and Expenses .......................... 206,290 205,853
--------- ---------
Operating Income ........................................ 60,148 77,613
Interest Expense ........................................ (23,061) (23,754)
Interest Income ......................................... 331 621
Other Expense - Net ..................................... (83) (984)
--------- ---------
Income before Income Taxes .............................. 37,335 53,496
Provision for Income Taxes .............................. 443 570
--------- ---------
Net Income .............................................. $ 36,892 $ 52,926
General Partner Interest ................................ 11,537 10,531
--------- ---------
Net Income Allocable to Unitholders ..................... $ 25,355 $ 42,395
========= =========
Net Income per Unit ..................................... $ 0.62 $ 1.04
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements.
2
<PAGE> 4
PLUM CREEK TIMBER COMPANY, L. P.
COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents ........................... $ 61,849 $ 87,604
Accounts Receivable ................................. 38,442 31,750
Inventories ......................................... 44,946 47,366
Timber Contract Deposits ............................ 1,646 2,320
Other Current Assets ................................ 7,809 4,949
--------- ---------
154,692 173,989
Timber and Timberlands - Net ........................... 454,449 467,992
Property, Plant and Equipment - Net ................... 162,996 166,152
Other Assets ............................................ 17,176 17,953
--------- ---------
Total Assets ........................................ $ 789,313 $ 826,086
========= =========
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt ................... $ 17,400 $ 14,100
Accounts Payable .................................... 12,361 15,771
Interest Payable .................................... 7,313 7,543
Wages Payable ....................................... 6,897 11,513
Taxes Payable ....................................... 5,827 5,122
Workers' Compensation Liabilities ................... 2,014 2,318
Other Current Liabilities ........................... 7,465 6,081
--------- ---------
59,277 62,448
Long-Term Debt .......................................... 402,400 419,800
Lines of Credit ......................................... 97,500 97,500
Workers' Compensation Liabilities ....................... 8,685 8,405
Other Liabilities ....................................... 2,545 4,065
--------- ---------
Total Liabilities ................................... 570,407 592,218
--------- ---------
Commitments and Contingencies
PARTNERS' CAPITAL
Limited Partners' Units ................................. 219,676 234,117
General Partner ......................................... (770) (249)
--------- ---------
Total Partners' Capital ............................. 218,906 233,868
--------- ---------
Total Liabilities and Partners' Capital ............. $ 789,313 $ 826,086
========= =========
</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>
Six Months Ended June 30,
-------------------------------
1996 1995
----- -----
(In Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income .............................................. $ 36,892 $ 52,926
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization ............ 26,366 25,692
Gain on Asset Dispositions - Net .................... (3,853) (2,424)
Working Capital Changes:
Accounts Receivable ............................... (6,692) (2,578)
Inventories ....................................... 2,420 17,059
Timber Contract Deposits and Other Current Assets.. (2,186) 314
Accounts Payable .................................. (3,410) (1,580)
Other Accrued Liabilities.......................... (3,061) (2,801)
Other ............................................... 137 (1,713)
------------- ------------
Net Cash Provided By Operating Activities ............... $ 46,613 $ 84,895
------------- ------------
Cash Flows From Investing Activities:
Additions to Properties ............................. $ (10,273) $ (14,004)
Proceeds from Asset Dispositions .................... 3,859 4,430
------------- ------------
Net Cash Used In Investing Activities ................... $ (6,414) $ (9,574)
------------- ------------
Cash Flows From Financing Activities:
Cash Distributions .................................. $ (51,854) $ (47,986)
Retirement of Long-Term Debt......................... (14,100) (13,000)
Borrowings on the Lines of Credit ................... 276,500 114,500
Repayments on the Lines of Credit ................... (276,500) (114,500)
------------- ------------
Net Cash Used In Financing Activities ................... $ (65,954) $ (60,986)
------------- ------------
Increase (Decrease) In Cash and Cash Equivalents ........ (25,755) 14,335
Cash and Cash Equivalents:
Beginning of Period ................................ 87,604 60,942
------------- -------------
End of Period ....................................... $ 61,849 $ 75,277
============= ============
</TABLE>
See accompanying Notes to Combined Financial Statements.
4
<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"), Plum Creek Manufacturing, L.P.
("Manufacturing") and Plum Creek Marketing, Inc. ("Marketing"). All
significant intercompany transactions have been eliminated in the combination.
The Partnership owns 98 percent of Manufacturing and 96 percent of
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 general partner interest 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 1995 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. Certain financial statement
reclassifications have been made to the 1995 amounts presented for
comparability purposes and have no impact on net income. 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). However, Unitholders are 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.
In virtually all cases, a Unitholder's 1996 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
5
<PAGE> 7
for deferred taxes in order to reflect the tax consequences in future years 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 six month periods ended June
30, 1996 and 1995.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------------- ---------------
<S> <C> <C>
Raw materials (logs) $13,227 $18,967
Work-in-process 7,226 5,798
Export logs 413 420
Finished goods 17,290 16,012
------- -------
38,156 41,197
Supplies 6,790 6,169
------- -------
Total $44,946 $47,366
------- -------
</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 June 30, 1996 and December 31, 1995 was $44.0
million and $46.3 million, respectively.
3. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT
Timber and timberlands consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ----------
<S> <C> <C>
Timber and logging roads - net $409,312 $423,475
Timberlands 45,137 44,517
-------- --------
Timber and Timberlands - net $454,449 $467,992
-------- --------
</TABLE>
6
<PAGE> 8
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------------- --------------
<S> <C> <C>
Land, buildings and improvements $ 50,476 $ 50,056
Machinery and equipment 234,430 227,598
-------- --------
284,906 277,654
Accumulated depreciation (121,910) (111,502)
-------- --------
Property, Plant and
Equipment - net $162,996 $166,152
-------- --------
</TABLE>
4. BORROWINGS
As of June 30, 1996, the Company had $97.5 million of borrowings under
its 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 June 30, 1996. 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
June 30, 1996. The $15 million was classified as long-term debt due in 2000
due to the Company's intent and ability to finance these borrowings on a
long-term basis. As of June 30, 1996, the Company had unused bank lines of
credit totaling $36.7 million. As of July 1, 1996, $61.0 million of borrowings
on the lines of credit were repaid.
5. SUBSEQUENT EVENTS
On July 16, 1996, the Board of Directors of the General Partner
authorized the Partnership to make a distribution of $0.51 per Unit for the
second quarter of 1996. Total distributions will equal approximately $27.2
million (including $6.5 million to the General Partner) and will be paid on
August 23, 1996 to Unitholders of record on August 16, 1996.
On August 6, 1996, the Partnership entered into a definitive agreement
with Riverwood International Corporation ("Riverwood") to purchase Riverwood's
forestlands and solid wood conversion facilities. The Partnership will acquire
538,000 acres of timberlands located primarily in northern Louisiana and
southern Arkansas, a sawmill and a plywood plant located in Joyce, Louisiana, a
sawmill in Huttig, Arkansas, and a nursery in Texas for a purchase price of
approximately $540 million. As part of the acquisition, the Partnership will
enter into a long-term agreement to supply fiber to Riverwood's paper facility
in West Monroe, Louisiana. The proposed acquisition is subject to a number of
contingencies including the approval of Riverwood's lenders. Should all
contingencies be satisfied, the transaction is expected to close during the
fourth quarter of 1996.
7
<PAGE> 9
The Partnership expects that the acquisition will initially be
financed with bank debt. Alternatively, the Partnership may finance the
acquisition with a combination of bank debt and permanent financing which may
include senior notes and/or issuance of additional Limited Partner Units (the
"Permanent Financing"). In any case, subsequent to closing, a portion of the
bank debt would be replaced with the Permanent Financing. The bank debt will
contain certain restrictive covenants similar to those contained in the
Partnership's existing Senior Note agreements, including limitations on harvest
levels, asset sales, cash distributions and amounts of future indebtedness, and
will also require the Partnership to maintain certain interest coverage ratios.
The new bank debt will, in part, replace the Partnership's existing Lines of
Credit.
8
<PAGE> 10
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 exchange markets, competition, log supply, the
availability of substitute 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. Additionally, the demand for
logs is impacted by the demand for wood chips in the pulp and paper markets.
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,
affecting 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. In addition to seasonal fluctuations in demand,
prices of manufactured products can be impacted by weather-related, seasonal
fluctuations in supply, as production can be hampered during severely cold
winter months and then rebound when warmer spring weather arrives. Log
inventories increase during the winter months to prepare for reduced harvest
during spring break-up. Working capital varies with seasonal fluctuations.
CURRENT MARKET CONDITIONS. Prices for domestic logs in the Cascades
Region have decreased since the second quarter of 1995 and the first quarter of
1996, primarily as a result of
9
<PAGE> 11
weak chip markets. Prices for domestic logs in the Rockies Region have
decreased from levels experienced in the second quarter of 1995 as a result of
weaker plywood and chip markets and concern over the continued penetration of
Canadian lumber in the U.S. market. Such market penetration continued despite
the recent U.S. - Canadian lumber trade agreement, which became effective April
1, 1996 and established quarterly quotas for exports of Canadian lumber to the
U.S. Canadian lumber producers continue to have a significant raw material
cost advantage over U.S. sawmills. Throughout both regions excess chip
inventories currently exist due to the continued weakness in the pulp and paper
markets, resulting in production curtailments and declining chip prices. This
has contributed to the downward pressure on the price of domestic logs. Even
with improving lumber prices in the second quarter of 1996, downward price
pressure continues due to the significant loss of chip revenue. Pulp log
prices continued to decline in the second quarter of 1996 in both regions due
to the saturation of logs and chips. Export log prices decreased as compared
to the second quarter of 1995 due to both weaker Japanese demand as a result of
increased acceptance of substitute products in the Japanese market and a
greater supply of logs due to a weaker domestic log market. Export prices have
also decreased from the first quarter of 1996 due to the seasonal decline in
building activity as a result of the summer rainy season in Japan.
Second quarter 1996 industry composite indices for lumber commodity
prices were 27% and 17% higher than the second quarter of 1995 and the first
quarter of 1996, respectively. The increase in lumber prices was a result of
increased demand combined with limited supply. Demand increased due to strong
housing starts in the second quarter of 1996, which were significantly higher
than second quarter of 1995 starts despite rising mortgage rates.
Additionally, there was significant pent-up demand in the second quarter of
1996 as a result of the severe weather conditions in the first quarter of 1996.
