UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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
----- -----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended September 30,
---------------------------
1997 1996
---------- ----------
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues ................................. $ 198,663 $ 173,039
---------- ----------
Costs and Expenses:
Cost of Goods Sold...................... 135,024 115,155
Selling, General and Administrative..... 15,973 9,435
---------- ----------
Total Costs and Expenses.............. 150,997 124,590
---------- ----------
Operating Income.......................... 47,666 48,449
Interest Expense.......................... (14,991) (11,289)
Interest Income........................... 328 212
Other Expense - Net....................... (238) (145)
---------- ----------
Income before Income Taxes................ 32,765 37,227
Provision for Income Taxes................ (36) 451
---------- ----------
Net Income................................ $ 32,801 $ 36,776
General Partner Interest.................. 8,329 6,578
---------- ----------
Net Income Allocable to Unitholders....... $ 24,472 $ 30,198
========== ==========
Net Income per Unit....................... $ 0.52 $ 0.75
========== ==========
</TABLE>
See accompanying Notes to Combined Financial Statements
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
(In Thousands, Except Per Unit)
<S> <C> <C>
Revenues................................... $ 541,873 $ 439,477
------------ -----------
Costs and Expenses:
Cost of Goods Sold.................... 370,734 306,058
Selling, General and Administrative... 37,568 24,822
------------ -----------
Total Costs and Expenses............ 408,302 330,880
------------ -----------
Operating Income........................... 133,571 108,597
Interest Expense........................... (45,511) (34,350)
Interest Income............................ 787 543
Other Expense - Net........................ (930) (228)
------------ -----------
Income before Income Taxes................. 87,917 74,562
Provision for Income Taxes................. 534 894
------------ -----------
Net Income................................. $ 87,383 $ 73,668
General Partner Interest................... 23,758 18,115
------------ -----------
Net Income Allocable to Unitholders........ $ 63,625 $ 55,553
============ ===========
Net Income per Unit........................ $ 1.37 $ 1.37
============ ===========
</TABLE>
See accompanying Notes to Combined Financial Statements
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents............... $ 150,340 $ 123,892
Accounts Receivable..................... 34,778 23,697
Inventories............................. 52,423 53,884
Timber Contract Deposits................ 5,695 5,987
Other Current Assets.................... 4,769 15,025
---------- ----------
248,005 222,485
Timber and Timberlands - Net............. 893,237 922,652
Property, Plant and Equipment - Net..... 163,796 172,688
Other Assets ............................. 19,394 18,609
--------- ---------
Total Assets............................ $ 1,324,432 $ 1,336,434
========= =========
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt....... $ 18,400 $ 17,400
Accounts Payable........................ 19,513 13,443
Interest Payable........................ 17,081 9,530
Wages Payable........................... 14,715 13,187
Taxes Payable........................... 7,553 5,275
Workers' Compensation Liabilities....... 1,450 1,450
Other Current Liabilities............... 8,851 9,212
--------- ---------
87,563 69,497
Long-Term Debt............................ 584,000 602,400
Lines of Credit........................... 161,000 161,000
Workers' Compensation Liabilities......... 8,571 8,533
Other Liabilities......................... 3,287 3,356
--------- ---------
Total Liabilities....................... 844,421 844,786
--------- ---------
Commitments and Contingencies
PARTNERS' CAPITAL
Limited Partners' Units................... 479,149 490,105
General Partner........................... 862 1,543
--------- ---------
Total Partners' Capital................. 480,011 491,648
--------- ---------
Total Liabilities and Partners' Capital. $ 1,324,432 $ 1,336,434
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1997 1996
--------- ---------
(In Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income...................................... $ 87,383 $ 73,668
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization...... 51,688 41,716
Gain (Loss) on Asset Dispositions - Net....... (200) 70
Working Capital Changes:
Accounts Receivable......................... (11,081) (7,174)
Inventories................................. 1,461 (3,071)
Timber Contract Deposits and
Other Current Assets........................ 10,548 (1,917)
Accounts Payable............................ 6,070 75
Other Accrued Liabilities................... 10,996 5,249
Other......................................... (167) (2,395)
--------- ---------
Net Cash Provided By Operating Activities....... 156,698 106,221
--------- ---------
Cash Flows From Investing Activities:
Additions to Properties....................... (14,205) (14,169)
Proceeds from Asset Dispositions.............. 375 133
--------- ---------
Net Cash Used In Investing Activities........... (13,830) (14,036)
--------- ---------
Cash Flows From Financing Activities:
Cash Distributions............................ (99,020) (79,070)
Retirement of Long-Term Debt.................. (17,400) (14,100)
Borrowings Under the Lines of Credit.......... 637,500 413,500
Repayments Under the Lines of Credit.......... (637,500) (413,500)
--------- ---------
Net Cash Used In Financing Activities........... (116,420) (93,170)
--------- ---------
Increase (Decrease) In Cash and Cash Equivalents 26,448 (985)
Cash and Cash Equivalents:
Beginning of Period........................... 123,892 87,604
--------- ---------
End of Period................................. $ 150,340 $ 86,619
========= =========
</TABLE>
See accompanying Notes to Combined Financial Statements
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 1996 annual
report on Form 10-K include a summary of significant accounting policies
of the Company and should be read in conjunction with this Form 10-Q.