Lumber supply was limited due to production curtailments as a result of poor
chip markets, an extended spring break-up, which limited log supply, and the
U.S. - Canadian lumber trade agreement. Additionally, distributors have been
converting their inventory management to just-in-time buying, and as a result,
they were unable to keep up with the surge in demand during the second quarter
of 1996.
Second quarter 1996 industry composite indices for plywood commodity
prices were 10% lower than the second quarter of 1995 primarily due to
increased competition from substitute products due to the capacity expansion of
oriented strand board (OSB). In 1996, 11 new OSB plants have begun or are
expected to begin operations and four existing OSB plants have expanded or have
announced plans to expand capacity. This expansion will increase OSB
production in the U.S. and Canada by 3.9 billion square feet in 1996, which
represents an increase of approximately 12% over 1995 total structural panel
production. MDF prices decreased by 24% in the second quarter of 1996, as
compared to the second quarter of 1995, due to significant projected capacity
expansion during 1996. Between 1995 and 2000, North American capacity is
expected to increase from 1.5 billion square feet to 2.6 billion square feet.
Since the capacity expansion began in 1995, competitors have been forced to
lower prices or lose market share. Additionally, distributors are keeping
inventory levels low due to concerns over further price declines. Demand for
MDF began to decline in the second quarter of 1995 when distributors and
end-users determined a supply shortage no longer existed. Recently, demand has
been improving due to improved consumer
10
<PAGE> 12
confidence, higher housing starts and lower inventories held by distributors.
MDF prices decreased 6% in the second quarter of 1996, as compared to the first
quarter of 1996, as a result of additional capacity coming on-line.
THREATENED AND ENDANGERED SPECIES. The federal Endangered Species Act
("ESA") protects species threatened with possible extinction. Protection of
endangered species may include restrictions on timber harvesting activities in
areas containing the affected species. A number of species indigenous to the
Pacific Northwest have been protected under the ESA, including the northern
spotted owl, marbled murrelet, gray wolf, mountain caribou, grizzly bear, bald
eagle and various salmon 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 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. The Guidelines recommend several measures, including the
restriction and preclusion of harvest activities in areas within a certain
proximity of known nest sites.
In May 1996, the Washington State Forest Practices Board (the "Board")
adopted permanent regulations, effective July 1996, to protect habitat for the
Owl. Under the permanent rule, designated Owl special emphasis areas ("SEAs")
have restrictions that are similar to, but slightly greater than those
contained in the Guidelines. Approximately 60% (170,000 acres) of the
Partnership's Timberlands in the Cascades Region are within SEAs. The
permanent rule exempts from its provisions forest practices that are consistent
with a federally approved habitat conservation plan and permit.
In June 1996, the Partnership received a two part, 100 year permit
under the ESA from the USFWS and the National Marine Fisheries Service ("NMFS")
that covers the Partnership's forest management on 170,000 acres within SEAs in
the Cascades Region (the "Planning Area"). As a part of the permit
application, the Partnership prepared a habitat conservation plan ("HCP") that
will govern the Partnership's management activities in the Planning Area during
the life of the permit. The HCP requires the Partnership to maintain certain
levels of wildlife habitat and to take numerous other mitigation measures,
including the protection of riparian areas.
In consideration for such mitigation, the permit authorizes forestry
practices that are consistent with the HCP even though they may have an impact
on Owls, marbled murrelets, grizzly bears and gray wolves, which are currently
listed under the ESA, as well as numerous other species. As an incentive to
the Partnership to create additional wildlife habitat in the Planning Area, the
permit provides certain additional authorization during the second 50-year part
of the permit if wildlife habitat within the Planning Area exceeds levels set
in the HCP. The permit thus provides long-term certainty and predictability to
the Partnership's harvest activities in the Planning Area. For lands within
the Planning Area, the management restrictions in the HCP replace restrictions
for Owls under the permanent Washington state Owl rule and the Guidelines.
11
<PAGE> 13
Under the HCP, a permit will be awarded in the future to cover any
newly listed species because the HCP has adequately addressed the needs of all
fish and wildlife within the Planning Area. The HCP further provides that the
addition of new species to the permit would not require additional mitigation
absent extraordinary circumstances where continued activity under the HCP would
have a significant material adverse impact on the species and no other
alternative would alleviate the concern.
In December 1995, the Company entered into a Grizzly Bear Conservation
Agreement with the USFWS, the United States Forest Service, and the state of
Montana covering 83,000 acres of its Timberland in the Swan Valley in western
Montana. Under this agreement, the Partnership has agreed to protect certain
grizzly bear habitats and to minimize the impact of the Partnership's forestry
activities on the bear. In consideration for this mitigation, the USFWS
authorized forestry practices in the Swan Valley that are consistent with the
agreement even though they may have an impact on grizzly bears.
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 would cause jeopardy, 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. Access across federal
lands may require federal approval. The granting of access to such areas has
been delayed by the administrative process and legal challenges and may be
subjected to restrictions under the ESA. The Partnership believes that access
to its lands in the Planning Area and the Swan Valley should be facilitated by
the HCP and the Grizzly Bear Conservation Agreement because concerns regarding
the impact on threatened and endangered species by federal and state
governmental agencies have already been addressed by these plans, although no
assurance can be given that further such delays will not be encountered.
At this time, the General Partner believes that federal and state laws
and regulations related to the protection of endangered species will not have a
material adverse effect on the financial position of the Company, its results
of operations or liquidity. The General Partner anticipates, however, 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 leading to increased costs, additional capital
expenditures and reduced operating flexibility. In addition, legal challenges
12
<PAGE> 14
by opposition groups could disrupt the continued operation of the HCP and the
Grizzly Bear Conservation Agreement, and thereby reduce the level of certainty
that the Partnership anticipates gaining from such plans.
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 U.S. 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.
In order to enforce this substitution prohibition, the legislation requires
persons who export private logs and who wish to purchase federal timber to
obtain an approved federal timber "sourcing area". To gain approval it must be
shown that the desired federal timber sourcing area is economically and
geographically separate from the area from which such person exports private
logs. In 1991, the Company applied for and obtained an approved sourcing area
for the Company's conversion facilities. Under the legislation, sourcing areas
are subject to review and renewal at least every five years. The Company's
sourcing area may, therefore, be reviewed in 1996.
In October 1995, the USFS issued final regulations implementing the
1990 legislation that could have made it more difficult to obtain sourcing
areas. Such regulations, however, have been temporarily withdrawn pursuant to
Congressional action to allow time for further public comment and for Congress
to consider modifications to the export law. Revisions to the law and
regulations have not yet been proposed. Although the uncertainty surrounding
the export law and regulations makes it difficult to predict the timing or the
outcome of a review, the Company believes that its sourcing area meets the
current statutory test and should be renewed.
In addition, federal legislation prohibits the export of unprocessed
logs harvested from certain state lands. Initially, Washington and Oregon
prohibited the export of all logs harvested from state lands. The legislation
provided, however, that the ban in Washington state on the export of state logs
would become a partial ban beginning January 1, 1996. Pending finalization of
the rules implementing such legislation, the full ban is being maintained.
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.
13
<PAGE> 15
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 startup in 1990 of a boiler at the Company's Pablo
sawmill did not meet new source performance standards ("NSPS"). Work on the
boiler project commenced in March of 1989, when NSPS did not apply to boilers
of this size. Prior to final startup of the boiler, however, new rules were
proposed that, if applicable, would have required meeting these standards. The
EPA has taken the position that the new rules applied, and is seeking
compliance with NSPS. In December 1995, the Company voluntarily installed
both a pollution control device and an opacity monitor on the boiler without
waiving any defenses to the EPA claim. The Company believes it is in full
compliance with the Order and that it has not violated NSPS. On March 12,
1996, the Department of Justice, on behalf of the EPA, filed suit in federal
district court in Montana seeking civil penalties and injunctive relief for
eight alleged violations of NSPS in accordance with the Clean Air Act which
contemplates statutory civil penalties. The Company believes it has
meritorious defenses to the claim. However, due to the inherent nature of
litigation, the Company cannot predict the outcome of the enforcement case. If
not resolved earlier, it is likely that the matter will go to trial in 1997.
The General Partner believes, based upon available information and current EPA
enforcement policies, that the ultimate outcome of this action will not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.
In addition to the above, the Company has normal recurring litigation,
none of which the General Partner believes will have a material adverse effect
on the financial position, the results of operations or liquidity of the
Company.
14
<PAGE> 16
RESULTS OF OPERATIONS
SECOND QUARTER 1996 COMPARED TO SECOND QUARTER 1995
The following table compares operating income by segment for the
quarters ended June 30, 1996 and 1995.
Operating Income by Segment
<TABLE>
<CAPTION>
Quarter Ended June 30,
----------------------------
1996 1995
-------- --------
(In Thousands)
<S> <C> <C>
Resources Segment . . . . . . . . . . . . . . . . $23,727 $26,941
Manufacturing Segment . . . . . . . . . . . . . . 4,670 5,320
Other Costs and Eliminations . . . . . . . . . . . 4,353 4,394
------- --------
Total . . . . . . . . . . . . . . . . . . . . . $32,750 $36,655
======= =======
</TABLE>
Resources Segment revenues decreased by $6.7 million, or 10.0%, to
$60.6 million for the quarter ended June 30, 1996 as compared to $67.3 million
for the quarter ended June 30, 1995. Such decrease was primarily due to lower
export and domestic sales prices, lower domestic sales volumes and a $1.2
million decrease in revenues from pulpwood and chip sales, offset in part by a
$4.6 million increase in land sales. Export prices decreased by 19%, as
compared to the second quarter of 1995, due to a higher percentage of
whitewoods (such as hemlock as compared to Douglas-fir which sells at premium
prices) in the sales mix, weaker Japanese demand as a result of increased
acceptance of substitute products in the Japanese market and a softer domestic
log market. The higher percentage of whitewoods in the second quarter of 1996
as compared to the second quarter of 1995 was a result of a weaker pulp market
in 1996. During most of 1995 lower quality export logs (whitewoods) were being
diverted to the domestic market due to the shortage of pulp fiber. Domestic log
sales prices decreased by 8% as compared to the second quarter of 1995 due to
the significant decline in chip prices as a result of the abundant supply of
chips and pulp logs, and to a lesser extent, weaker plywood prices. Domestic
log sales volume decreased 7%, as compared to the second quarter of 1995,
primarily due to an extended spring break-up in the second quarter of 1996, as
compared to an early spring break-up in 1995. Pulpwood and chip revenues
decreased as compared to the second quarter of 1995 due to weaker paper markets
and the over supply of available wood fiber. Second quarter 1996 higher and
better use land sales (856 acres) resulted in revenues of $4.5 million. There
were no such sales in the second quarter of 1995. Over the next five to
fifteen years, the Company expects to realize the potential value of
approximately 150,000 acres of its timberland located in recreational areas or
near expanding population centers that may optimally be used for conservation,
residential, recreational or other development purposes.
15
<PAGE> 17
Resources Segment costs and expenses decreased by $3.5 million, or
8.7%, to $36.8 million for the second quarter of 1996, as compared to $40.3
million for the second quarter of 1995. Such decrease was primarily due to the
decrease in domestic log sales volumes and reduced pulpwood and chip
operations.
Manufacturing Segment revenues increased by $2.5 million, or 2.8%, to
$93.2 million for the second quarter of 1996, as compared to $90.7 million for
the second quarter of 1995. Such increase was due to increased lumber sales
prices and increased sales volumes for MDF, offset in part by decreased plywood
and MDF sales prices and decreased residual chip revenues, as compared to the
second quarter of 1995. Lumber sales prices increased by 9% as compared to the
year earlier period due to strong housing activity combined with limited supply
due to production curtailments as a result of weak chip markets, a reduction in
the volume of Canadian lumber exported to the U.S. and low field inventory
levels. Distributors have maintained just-in-time inventory levels and, as a
result, were not able to keep up with the surge in demand when the weather
improved. MDF sales volume increased by 19% as a result of increased demand as
compared to the year earlier period. Demand for MDF deteriorated in the second
quarter of 1995 due to excess inventories being carried by end users resulting
in 12 days of production downtime for Plum Creek in June 1995. However, after
four quarters of weak demand, demand began to improve in the second quarter of
1996 due to increased housing starts, improved consumer confidence and reduced
inventory levels. Additionally, even with the industry wide capacity
expansion, demand for Plum Creek's higher quality super-refined MDF2 has been
improving. The decrease in plywood prices is primarily a result of declining
commodity prices due to increased competition from OSB due to capacity
expansion. The Company is also experiencing increased competition in the
industrial markets it serves, as numerous commodity plywood manufacturers that
are losing market share to OSB have been attempting to identify new customers.
MDF prices decreased due to significant 1996 capacity expansion. Residual chip
prices decreased by 27% over the second quarter of 1995 due to excess chip
inventories throughout the entire industry, as a result of weakness in the pulp
and paper sector.
Manufacturing Segment costs and expenses increased by $3.1 million, or
3.6%, to $88.5 million for the second quarter of 1996, as compared to $85.4
million for the second quarter of 1995. Such increase was primarily due to a
3%, 5%, and 19% increase in lumber, plywood, and MDF sales volumes,
respectively, higher plywood and MDF production costs as a result of
manufacturing higher quality products, and increased maintenance costs at the
plywood facilities for dryer repairs.
16
<PAGE> 18
SIX MONTHS 1996 COMPARED TO SIX MONTHS 1995
The following table compares operating income by segment for the six
months ended June 30, 1996 and 1995.
Operating Income by Segment
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1996 1995
------- -------
(In Thousands)
<S> <C> <C>
Resources Segment . . . . . . . . . . . . . . . . $54,881 $55,985
Manufacturing Segment . . . . . . . . . . . . . . 6,450 15,135
Other Costs and Eliminations . . . . . . . . . . . (1,183) 6,493
------- -------
Total . . . . . . . . . . . . . . . . . . . . . $60,148 $77,613
======= =======
</TABLE>
Resources Segment revenues decreased by $0.7 million, or 0.5%, to
$134.2 million for the six months ended June 30, 1996, as compared to $134.9
million for the six months ended June 30, 1995. Such decrease was primarily
due to lower export and domestic sales prices and a $2.2 million decrease in
revenues from pulpwood and chip sales, offset in part by increased domestic
sales volumes and a $1.4 million increase in land sales. Export prices
decreased by 13%, as compared to the first six months of 1995, due to a higher
percentage of whitewoods in the sales mix and weaker Japanese demand as a
result of increased acceptance of substitute products in the Japanese market.
Domestic log sales prices decreased by 7%, as compared to the first six months
of 1995, due to the significant decline in chip prices as a result of the
abundant supply of chips and pulp logs, and to a lesser extent, weaker plywood
prices. Pulpwood and chip revenues decreased 40%, as compared to the first six
months of 1995, due to the weaker paper markets and the over supply of
available wood fiber. Domestic log sales volume increased 10%, as compared to
the first six months of 1995, primarily due to low log inventory levels as of
December 31, 1995, as compared to December 31, 1994, as a result of unfavorable
logging conditions during the fourth quarter of 1995.
Resources Segment costs and expenses increased by $0.3 million, or
0.4%, to $79.3 million for the six months ended June 30, 1996, as compared to
$79.0 million for the six months ended June 30, 1995. Such increase was
primarily due to the increase in domestic log sales volumes, offset in part by
reduced pulpwood and chip operations.
Manufacturing Segment revenues decreased by $11.9 million, or 6.2%, to
$178.8 million for the six months ended June 30, 1996, as compared to $190.7
million for the six months ended June 30, 1995. Such decrease was due to
decreases of 6% and 24% in sales prices for plywood and MDF, respectively, and
decreased residual revenues, as compared to the first six months of 1995.
17
<PAGE> 19
The decrease in plywood prices is primarily a result of declining commodity
prices due to increased competition from OSB as a result of capacity expansion,
as well as from severe winter weather in the first quarter of 1996. MDF prices
decreased due to a weakening in demand which began in the second quarter of
1995 and continued through the first quarter of 1996, along with the impact of
significant 1996 capacity expansion. Residual chip prices decreased by 19%
over the first six months of 1995 due to excess chip inventories throughout the
entire industry, as a result of weakness in the pulp and paper sector.
Manufacturing Segment costs and expenses decreased by $3.3 million, or
1.9%, to $172.3 million for the six months ended June 30, 1996, as compared to
$175.6 million for the six months ended June 30, 1995. Such decrease was
primarily due to a 7% decrease in lumber log costs as a result of lower
domestic log prices, offset in part by increases of 8% and 11% in plywood and
MDF manufacturing costs as a result of manufacturing higher quality products,
increased maintenance costs at the plywood facilities for dryer repairs and
reduced production at the MDF facility. The decreased MDF production was
required to ensure that the Company maintained the superior quality of its new
Super-Refined MDF2 while it experimented with modifications to its new
high-energy refiner plates.
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $1.2 million in the first six months of 1996, as
compared to increasing operating income by $6.5 million in the first six months
of 1995. The variance is primarily due to the release of intercompany log
profit during the first quarter of 1995 as Manufacturing's log inventories were
being depleted, compared to the deferral of intercompany log profit during the
first quarter of 1996 as Manufacturing was building log inventories. Weather
is the primary factor influencing the Resource Segment's log production, which
directly impacts Manufacturing's intercompany log purchases. 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 $1.0 million higher in
the six months ended June 30, 1996, 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, offset
in part by lower net income. 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 $0.98 per Unit in the aggregate in the first two quarters of 1996, as
compared to $0.92 per Unit in the aggregate during the first two quarters of
1995.
18
<PAGE> 20
FINANCIAL CONDITION AND LIQUIDITY
During the first six months of 1996, net cash provided by operating
activities totaled $46.6 million compared to $84.9 million for the same period
in 1995. The decrease of $38.3 million was primarily due to unfavorable
working capital changes of $23.3 million and lower net income of $16.0 million,
in the first six months of 1996. The unfavorable working capital change
variance is primarily related to a $14.6 million fluctuation in inventory,
which principally related to logs, and a $4.1 million increase in accounts
receivable, which was due to increased activity during June of 1996 as compared
to June of 1995. During the first six months of 1996, log inventories
decreased by 37% from December 31, 1995, compared to a 64% decrease during the
first six months of 1995, primarily due to significantly higher log inventories
at December 31, 1994 than at December 31, 1995 as a result of unfavorable
logging conditions during the fourth quarter of 1995.
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 June 30, 1996. The other line of credit allows the
Partnership to borrow $35 million through October 28, 1996 (any outstanding
borrowings are payable at that time, or, at the option of the Partnership, in
quarterly installments commencing January 1997 through October 1998), of which
$15 million was outstanding at June 30, 1996. As of June 30, 1996, there were
letters of credit outstanding in the amount of $0.8 million. On July 1, 1996,
the Partnership repaid $61.0 million of borrowings on the Lines of Credit. The
Partnership expects that upon the closing of the Riverwood asset acquisition,
the Lines of Credit will be replaced by the new bank debt. See Note 5 of
Notes to Combined Financial Statements.
The Company's loan 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 June 30, 1996.
The Partnership will distribute $0.51 per Unit for the second quarter
of 1996. The distribution will equal $27.2 million (including $6.5 million to
the General Partner), and will be paid on August 23, 1996 to Unitholders of
record on August 16, 1996. 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 cash on
hand and cash generated from operations. The Partnership expects to make cash
distributions from cash on hand and cash generated from operations. It is
anticipated
19
<PAGE> 21
that future capital expenditures will be funded from cash on hand, cash
generated from operations, and borrowings under the line of credit.
CAPITAL EXPENDITURES
Capital expenditures for the first six months of 1996 totaled $10.3
million compared to $14.0 million for the same period in 1995. Total 1996
capital expenditures are expected to equal approximately $20 million, compared
to $30.7 million in 1995. The principal projects in the 1996 plan include
upgrading the Pablo mill to process small logs more efficiently, the purchase
and installation of various lumber and plywood optimization projects,
replacement and equipment upgrades in the manufacturing facilities and road
construction and timberland reforestation. Capital expenditures have decreased
as compared to the year earlier period due to the completion of major
improvements at the majority of the manufacturing facilities.
20
<PAGE> 22
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, 4 and 5 of Part II are not applicable and have been omitted.
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
<TABLE>
<CAPTION>
Exhibit
Designation Nature of Exhibit
----------- -----------------
<S> <C>
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 (Form 10-Q,
No. 1-10239, filed November 1995).
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.1 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent
Senior Notes due June 8, 2007, Plum Creek Timber Company, L.