In the opinion of management, all material adjustments necessary to
present fairly the results of operations for such periods have been
included. All such adjustments are of a normal and recurring nature.
The results of operations for any interim period are not necessarily
indicative of the results of operations for the entire year.
The taxable income, deductions, and credits of the Partnership and
Manufacturing are allocated to the Unitholders based on the number of
depositary units representing limited partner interests ("Units") held
and the holding period. Distributions of cash to a Unitholder are
considered a non-taxable return of capital to the extent of the
Unitholder's basis in the Units (as such basis is increased by the
allocable share of the Partnership's and Manufacturing's taxable
income). 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 1997 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 for a tax year, it may be required to pay federal income taxes.
Marketing, as a separate taxable corporation, provides for income taxes
on a separate company basis. Marketing provides for deferred taxes in
order to reflect the tax consequences in future years 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 46,323,300 for the three and nine month
periods ended September 30, 1997 and was 40,608,300 for the three and
nine month periods ended September 30, 1996.
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Raw materials (logs) $ 19,340 $ 23,171
Work-in-process 6,876 7,227
Export logs 1,662 1,048
Finished goods 16,721 15,034
--------- ---------
44,599 46,480
Supplies 7,824 7,404
--------- ---------
Total $ 52,423 $ 53,884
========= =========
</TABLE>
Excluding supplies, which are valued at average cost, the cost of
the LIFO inventories valued at the lower of average cost or market
(which approximates current cost) at September 30, 1997 and December 31,
1996 was $45.5 million and $46.4 million, respectively.
3. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT
Timber and timberlands consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Timber and logging roads - net $ 795,106 $ 824,160
Timberlands 98,131 98,492
---------- ----------
Timber and Timberlands - net $ 893,237 $ 922,652
========== ===========
</TABLE>
Property, plant and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION> September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Land, buildings and improvements $ 60,633 $ 60,173
Machinery and equipment 235,405 229,513
--------- ---------
296,038 289,686
Accumulated depreciation (132,242) (116,998)
--------- ---------
Property, Plant and Equipment - net $ 163,796 $ 172,688
========= =========
</TABLE>
4. BORROWINGS
As of September 30, 1997, the Company had $161.0 million of
borrowings under its revolving line of credit. The revolving line of
credit allows the Partnership to borrow $225 million, including up to
$20 million of standby letters of credit issued on behalf of the
Partnership or Manufacturing, through December 13, 2001. As of
September 30, 1997, $64 million remained available for borrowing under
the line of credit. As of October 3, 1997, $146 million of borrowings
on the line of credit were repaid.
5. SUBSEQUENT EVENTS
On October 14, 1997, the Board of Directors of the General Partner
authorized the Partnership to make a distribution of $0.55 per Unit for
the third quarter of 1997. Total distributions will equal approximately
$34.0 million (including $8.5 million to the General Partner) and will
be paid on November 26, 1997 to Unitholders of record on November 14,
1997.
On November 4, 1997, the Company announced plans to reconfigure its
manufacturing complex at Joyce, Louisiana to add value in targeted high
margin, higher growth lumber product areas. With an investment of
approximately $22 million, the Company plans to build a state-of-the-art,
high-volume sawmill that will allow the Company to capture greater
value from its timber resource through improved productivity and
efficiency. As part of the plan, the existing plywood plant and
sawmill, which currently employ 430 people, will be closed in stages,
commencing in the third quarter of 1998. The new sawmill will employ
approximately 230 people and is expected to be fully operational by
October 1998. The Company expects to record an expense of approximately
$2 million during the fourth quarter of 1997 for severance costs related
to the closure of the plywood plant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
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.