P. (Form 10-Q, No. 1-10239, filed August 1989). Amendment
No. 1, consent and waiver dated January 1, 1991 to Senior
Note Agreement, dated May 31, 1989, 11 1/8 percent Senior
Notes due June 8, 2007, Plum Creek Timber Company, L.P.
(Form 8 Amendment No. 1, No. 1-10239, filed April 1991).
Amendment No. 2, consent and waiver dated September 1, 1993
to the Senior Note Agreement (Form 10-K/A, Amendment No. 1,
No. 1-10239, filed April 1994). Amendment No. 3, Senior
Note Agreement Amendment dated May 20, 1994 (Form 10-Q, No.
1-10239, filed November 1995). Senior Note Agreement
Amendment* dated May 31, 1996. See attached exhibit.
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
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C>
Creek Manufacturing, L.P. (Form 8 Amendment No. 1, No.
1-10239, 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, No. 1-10239, filed
April 1994). Amendment No. 3, Mortgage Note Agreement
Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1,
No. 1-10239, filed April 1995). Amendment to Mortgage Note
Agreement dated June 15, 1995 (Form 10-Q, No. 1-10239, filed
November 1995). Mortgage Note Agreement Amendment* dated
May 31, 1996. See attached exhibit.
4C.3 Senior Note Agreement, dated August 1, 1994, 8.73% Senior
Notes due August 1, 2009, Plum Creek Timber Company, L.P.
(Form 10-K/A, Amendment No. 1, No. 1-10239, filed April
1995). Senior Note Agreement Amendment dated as of October
15, 1995 (Form 10-K, No. 1-10239, filed March 1996). Senior
Note Agreement Amendment* dated May 31, 1996. See attached
exhibit.
27* Financial Data Schedule. See attached exhibit.
</TABLE>
(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
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and
Accounting Officer)
Date: August 13, 1996
23
<PAGE> 1
EXHIBIT 4C.1
SENIOR NOTE AGREEMENTS AMENDMENT
PLUM CREEK TIMBER COMPANY, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of May 31, 1996
To each of the Noteholders
listed on Schedule I
attached hereto
Dear Noteholder:
WHEREAS, each of the purchasers of the Senior Notes and Plum Creek
Timber Company, L.P., a Delaware limited partnership (the "Company"), entered
into Senior Note Agreements dated as of May 31, 1989 (the "Original Senior Note
Agreements") pursuant to which the Company issued $165,000,000 aggregate
principal amount of its 11 1/8% Notes due June 8, 2007 (the "Senior Notes");
WHEREAS, the Original Senior Note Agreements were amended and affected
by (i) the Senior Note Agreement Amendment, Consent and Waiver dated as of
January 1, 1991, (ii) a letter amendment dated April 22, 1993, (iii) a Senior
Note Agreement Amendment dated as of September 1, 1993 and (iv) a Senior Note
Agreement Amendment dated as of May 20, 1994 (collectively the "Amendments," the
Original Senior Note Agreements, as amended by the Amendments, the "Senior Note
Agreements");
WHEREAS, Senior Notes in the aggregate principal amount of $145,200,000
remain outstanding and are held by the holders thereof (individually a
"Noteholder", and collectively the "Noteholders") in the aggregate principal
amount for each Noteholder shown opposite the name of such Noteholder on
Schedule I;
WHEREAS, the Company and the Noteholders wish to enter into this
agreement (this "Agreement") in order to further amend certain provisions of the
Senior Note Agreements;
NOW, THEREFORE, the Company hereby agrees with each Noteholder as
follows:
11 1/8% Senior Note Agreements Amendment
<PAGE> 2
SECTION 1. DEFINITIONS.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings ascribed to them in the Senior Note Agreements.
SECTION 2. AMENDMENTS TO THE SENIOR NOTE AGREEMENTS.
2.1 AMENDMENTS TO PARAGRAPH 10B OF THE SENIOR NOTE AGREEMENTS.
The definition of the term "Pro Forma Free Cash Flow"
contained in paragraph 10B of the Senior Note Agreements is hereby amended in
its entirety to read as follows:
" 'Pro Forma Free Cash Flow' as of any date shall mean (i) net
income of the Company and its Restricted Subsidiaries on a combined
basis (excluding (a) gain on the sale of any Capital Asset, (b) noncash
items of income, and (c) any distributions or other income received
from, or equity of the Company or any Restricted Subsidiary in the
earnings of, any entity which is not a Restricted Subsidiary) for the
period of four consecutive fiscal quarters immediately prior to such
date (such period of four consecutive fiscal quarters being the
"Measurement Period"), determined in accordance with generally accepted
accounting principles plus depreciation, depletion, amortization and
other noncash charges, interest expense on Debt and provision for
income taxes, minus (ii) capital expenditures made by the Company and
its Restricted Subsidiaries during the Measurement Period, to maintain
their respective operations; provided, however, if (A) the Company or a
Restricted Subsidiary is acquiring a Restricted Subsidiary or assets
and (B) Pro Forma Free Cash Flow is being determined in connection
therewith, such Restricted Subsidiary shall be considered to have been
a Restricted Subsidiary during the entire Measurement Period and such
assets shall be considered to have been owned by the Company during the
entire Measurement Period if net income attributable to such Restricted
Subsidiary or such assets (as the case may be) for the entire
Measurement Period is readily determinable and confirmed pursuant to an
audit or a certification prepared in good faith by the Company's chief
financial officer; further provided, however, that portion of Pro Forma
Free Cash Flow allocable to such Restricted Subsidiary or assets shall
be reduced on a pro rata basis to the extent Timber has been harvested
by such Restricted Subsidiary or from such assets during the
Measurement Period at a rate greater than the rate at which the Company
has harvested Timber from its Timberlands during the Measurement
Period, as certified in good faith by the chief financial officer of
the Company; and finally provided, however, if Pro Forma Free Cash Flow
is being determined for any Measurement Period and a Restricted
Subsidiary or assets have been sold or otherwise disposed of at any
time during such Measurement Period by the Company or any Restricted
Subsidiary, such Restricted Subsidiary shall not be considered to have
been a Restricted Subsidiary during any part of such Measurement Period
and such assets shall
11 1/8% Senior Note Agreements Amendment
-2-
<PAGE> 3
not be considered to have been owned by the Company during any part of
such Measurement Period, and the net income that otherwise would have
been attributable to such Restricted Subsidiary or asset during such
Measurement Period shall be certified in good faith by the chief
financial officer of the Company.".
2.2 AMENDMENTS TO PARAGRAPH 11C OF THE SENIOR NOTE
AGREEMENTS.
Paragraph 11C of the Senior Note Agreements is hereby amended
in its entirety to read as follows:
"11C. Consent to Amendments. This Agreement (including,
without limitation, paragraph 5, paragraph 6 and clauses (iii) through
(xvi) of paragraph 7A) may be amended, and the Company may take any
action herein prohibited, or omit to perform any act herein required to
be performed by it, if the Company shall obtain the written consent to
such amendment, action or omission to act, of the Required Holder(s)
except that, without the written consent of the holder or holders of
all Notes at the time outstanding, no amendment to this Agreement shall
change the maturity of any Note, or change the principal of, or the
rate or time of payment of interest or any premium payable with respect
to, any Note, or affect the time, amount or allocation of prepayments
required pursuant to paragraph 4A or alter or amend the right of any
Significant Holder to declare all of the Notes held by such Significant
Holder to be due and payable in accordance with the provisions of
paragraph 7A, or reduce the proportion of the principal amount of the
Notes required with respect to any consent. Each holder of any Note at
the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have
been marked to indicate such consent, but any Notes issued thereafter
may bear a notation referring to any such consent. No course of dealing
between the Company and the holder of any Note nor any delay in
exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any holder of such Note. As used herein and in
the Notes, the term "this Agreement" and references thereto shall mean
this Agreement as it may from time to time be amended or
supplemented.".
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
3.1 NO DEFAULT.
No Default or Event of Default has occurred and is continuing.
11 1/8% Senior Note Agreements Amendment
-3-
<PAGE> 4
3.2 ORGANIZATION.
The Company is a limited partnership duly organized, validly
existing and in good standing under the Delaware Revised Uniform Limited
Partnership Act and has all requisite partnership power and authority to own and
operate its properties, to conduct its business as now conducted and as proposed
to be conducted and to enter into this Agreement.
3.3 QUALIFICATION.
The Company is duly qualified or registered for transaction of
business and in good standing as a foreign limited partnership in each
jurisdiction in which the failure so to qualify or be registered would have a
material adverse effect on the business, property or assets, condition or
operations of the Company, or on the ability of the Company to perform its
obligations under this Agreement, or, after giving effect to the transactions
contemplated hereby, the Senior Note Agreements or the Senior Notes.
3.4 CHANGES, ETC.
Except as contemplated by this Agreement, since June 30, 1995,
the date of the most recent combined financial statements of the Company, (a)
the Company has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions not in the ordinary course
of business, and (b) there has not been any material adverse change in the
business, properties or assets, condition (financial or otherwise) or operations
of the Company.
3.5 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
Agreement, or any action taken or to be taken pursuant to this Agreement, which
would be reasonably likely to result in any material adverse change in the
business, properties or assets, coalition or operations of the Company, or in
the inability of the Company to perform its obligations under this Agreement,
the Senior Note Agreements or the Senior Notes, following the effectuation of
the transactions described herein.
3.6 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
11 1/8% Senior Note Agreements Amendment
-4-
<PAGE> 5
governmental authority or any term of any applicable order, judgment or decree
of any court arbitrator or governmental authority, 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
Agreement. or, after giving effect to the transactions contemplated hereby, the
performance of the Senior Note Agreements or the Senior Notes, and the
execution, delivery and performance by the Company of this Agreement, or, after
giving effect to the transactions contemplated hereby, the Senior Note
Agreements or the Senior 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(l) of the Senior 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 Agreement, or, after giving effect to the
transactions contemplated hereby, the Senior Note Agreements or the Senior
Notes.
3.7 GOVERNMENTAL CONSENT.
No consent, approval or authorization of, or declaration or
filing with, any governmental authority is required for the valid execution,
delivery and performance by the Company of this Agreement, or, after giving
effect to the transactions contemplated hereby, the Senior Note Agreements or
the Senior Notes.
3.8 AUTHORIZATION; ENFORCEABILITY.
This Agreement has been duly authorized by all requisite
action and duly executed and delivered by authorized officers of the General
Partner of the Company, and the Senior Note Agreements and the Senior Notes, as
amended and affected by this 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).