CURRENT MARKET CONDITIONS
Prices for domestic logs in the Cascades Region were slightly
higher than the third quarter of 1996, but declined compared to second
quarter 1997 prices. Prices were generally under downward pressure
throughout the third quarter due to declining lumber prices, the
seasonal increase in supply as a result of favorable harvesting
conditions, and the diversion of export quality logs to the domestic
market due to weak export demand. Domestic log prices in the Rocky
Mountain Region decreased modestly compared to the third quarter of 1996
and the second quarter of 1997 primarily as a result of weaker lumber
markets. Pulp log and residual chip prices remain relatively weak in
both the Cascades and Rocky Mountain Regions; however, demand has begun
to improve as chip inventories continue to decline and pulp and paper
markets improve. Third quarter domestic and pulp log prices in the
Southern Region declined compared to second quarter pricing due to the
seasonal increase in log supply. However, pulp log prices remained
strong due to low chip inventories and improving pulp and paper markets.
Export log prices for the third quarter of 1997 decreased compared
to the prior year third quarter and the second quarter of 1997 as a
result of weak Japanese demand and ample supply from global sources.
Demand has fallen due to a weaker Japanese economy, declining consumer
confidence, and accelerated building earlier in the year due to the
April 1, 1997 2% increase in the Japanese consumption tax. There
remains a steady supply of lower cost substitutes from global sources
including Russian logs and Scandinavian and Canadian lumber.
Third quarter 1997 industry composite indices for lumber were 3%
and 7% lower than the third quarter of 1996 and the second quarter of
1997, respectively, primarily due to an excess supply of lumber. North
American lumber production in all major producing regions has increased
and 1997 production is expected to exceed the prior year's production by
4%. In addition to the increased production, the domestic supply of
lumber has also risen as a result of the weak export markets. Overall
demand for lumber during the third quarter of 1997 was strong due to a
robust U.S. economy but weakened near the end of the quarter due to the
seasonal decline in building activity. Third quarter 1997 lumber prices
in the retail board markets improved compared to the prior year third
quarter due to a decline in the supply of preferred western species.
However, retail board prices began to moderate late in the quarter as
mills began targeting production toward the retail board sector due to
falling commodity prices.
Third quarter 1997 industry composite indices for commodity plywood
prices were comparable with the third quarter of 1996 and the second
quarter of 1997. Despite continued capacity expansion of low-cost
oriented strand board (OSB), plywood prices remained firm during the
third quarter due to strong demand as a result of solid building
activity, low field inventories due to just-in-time buying practices,
and reduced supply due to a greater focus by manufacturers on specialty
items. Inroads by OSB into traditional plywood markets appear to have
slowed, and plywood continues to be the panel of choice for many
applications. However, commodity plywood prices are expected to remain
under downward pressure due to continued OSB capacity expansion. OSB
production was 16% greater in the first six months of 1997 than the
prior year's first six months. Third quarter 1997 MDF prices decreased
8% compared to the prior year third quarter and were comparable to
second quarter 1997 prices. The decline from the prior year was
primarily due to continued industry capacity expansion and aggressive
pricing by start-up mills attempting to gain market share.
SOUTHERN REGION RECONFIGURATION
On November 4, 1997, the Company announced plans to reconfigure its
manufacturing complex at Joyce, Louisiana to add value in targeted high
margin, higher growth lumber product areas. With an investment of
approximately $22 million, the Company plans to build a state-of-the-art,
high-volume sawmill that will allow the Company to capture greater
value from its timber resource through improved productivity and
efficiency. As part of the plan, the existing plywood plant and
sawmill, which currently employ 430 people, will be closed in stages,
commencing in the third quarter of 1998. The new sawmill will employ
approximately 230 people and is expected to be fully operational by
October 1998. The Company expects to record an expense of approximately
$2 million during the fourth quarter of 1997 for severance costs related
to the closure of the plywood plant. The closure of the plywood plant
is not expected to be material to the Company's results of operations.
All costs related to the reconfiguration are expected to be funded from
cash on hand, cash generated from operations, and borrowings under the
Line of Credit.