3.9 DISCLOSURE.
Neither this Agreement nor any other document, certificate or
statement furnished in writing 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)
11 1/8% Senior Note Agreements Amendment
-5-
<PAGE> 6
materially adversely affect the business, property or assets, condition or
results of operations of the Company and which has not been set forth in this
Agreement, or in the other documents, certificates and statements furnished in
writing to you by or on behalf of the Company, prior to the date hereof in
connection with the transactions contemplated hereby.
SECTION 4. MISCELLANEOUS.
4.1 CONTINUITY AND INTEGRATION OF AGREEMENTS.
Upon the effectiveness of this Agreement, the Senior Note
Agreements and the Senior Notes, as amended and affected by this Agreement,
shall remain in full force and effect and are hereby ratified and confirmed by
the parties hereto, and the Senior Note Agreements and this Agreement shall be
deemed to be and are construed as a single agreement.
4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement, and the transfer of any
Senior Note by a holder thereof. Such representations and warranties may be
relied upon by any Transferee of a Senior Note from a holder thereof.
4.3 EFFECTIVENESS.
This Agreement shall become effective upon its execution and
delivery by the Company and (a) in the case of the amendments set forth in
paragraph 2.1, the Required Holders, and (b) in the case of the amendments set
forth in paragraph 2.2, the Noteholders holding 100% of the outstanding Senior
Notes as indicated on Schedule I hereto. Upon the effectiveness of this
Agreement all of the Senior Note Agreements shall be amended as set forth in
paragraph 2.1, paragraph 2.2 or both, depending upon the percentage of
Noteholders agreeing thereto by the execution of this Agreement, and thereafter,
all references to, and actions taken or omitted to be taken in connection with,
the Senior Note Agreements (including, without limitation, all references to the
Senior Note Agreements in the Senior Notes) shall mean and be a reference to the
Senior Note Agreements as amended by this Agreement.
4.4 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this 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.
11 1/8% Senior Note Agreements Amendment
-6-
<PAGE> 7
4.5 DESCRIPTIVE HEADINGS.
The descriptive headings of the several paragraphs of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
4.6 COUNTERPARTS.
This 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.
4.7 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK.
// IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the date first above written.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company, L.P.,
General Partner
By: /s/ Diane M. Irvine
-----------------------------------------
Name: Diane M. Irvine
Title: Vice President and Chief Financial
Officer
11 1/8% Senior Note Agreements Amendment
-7-
<PAGE> 8
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
---------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
---------------------------------
Title: Authorized Signatory
ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK
By: /s/ Patricia W. Wilson
---------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
---------------------------------
Title: Authorized Signatory
AMERICAN MUTUAL LIFE
INSURANCE COMPANY
(formerly Central Life Assurance Company)
By: /s/ Roger D. Fors
---------------------------------
Title: VP - Investment Mgt & Research
FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Richard D. Warming
---------------------------------
Title: Vice President
Chief Investment Officer
11 1/8% Senior Note Agreements Amendment
-8-
<PAGE> 9
FBL INSURANCE COMPANY
By: /s/ Richard D. Warming
-------------------------------------
Title: Vice President
Chief Investment Officer
FIRST COLONY LIFE INSURANCE COMPANY
By: /s/ George D. Vermilya, Jr.
-------------------------------------
Title: Associate Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Stephen A. MacLean
-------------------------------------
Title: Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By: /s/ Stephen A. MacLean
-------------------------------------
Title: Vice President - Investments
11 1/8% Senior Note Agreements Amendment
-9-
<PAGE> 10
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Richard C. Morrison
-------------------------------------
Title: Managing Director
MELLON BANK, N.A., solely in its capacity as
Trustee for the AT&T MASTER PENSION TRUST, (as
directed by John Hancock Mutual life Insurance
Company), and not in its individual capacity
By: /s/ Allan M. Seaman
-------------------------------------
Title: Associate Counsel
MELLON BANK, N.A., solely in its capacity as
Trustee for the NYNEX MASTER PENSION TRUST, (as
directed by John Hancock Mutual life Insurance
Company), and not in its individual capacity
By: /s/ Allan M. Seaman
-------------------------------------
Title: Associate Counsel
MODERN WOODMEN OF AMERICA
By: /s/ Nick S. Coin
-------------------------------------
Title: Supervisor, Securities Division
11 1/8% Senior Note Agreements Amendment
-10-
<PAGE> 11
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Ray G. Kennedy
----------------------------------------
Title: Vice President
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Angela Brock-Kyle
----------------------------------------
Title: Associate Director-Private Placements
WOODMEN ACCIDENT AND LIFE COMPANY
By: /s/ Michael F. Wilder
----------------------------------------
Title: Senior Vice President
and Treasurer
11 1/8% Senior Note Agreements Amendment
-11-
<PAGE> 12
SCHEDULE I
SCHEDULE OF NOTEHOLDERS
<TABLE>
<CAPTION>
Principal Amount of
Senior Notes
Noteholder Held as of 5/31/96
- ---------- -------------------
<S> <C>
Allstate Life Insurance Company $ 8,800,000
Allstate Life Insurance Company of New York 1,760,000
American Mutual Life Insurance Company 2,640,000
(formerly Central Life Assurance Company)
Farm Bureau Life Insurance Company 1,760,000
FBL Insurance Company 2,640,000
First Colony Life Insurance Company 4,400,000
John Hancock Mutual Life Insurance Company 27,720,000
John Hancock Variable Life Insurance Company 1,320,000
Massachusetts Mutual Life Insurance Company 8,880,000
Mellon Bank, N.A., as Trustee for AT&T Master Pension Trust 880,000
Mellon Bank, N.A., as Trustee for NYNEX Master Pension Trust 880,000
Modern Woodmen of America 2,200,000
The Prudential Insurance Company of America 69,520,000
Teachers Insurance and Annuity Association of America 11,000,000
Woodmen Accident and Life Company $ 880,000
------------
Aggregate Principal Amount of Senior Notes $145,200,000
//
</TABLE>
11 1/8% Senior Note Agreements Amendment
-12-
<PAGE> 1
EXHIBIT 4C.2
MORTGAGE NOTE AGREEMENTS AMENDMENT
PLUM CREEK MANUFACTURING, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of May 31, 1996
To each of the Noteholders
listed on Schedule I
attached hereto
Dear Noteholder:
WHEREAS, each of the purchasers of the Mortgage Notes, Plum Creek
Manufacturing, L.P., a Delaware limited partnership (the "Company"), as
successor in interest to Plum Creek Manufacturing, Inc., and Plum Creek Timber
Company, L.P., a Delaware limited partnership (the "Partnership") entered into
First Mortgage Note Agreements dated as of May 31, 1989 (the "Original Mortgage
Note Agreements") pursuant to which the Company issued $160,000,000 aggregate
principal amount of its 11 1/8% First Mortgage Notes due June 8, 2007 (the
"Mortgage Notes");
WHEREAS, the Original Mortgage Note Agreements were amended and
affected by (i) the Mortgage Note Agreement Amendment, Consent and Waiver dated
as of January 1, 1991, (ii) a letter amendment dated April 22, 1993, (iii) a
Mortgage Note Agreement Amendment dated as of September 1, 1993, (iv) a Mortgage
Note Agreement Amendment dated as of May 20, 1994 and (v) an Amendment to
Mortgage Note Agreement dated as of June 15, 1995 (collectively the
"Amendments," the Original Mortgage Note Agreements, as amended by the
Amendments, the "Mortgage Note Agreements");
WHEREAS, Mortgage Notes in the aggregate principal amount of
$138,700,000 remain outstanding and are held by the holders thereof
(individually a "Noteholder", and collectively the "Noteholders") in the
aggregate principal amount for each Noteholder shown opposite the name of such
Noteholder on Schedule I;
WHEREAS, the Company, the Partnership and the Noteholders wish to enter
into this agreement (this "Agreement") in order to further amend certain
provisions of the Mortgage Note Agreements;
11 1/8% Mortgage Note Agreements Amendment
<PAGE> 2
NOW, THEREFORE, the Company and the Partnership hereby agree with each
Noteholder as follows:
SECTION 1. DEFINITIONS.
All capitalized terms used in this Agreement and not otherwise
defined herein have the meanings ascribed to them in the Mortgage Note
Agreements.
SECTION 2. AMENDMENTS TO THE MORTGAGE NOTE AGREEMENTS.
2.1 AMENDMENTS TO PARAGRAPH 11B OF THE MORTGAGE NOTE AGREEMENTS.
The definition of the term "Company's Pro Forma Free Cash
Flow" contained in paragraph 11B of the Mortgage Note Agreements is hereby
amended in its entirety to read as follows:
" 'Company's Pro Forma Free Cash Flow' as of any date shall
mean (i) net income of the Company and its Restricted Subsidiaries
(excluding (a) gain on the sale of any Capital Asset of the Company or
any Restricted Subsidiary, (b) noncash items of income, and (c) any
distributions or other income received from, or equity of the Company
or any Restricted Subsidiary in the earnings of, any entity which is
not a Restricted Subsidiary) for the period of four consecutive fiscal
quarters immediately prior to such date (such period of four
consecutive fiscal quarters being the "Company Measurement Period")
determined in accordance with generally accepted accounting principles
before deducting depreciation, depletion, amortization and other
noncash charges, interest expense on Debt and provision for income
taxes, minus (ii) capital expenditures made by the Company and its
Restricted Subsidiaries during the Company Measurement Period to
maintain their respective operations; provided, however, if (A) the
Company or a Restricted Subsidiary is acquiring a Restricted Subsidiary
or assets and (B) Company's Pro Forma Free Cash Flow is being
determined in connection therewith, such Restricted Subsidiary shall be
considered to have been a Restricted Subsidiary during the entire
Company Measurement Period and such assets shall be considered to have
been owned by the Company during the entire Company Measurement Period
if net income attributable to such Restricted Subsidiary or such assets
(as the case may be) for the entire Company Measurement Period is
readily determinable and confirmed pursuant to an audit or a
certification prepared in good faith by the Company's chief financial
officer; further provided, however, that portion of Company's Pro Forma
Free Cash Flow allocable to such Restricted Subsidiary or assets shall
be reduced on a pro rata basis to the extent Timber has been harvested
by such Restricted Subsidiary or from such assets during the Company
Measurement Period at a rate greater than the rate at which the Company
has harvested Timber from its Timberlands during the Company
Measurement
11 1/8% Mortgage Note Agreements Amendment
-2-
<PAGE> 3
Period, as certified in good faith by the chief financial officer of
the Company; and finally provided, however, if Company's Pro Forma Free
Cash Flow is being determined for any Company Measurement Period and a
Restricted Subsidiary or assets have been sold or otherwise disposed of
at any time during such Company Measurement Period by the Company or
any Restricted Subsidiary, such Restricted Subsidiary shall not be
considered to have been a Restricted Subsidiary during any part of such
Measurement Period and such assets shall not be considered to have been
owned by the Company during any part of such Company Measurement
Period, and the net income that otherwise would have been attributable
to such Restricted Subsidiary or asset during such Company Measurement
Period shall be certified in good faith by the chief financial officer
of the Company.".
The definition of the Term "Partnership Pro Forma Free Cash
Flow" contained in paragraph 11B of the Mortgage Note Agreements is hereby
amended in its entirety to read as follows:
" 'Partnership Pro Forma Free Cash Flow' as of any date shall
mean (i) consolidated net income of the Partnership and the Partnership
Restricted Subsidiaries (excluding (a) gain on the sale of any Capital
Asset, (b) noncash items of income, and (c) any distributions or other
income received from, or equity of the Partnership or any Partnership
Restricted Subsidiary in the earnings of, any entity which is not a
Partnership Restricted Subsidiary) for the period of four consecutive
fiscal quarters immediately prior to such date (such period of four
consecutive fiscal quarters being the "Partnership Measurement Period")
determined in accordance with generally accepted accounting principles
plus depreciation, depletion, amortization and other noncash charges,
interest expense on Debt and provision for income taxes, minus (ii)
capital expenditures made by the Partnership and Partnership Restricted
Subsidiaries during the Partnership Measurement Period, to maintain
their respective operations; provided, however, if (A) the Partnership
or a Partnership Restricted Subsidiary is acquiring a Partnership
Restricted Subsidiary or assets and (B) Partnership Pro Forma Free Cash
Flow is being determined in connection therewith, such Partnership
Restricted Subsidiary shall be considered to have been a Partnership
Restricted Subsidiary during the entire Partnership Measurement Period
and such assets shall be considered to have been owned by the
Partnership during the entire Partnership Measurement Period if net
income attributable to such Partnership Restricted Subsidiary or such
assets (as the case may be) for the entire Partnership Measurement
Period is readily determinable and confirmed pursuant to an audit or a
certification prepared in good faith by the Partnership's chief
financial officer; further provided, however, that portion of
Partnership Pro Forma Free Cash Flow allocable to such Partnership
Restricted Subsidiary or assets shall be reduced on a pro rata basis to
the extent Timber has been harvested by such Partnership Restricted
Subsidiary or from such assets during the Partnership Measurement
Period at a rate greater than the rate at which the Partnership has
harvested Timber from its Timberlands during the Partnership
11 1/8% Mortgage Note Agreements Amendment
-3-
<PAGE> 4
Measurement Period, as certified in good faith by the chief financial
officer of the Partnership; and finally provided, however, if
Partnership Pro Forma Free Cash Flow is being determined for any
Partnership Measurement Period and a Partnership Restricted Subsidiary
or assets have been sold or otherwise disposed of at any time during
such Partnership Measurement Period by the Partnership or any
Partnership Restricted Subsidiary, such Partnership Restricted
Subsidiary shall not be considered to have been a Partnership
Restricted Subsidiary during any part of such Partnership Measurement
Period and such assets shall not be considered to have been owned by
the Partnership during any part of such Partnership Measurement Period,
and the net income that would otherwise have been attributable to such
Partnership Restricted Subsidiary or asset during such Partnership
Measurement Period shall be certified in good faith by the chief
financial officer of the Partnership.".
2.2 AMENDMENTS TO PARAGRAPH 12C OF THE MORTGAGE NOTE
AGREEMENTS.
Paragraph 12C of the Mortgage Note Agreements is hereby
amended in its entirety to read as follows:
"12C. Consent to Amendments. This Agreement (including,
without limitation, paragraph 5, paragraph 6 and clauses (iii) through
(xv) of paragraph 8A) may be amended, and the Company or the
Partnership may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, if the Company (or in
the case of paragraph 7, the Partnership) shall obtain the written
consent to such amendment, action or omission to act, of the Required
Holder(s) except that, without the written consent of the holder or
holders of all Notes at the time outstanding, no amendment to this
Agreement shall change the maturity of any Note, or change the
principal of, or the rate or time of payment of interest or any premium
payable with respect to, any Note, or affect the time, amount or
allocation of prepayments required pursuant to paragraph 4A or alter or
amend the right of any Significant Holder to declare all of the Notes
held by such Significant Holder to be due and payable in accordance
with the provisions of paragraph 8A, or reduce the proportion of the
principal amount of the Notes required with respect to any consent.
Each holder of any Note at the time or thereafter outstanding shall be
bound by any consent authorized by this paragraph 12C, whether or not
such Note shall have been marked to indicate such consent, but any
Notes issued thereafter may bear a notation referring to any such
consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note
shall operate as a waiver of any rights of any holder of such Note. As
used herein and in the Notes, the term "this Agreement" and references
11 1/8% Mortgage Note Agreements Amendment
-4-
<PAGE> 5
thereto shall mean this Agreement as it may from time to time be
amended or supplemented.".
SECTION 3. REPRESENTATIONS AND WARRANTIES.
Each of the Company and the Partnership represents and
warrants as follows:
3.1 NO DEFAULT.
No Default or Event of Default has occurred and is continuing.
3.2 ORGANIZATION.
The Company is a limited partnership, duly organized, validly
existing and in good standing under the Delaware Revised Uniform Limited
Partnership Act and has all requisite partnership power and authority to own and
operate its properties, to conduct its business as now conducted and as proposed
to be conducted and to enter into this Agreement. The Partnership is a limited
partnership duly organized, validly existing and in good standing under the
Delaware Revised Uniform Limited Partnership Act and has all requisite
partnership power and authority to own and operate its properties, to conduct
its business as now conducted and as proposed to be conducted and to enter into
this Agreement.
3.3 QUALIFICATION.
Each of the Company and the Partnership is duly qualified or
registered for transaction of business and in good standing as a foreign limited
partnership, in each jurisdiction in which the failure so to qualify or be
registered would have a material adverse effect on the business, property or
assets, condition or operations of the Company or the Partnership, or on the
ability of the Company or the Partnership to perform its obligations under this
Agreement, or, after giving effect to the transactions contemplated hereby, the
Mortgage Note Agreements or the Mortgage Notes.
3.4 CHANGES, ETC.
Except as contemplated by this Agreement, since June 30, 1995,
the date of the most recent consolidated financial statements of the
Partnership, (a) neither the Company nor the Partnership has incurred any
material liabilities or obligations, direct or contingent, or entered into any
material transactions not in the ordinary course of business, and (b) there has
not been any material adverse change in the business, properties or assets,
condition (financial or otherwise) or operations of the Company or the
Partnership.
11 1/8% Mortgage Note Agreements Amendment
-5-
<PAGE> 6
3.5 ACTIONS PENDING.
There is no action, suit, investigation or proceeding pending
or, to the knowledge of the Company or the Partnership, threatened against the
Company or the Partnership, or any properties or rights of the Company or the
Partnership, by or before any court, arbitrator or administrative or
governmental body which questions the validity of this Agreement, or any action
taken or to be taken pursuant to this Agreement, which would be reasonably
likely to result in any material adverse change in the business, properties or
assets, coalition or operations of the Company or the Partnership, or in the
inability of the Company or the Partnership to perform its obligations under
this Agreement, the Mortgage Note Agreements or the Mortgage Notes, following
the effectuation of the transactions described herein.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC.
The Company is not in violation of any provision of its
Partnership Agreement and the Partnership is not in violation of any provision
of the Partnership Agreement and neither the Company nor the Partnership is in
violation 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, 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 or the
Partnership to perform its obligations under this Agreement, or, after giving
effect to the transactions contemplated hereby, the performance of the Mortgage
Note Agreements or the Mortgage Notes, and the execution, delivery and
performance by the Company and the Partnership of this Agreement, or, after
giving effect to the transactions contemplated hereby, the Mortgage Note
Agreements or the Mortgage 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 or the Partnership to
create) any Lien upon any of the properties or assets of the Company or the
Partnership, pursuant to any such term except for Liens permitted by paragraph
6B(l) of the Mortgage 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 Partnership or the ability of the Company or the Partnership
to perform its obligations under this Agreement, or, after giving effect to the
transactions contemplated hereby, the Mortgage Note Agreements or the Mortgage
Notes.
3.7 GOVERNMENTAL CONSENT.
No consent, approval or authorization of, or declaration or
filing with, any governmental authority is required for the valid execution,
delivery and performance by the
11 1/8% Mortgage Note Agreements Amendment
-6-
<PAGE> 7
Company and the Partnership of this Agreement, or, after giving effect to the
transactions contemplated hereby, the Mortgage Note Agreements or the Mortgage
Notes.
3.8 AUTHORIZATION; ENFORCEABILITY.
This Agreement has been duly authorized by all requisite
action and duly executed and delivered by authorized officers of each of the
General Partner of the Company and the General Partner of the Partnership, and
the Mortgage Note Agreements and the Mortgage Notes, as amended and affected by
this Agreement, are valid obligations of the Company and the Partnership (in the
case of the Mortgage Note Agreements), legally binding upon and enforceable
against the Company and the Partnership (in case of the Mortgage Note
Agreements) 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).
3.9 DISCLOSURE.
Neither this Agreement nor any other document, certificate or
statement furnished in writing to you by or on behalf of the Company or the
Partnership 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 or the Partnership which materially adversely affects or in the future
may (so far as the Company or the Partnership can now reasonably foresee)
materially adversely affect the business, property or assets, condition or
results of operations of the Company or the Partnership and which has not been
set forth in this Agreement, or in the other documents, certificates and
statements furnished in writing to you by or on behalf of the Company or the
Partnership, prior to the date hereof in connection with the transactions
contemplated hereby.
3.10 AFFIRMATION OF GUARANTEE.
The Partnership hereby agrees that its Guarantee in respect of
the Mortgage Notes, as set forth in paragraph 7 of the Mortgage Note Agreements
shall continue in full force and effect after the effectiveness of this
Agreement.
SECTION 4. MISCELLANEOUS.
4.1 CONTINUITY AND INTEGRATION OF AGREEMENTS.
Upon the effectiveness of this Agreement, the Mortgage Note
Agreements and the Mortgage Notes, as amended and affected by this Agreement,
shall remain in full force and effect
11 1/8% Mortgage Note Agreements Amendment
-7-
<PAGE> 8
and are hereby ratified and confirmed by the parties hereto, and the Mortgage
Note Agreements and this Agreement shall be deemed to be and are construed as a
single agreement.
4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement, and the transfer of any
Mortgage Note by a holder thereof. Such representations and warranties may be
relied upon by any Transferee of a Mortgage Note from a holder thereof.
4.3 EFFECTIVENESS.
This Agreement shall become effective upon its execution and
delivery by the Company and the Partnership and (a) in the case of the
amendments set forth in paragraph 2.1, the Required Holders, and (b) in the case
of the amendments set forth in paragraph 2.2, the Noteholders holding 100% of
the outstanding Mortgage Notes as indicated on Schedule I hereto. Upon the
effectiveness of this Agreement all of the Mortgage Note Agreements shall be
amended as set forth in paragraph 2.1, paragraph 2.2 or both, depending upon the
percentage of Noteholders agreeing thereto by the execution of this Agreement,
and thereafter, all references to, and actions taken or omitted to be taken in
connection with, the Mortgage Note Agreements (including, without limitation,
all references to the Mortgage Note Agreements in the Mortgage Notes) shall mean
and be a reference to the Mortgage Note Agreements as amended by this Agreement.
4.4 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this 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.
4.5 DESCRIPTIVE HEADINGS.
The descriptive headings of the several paragraphs of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
4.6 COUNTERPARTS.
This 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.
11 1/8% Mortgage Note Agreements Amendment
-8-
<PAGE> 9
4.7 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,THE LAW OF THE STATE
OF NEW YORK.
// IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the date first above written.
PLUM CREEK MARKETING, INC.
By: /s/ Diane M. Irvine
--------------------------------------------
Title: Vice President and Chief Financial Officer
PLUM CREEK MANUFACTURING, L.P.
By Plum Creek Management Company, L.P.,
its General Partner
By: /s/ Diane M. Irvine
--------------------------------------------
Title: Vice President & Chief Financial Officer
PLUM CREEK TIMBER COMPANY, L.P.
By Plum Creek Management Company, L.P.,
Its General Partner
By: /s/ Diane M. Irvine
--------------------------------------------
Title: Vice President and Chief Financial Officer
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
--------------------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
--------------------------------------------
Title: Authorized Signatory
11 1/8% Mortgage Note Agreements Amendment
-9-
<PAGE> 10
ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK
By: /s/ Patricia W. Wilson
-----------------------------------------
Title: Authorized Signatory
By: /s/ Steven M. Laude
-----------------------------------------
Title: Authorized Signatory
AMERICAN MUTUAL LIFE
INSURANCE COMPANY
(formerly Central Life Assurance Company)
By: /s/ Roger D. Fors
-----------------------------------------
Title: VP - Investment Mgt & Research
CENTURY LIFE OF AMERICA
By: /s/ Joseph P. Young
-----------------------------------------
Title: Sr Investment Officer
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Stephen A. MacLean
-----------------------------------------
Title: Senior Investment Officer
11 1/8% Mortgage Note Agreements Amendment
-10-
<PAGE> 11
JOHN HANCOCK VARIABLE LIFE INSURANCE
COMPANY
By: /s/ Stephen A. MacLean
---------------------------------------------
Title: Vice President - Investments
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Richard C. Morrison
---------------------------------------------
Title: Managing Director
MELLON BANK, N.A., solely in its capacity as
Trustee for the AT&T MASTER PENSION TRUST, (as
directed by John Hancock Mutual life Insurance
Company), and not in its individual capacity
By: /s/ Allan M. Seaman
---------------------------------------------
Title: Associate Counsel
MELLON BANK, N.A., solely in its capacity as
Trustee for the NYNEX MASTER PENSION TRUST, (as
directed by John Hancock Mutual life Insurance
Company), and not in its individual capacity
By: /s/ Allan M. Seaman
---------------------------------------------
Title: Associate Counsel
11 1/8% Mortgage Note Agreements Amendment
-11-
<PAGE> 12
MODERN WOODMEN OF AMERICA
By: /s/ Nick S. Coin
--------------------------------------------
Title: Supervisor, Securities Division
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Ray G. Kennedy
--------------------------------------------
Title: Vice President
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Angela Brock-Kyle
--------------------------------------------
Title: Associate Director - Private Placements
11 1/8% Mortgage Note Agreements Amendment
-12-
<PAGE> 13
SCHEDULE I
SCHEDULE OF NOTEHOLDERS
<TABLE>
<CAPTION>
Principal Amount of
Mortgage Notes
Noteholder Held as of 5/31/96
- ---------- -------------------
<S> <C>
Allstate Life Insurance Company $ 8,668,750.00
Allstate Life Insurance Company of New York 1,733,750.00
American Mutual Life Insurance Company 2,600,625.00
(formerly Central Life Assurance Company)
Century Life of America 2,600,625.00
John Hancock Mutual Life Insurance Company 30,774,062.50
John Hancock Variable Life Insurance Company 1,300,312.50
Massachusetts Mutual Life Insurance Company 8,668,750.00
Mellon Bank, N.A., as Trustee for AT&T Master Pension Trust 866,875.00
Mellon Bank, N.A., as Trustee for NYNEX Master Pension Trust 2,600,625.00
Modern Woodmen of America 2,167,187.50
The Prudential Insurance Company of America 65,882,500.00
Teachers Insurance and Annuity Association of America 10,835,937.50
---------------
Aggregate Principal Amount of Mortgage Notes $138,700,000.00
//
</TABLE>
11 1/8% Mortgage Note Agreements Amendment
-13-
<PAGE> 1
EXHIBIT 4C.3
SENIOR NOTE AGREEMENTS AMENDMENT
PLUM CREEK TIMBER COMPANY, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of May 31, 1996
To each of the Noteholders
listed on Schedule I
attached hereto
Dear Noteholder:
WHEREAS, each of the purchasers of the Senior Notes and Plum Creek
Timber Company, L.P., a Delaware limited partnership (the "Company"), entered
into Senior Note Agreements dated as of August 1, 1994 (the "Original Senior
Note Agreements") pursuant to which the Company issued $150,000,000 aggregate
principal amount of its 8.73% Senior Notes due August 1, 2009 (the "Senior
Notes");
WHEREAS, the Original Senior Note Agreements were amended by a Senior
Note Agreement Amendment dated as of October 15, 1995 (the "First Amendment,"
the Original Senior Note Agreements, as amended by the First Amendment, the
"Senior Note Agreements");
WHEREAS, Senior Notes in the aggregate principal amount of $150,000,000
remain outstanding and are held by the holders thereof (individually a
"Noteholder", and collectively the "Noteholders") in the aggregate principal
amount for each Noteholder shown opposite the name of such Noteholder on
Schedule I;
WHEREAS, the Company and the Noteholders wish to enter into this
agreement (this "Agreement") in order to further amend certain provisions of the
Senior Note Agreements;
NOW, THEREFORE, the Company hereby agrees with each Noteholder as
follows:
SECTION 1. DEFINITIONS.
All capitalized terms used in this Agreement and not otherwise defined
herein have the meanings ascribed to them in the Senior Note Agreements.
8.73% Senior Note Agreements Amendment
<PAGE> 2
SECTION 2. AMENDMENTS TO THE SENIOR NOTE AGREEMENTS.
2.1 AMENDMENTS TO PARAGRAPH 10B OF THE SENIOR NOTE AGREEMENTS.
The definition of the term "Pro Forma Free Cash Flow" contained
in paragraph 10B of the Senior Note Agreements is hereby amended in its entirety
to read as follows:
" 'Pro Forma Free Cash Flow' as of any date shall mean (i) net
income of the Company and its Restricted Subsidiaries on a combined
basis (excluding (a) gain on the sale of any Capital Asset, (b) noncash
items of income, and (c) any distributions or other income received
from, or equity of the Company or any Restricted Subsidiary in the
earnings of, any entity which is not a Restricted Subsidiary) for the
period of four consecutive fiscal quarters immediately prior to such
date (such period of four consecutive fiscal quarters being the
"Measurement Period"), determined in accordance with generally accepted
accounting principles plus depreciation, depletion, amortization and
other noncash charges, interest expense on Debt and provision for income
taxes, minus (ii) capital expenditures made by the Company and its
Restricted Subsidiaries during the Measurement Period, to maintain their
respective operations; provided, however, if (A) the Company or a
Restricted Subsidiary is acquiring a Restricted Subsidiary or assets and
(B) Pro Forma Free Cash Flow is being determined in connection
therewith, such Restricted Subsidiary shall be considered to have been a
Restricted Subsidiary during the entire Measurement Period and such
assets shall be considered to have been owned by the Company during the
entire Measurement Period if net income attributable to such Restricted
Subsidiary or such assets (as the case may be) for the entire
Measurement Period is readily determinable and confirmed pursuant to an
audit or a certification prepared in good faith by the Company's chief
financial officer; further provided, however, that portion of Pro Forma
Free Cash Flow allocable to such Restricted Subsidiary or assets shall
be reduced on a pro rata basis to the extent Timber has been harvested
by such Restricted Subsidiary or from such assets during the Measurement
Period at a rate greater than the rate at which the Company has
harvested Timber from its Timberlands during the Measurement Period, as
certified in good faith by the chief financial officer of the Company;
and finally provided, however, if Pro Forma Free Cash Flow is being
determined for any Measurement Period and a Restricted Subsidiary or
assets have been sold or otherwise disposed of at any time during such
Measurement Period by the Company or any Restricted Subsidiary, such
Restricted Subsidiary shall not be considered to have been a Restricted
Subsidiary during any part of such Measurement Period and such assets
shall not be considered to have been owned by the Company during any
part of such Measurement Period, and the net income that otherwise would
have been attributable to such Restricted Subsidiary or asset during
such Measurement Period shall be certified in good faith by the chief
financial officer of the Company.".
8.73% Senior Note Agreements Amendment
-2-
<PAGE> 3
2.2 AMENDMENTS TO PARAGRAPH 11C OF THE SENIOR NOTE AGREEMENTS.
Paragraph 11C of the Senior Note Agreements is hereby amended
in its entirety to read as follows:
"11C. Consent to Amendments. This Agreement (including, without
limitation, paragraph 5, paragraph 6 and clauses (iii) through (xvii) of
paragraph 7A) may be amended, and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed
by it, if the Company shall obtain the written consent to such
amendment, action or omission to act, of the Required Holder(s) except
that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement shall change the
maturity of any Note, or change the principal of, or the rate or time of
payment of interest or any premium payable with respect to, any Note, or
alter or amend the right of any Significant Holder to declare all of the
Notes held by such Significant Holder to be due and payable in
accordance with the provisions of paragraph 7A, or reduce the proportion
of the principal amount of the Notes required with respect to any
consent. Each holder of any Note at the time or thereafter outstanding
shall be bound by any consent authorized by this paragraph 11C, whether
or not such Note shall have been marked to indicate such consent, but
any Notes issued thereafter may bear a notation referring to any such
consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note
shall operate as a waiver of any rights of any holder of such Note. As
used herein and in the Notes, the term "this Agreement" and references
thereto shall mean this Agreement as it may from time to time be amended
or supplemented.".
SECTION 3. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants as follows:
3.1 NO DEFAULT.
No Default or Event of Default has occurred and is continuing.
3.2 ORGANIZATION.
The Company is a limited partnership duly organized, validly
existing and in good standing under the Delaware Revised Uniform Limited
Partnership Act and has all requisite partnership power and authority to own and
operate its properties, to conduct its business as now conducted and as proposed
to be conducted and to enter into this Agreement.
8.73% Senior Note Agreements Amendment
-3-
<PAGE> 4
3.3 QUALIFICATION.
The Company is duly qualified or registered for transaction of
business and in good standing as a foreign limited partnership in each
jurisdiction in which the failure so to qualify or be registered would have a
material adverse effect on the business, property or assets, condition or
operations of the Company, or on the ability of the Company to perform its
obligations under this Agreement, or, after giving effect to the transactions
contemplated hereby, the Senior Note Agreements or the Senior Notes.
3.4 CHANGES, ETC.
Except as contemplated by this Agreement, since June 30, 1995,
the date of the most recent combined financial statements of the Company, (a)
the Company has not incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions not in the ordinary course
of business, and (b) there has not been any material adverse change in the
business, properties or assets, condition (financial or otherwise) or operations
of the Company.
3.5 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
Agreement, or any action taken or to be taken pursuant to this Agreement, which
would be reasonably likely to result in any material adverse change in the
business, properties or assets, coalition or operations of the Company, or in
the inability of the Company to perform its obligations under this Agreement,
the Senior Note Agreements or the Senior Notes, following the effectuation of
the transactions described herein.
3.6 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, 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 Agreement. or, after giving effect
to the transactions contemplated hereby, the performance of the Senior Note
Agreements or the Senior Notes, and the execution, delivery and performance by
the Company of this Agreement, or, after giving effect to the transactions
contemplated hereby, the Senior Note Agreements or the Senior Notes will not
result in any violation of or be in conflict with or constitute a default under
any such
8.73% Senior Note Agreements Amendment
-4-
<PAGE> 5
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(l) of the Senior
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 Agreement, or, after giving
effect to the transactions contemplated hereby, the Senior Note Agreements or
the Senior Notes.
3.7 GOVERNMENTAL CONSENT.
No consent, approval or authorization of, or declaration or
filing with, any governmental authority is required for the valid execution,
delivery and performance by the Company of this Agreement, or, after giving
effect to the transactions contemplated hereby, the Senior Note Agreements or
the Senior Notes.
3.8 AUTHORIZATION; ENFORCEABILITY.
This Agreement has been duly authorized by all requisite
action and duly executed and delivered by authorized officers of the General
Partner of the Company, and the Senior Note Agreements and the Senior Notes, as
amended and affected by this 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).
3.9 DISCLOSURE.
Neither this Agreement nor any other document, certificate or
statement furnished in writing 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 business, property or
assets, condition or results of operations of the Company and which has not been
set forth in this Agreement, or in the other documents, certificates and
statements furnished in writing to you by or on behalf of the Company, prior to
the date hereof in connection with the transactions contemplated hereby.
8.73% Senior Note Agreements Amendment
-5-
<PAGE> 6
SECTION 4. MISCELLANEOUS.
4.1 CONTINUITY AND INTEGRATION OF AGREEMENTS.
Upon the effectiveness of this Agreement, the Senior Note
Agreements and the Senior Notes, as amended and affected by this Agreement,
shall remain in full force and effect and are hereby ratified and confirmed by
the parties hereto, and the Senior Note Agreements and this Agreement shall be
deemed to be and are construed as a single agreement.
4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement, and the transfer of any
Senior Note by a holder thereof. Such representations and warranties may be
relied upon by any Transferee of a Senior Note from a holder thereof.
4.3 EFFECTIVENESS.
This Agreement shall become effective upon its execution and
delivery by the Company and (a) in the case of the amendments set forth in
paragraph 2.1, the Required Holders, and (b) in the case of the amendments set
forth in paragraph 2.2, the Noteholders holding 100% of the outstanding Senior
Notes as indicated on Schedule I hereto. Upon the effectiveness of this
Agreement all of the Senior Note Agreements shall be amended as set forth in
paragraph 2.1, paragraph 2.2 or both, depending upon the percentage of
Noteholders agreeing thereto by the execution of this Agreement, and thereafter,
all references to, and actions taken or omitted to be taken in connection with,
the Senior Note Agreements (including, without limitation, all references to the
Senior Note Agreements in the Senior Notes) shall mean and be a reference to the
Senior Note Agreements as amended by this Agreement.
4.4 SUCCESSORS AND ASSIGNS.
All covenants and agreements in this 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.
4.5 DESCRIPTIVE HEADINGS.
The descriptive headings of the several paragraphs of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
4.6 COUNTERPARTS.
8.73% Senior Note Agreements Amendment
-6-
<PAGE> 7
This 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.
4.7 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF NEW YORK.
// IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective as of the date first above written.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company, L.P.,
General Partner
By: /s/ Diane M. Irvine
-------------------------------------------
Name: Diane M. Irvine
Title: Vice President and Chief Financial
Officer
AMERICA MUTUAL LIFE INSURANCE
COMPANY (formerly Central
Life Assurance Company)
By: /s/ Roger D. Fors
-------------------------------------------
Name: Roger D. Fors
Title: Vice President
8.73% Senior Note Agreements Amendment
-7-
<PAGE> 8
FARM BUREAU LIFE INSURANCE COMPANY
By: /s/ Richard D. Warming
-------------------------------------------
Name: Richard D. Warming
Title: VP - Chief Investment Officer
FIRST COLONY LIFE INSURANCE COMPANY
By: /s/ George D. Vermilya, Jr.
-------------------------------------------
Name: George D. Vermilya, Jr.
Title: Associate Vice President
GUARANTEE LIFE INSURANCE COMPANY
By: /s/ Robert M. Jergovic
-------------------------------------------
Name: Robert M. Jergovic, CFA
Title: Vice President - Private Placements
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Richard C. Morrison
-------------------------------------------
Name: Richard C. Morrison
Title: Managing Director
8.73% Senior Note Agreements Amendment
-8-
<PAGE> 9
MUTUAL OF OMAHA INSURANCE COMPANY
By: /s/ Kent Knudsen
-------------------------------------------
Name: Kent Knudsen
Title: First Vice President
OHIO CASUALTY INSURANCE COMPANY
By: /s/ Richard B. Kelly
-------------------------------------------
Name: Richard B. Kelly
Title: Senior Investment Officer
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Shabnam B. Miglani
-------------------------------------------
Name: Shabnam B. Miglani
Title: Counsel
By: /s/ Jane A. B. Eppink
-------------------------------------------
Name: Jane A. B. Eppink
Title: Counsel
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Angela Brock-Kyle
-------------------------------------------
Name: Angela Brock-Kyle
Title: Associate Director-Private
Placements
8.73% Senior Note Agreements Amendment
-9-
<PAGE> 10
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
By: /s/ Susan A. Silbert
-------------------------------------------
Name: Susan A. Silbert
Title: Investment Officer
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: /s/ Kent Knudsen
-------------------------------------------
Name: Kent Knudsen
Title: First Vice President
8.73% Senior Note Agreements Amendment
-10-
<PAGE> 11
SCHEDULE I
SCHEDULE OF NOTEHOLDERS
<TABLE>
<CAPTION>
Principal Amount
Noteholder of Senior Notes
- ---------- Held as of 5/31/96
------------------
<S> <C>
American Mutual Life Insurance Company (formerly $ 6,000,000
Central Life Assurance Company)
Farm Bureau Life Insurance Company $ 6,000,000
First Colony Life Insurance Company $ 10,000,000
Guarantee Life Insurance Company $ 4,000,000
Massachusetts Mutual Life Insurance Company $ 10,000,000
Mutual of Omaha Insurance Company $ 4,000,000
Ohio Casualty Insurance Company $ 3,000,000
Principal Mutual Life Insurance Company $ 25,000,000
Teachers Insurance and Annuity Association of America $ 51,000,000
TransAmerica Life and Annuity Insurance Company $ 10,000,000
TransAmerica Occidental Life Insurance Company $ 10,000,000
United of Omaha Life Insurance Company $ 11,000,000
------------
Aggregate Principal Amount of Senior Notes $150,000,000
</TABLE>
8.73% Senior Note Agreements Amendment
-11-
<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 SIX MONTHS ENDED JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 61,849
<SECURITIES> 0
<RECEIVABLES> 39,806
<ALLOWANCES> 1,364
<INVENTORY> 44,946
<CURRENT-ASSETS> 154,692
<PP&E> 739,355
<DEPRECIATION> 121,910
<TOTAL-ASSETS> 789,313
<CURRENT-LIABILITIES> 59,277
<BONDS> 499,900
0
0
<COMMON> 0
<OTHER-SE> 218,906
<TOTAL-LIABILITY-AND-EQUITY> 789,313
<SALES> 266,438
<TOTAL-REVENUES> 266,438
<CGS> 190,903
<TOTAL-COSTS> 206,290
<OTHER-EXPENSES> 83
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,061
<INCOME-PRETAX> 37,335
<INCOME-TAX> 443
<INCOME-CONTINUING> 36,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,892
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0
</TABLE>