RESULTS OF OPERATIONS
THIRD QUARTER 1997 COMPARED TO THIRD QUARTER 1996
The following table compares operating income by segment for the
quarters ended September 30, 1997 and 1996.
Operating Income by Segment
<TABLE>
<CAPTION>
Quarter Ended September 30,
--------------------------
(In Thousands)
1997 1996
--------- --------
<S> <C> <C>
Resources Segment $ 50,443 $ 51,349
Manufacturing Segment 12,324 11,247
Other Costs and Eliminations (15,101) (14,147)
--------- --------
Total $ 47,666 $ 48,449
========= ========
</TABLE>
Resources Segment revenues increased by $8.2 million, or 7%, to
$120.9 million for the quarter ended September 30, 1997, compared to
$112.7 million for the quarter ended September 30, 1996. This increase
was primarily due to revenues of $32.8 million from the Southern
Timberlands, purchased in the Southern Region Acquisition in the fourth
quarter of 1996, and a $2.6 million increase in land sales revenue,
offset in part by lower Northwest domestic and export log sales volumes
and decreased in-woods chipping activity in the Rocky Mountain Region.
Northwest domestic log sales volume decreased by 23% compared to the
third quarter of 1996, primarily due to the October 1996 sale of 107,000
acres of timberlands in the Rocky Mountain Region and a planned
reduction in harvest volumes in the Cascades Region. Export log sales
volume decreased by 21% compared to the third quarter of 1996, primarily
due to the diversion of lower quality export logs to the domestic market
in response to weaker Japanese demand. Revenues from in-woods chipping
activities in the Rockies decreased by $2.8 million compared to the
third quarter of 1996 as a result of planned reductions in volume due to
weak market conditions.
Resources Segment operating income was 42% and 46% as a percentage
of revenues for the quarters ended September 30, 1997 and 1996,
respectively. The decrease is primarily due to a 9% increase in log and
haul expenses in the Northwest as a result of longer hauling distances
and more costly logging methods required in the areas harvested and a 2%
decrease in Northwest domestic log sales prices. Resources Segment
costs and expenses increased by $9.2 million, or 15%, to $70.5 million
for the quarter ended September 30, 1997, compared to $61.3 million for
the quarter ended September 30, 1996. This increase was primarily due
to $16.7 million of costs related to the Southern Region and increased
log and haul expenses in the Northwest, offset in part by lower
Northwest domestic and export sales volume.
Manufacturing Segment revenues increased by $32.9 million, or 34%,
to $131.0 million for the quarter ended September 30, 1997, compared to
$98.1 million for the quarter ended September 30, 1996. This increase
was primarily due to revenues of $40.9 million from the Southern
Conversion Facilities and higher Northwest plywood and MDF sales
volumes, offset in part by decreased lumber and wood chip sales volume
and lower MDF sales prices. Plywood sales volumes in the Northwest
increased by 8% compared to the prior year third quarter primarily as a
result of increased production due to capital improvements and
additional production shifts. MDF sales volume increased by 14%
compared to the prior year third quarter, primarily due to greater
efficiencies from high-energy refiners that were installed in the third
quarter of 1995. Northwest lumber sales volume decreased by 18%
compared to the prior year third quarter, primarily due to the October
1996 sale of the Arden sawmill in Colville, Washington. Wood chip sales
volume decreased compared to the prior year third quarter due to the
sale of the Arden sawmill. MDF sales prices decreased by 8% primarily
as a result of continued industry capacity expansion and aggressive
pricing by start-up mills attempting to gain market share.
Manufacturing Segment operating income was 9% and 11% as a
percentage of revenues for the quarters ended September 30, 1997 and
1996, respectively. Manufacturing Segment costs and expenses increased
by $31.9 million, or 37%, to $118.7 million for the quarter ended
September 30, 1997, compared to $86.8 million for the quarter ended
September 30, 1996. This increase was primarily due to $37.6 million of
costs related to the Southern Region and increased Northwest plywood and
MDF sales volumes, offset in part by lower Northwest lumber sales
volume.
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $15.1 million in the third quarter of
1997, compared to $14.1 million in the third quarter of 1996. The
variance of $1.0 million is primarily due to an increase in corporate
overhead. The increase in corporate overhead is primarily due to
expense resulting from the achievement of a Unit Value Target ("UVT")
under the Company's Long-Term Incentive Plan and Key Employee Long-Term
Incentive Plan during the third quarter of 1997, offset in part by the
accrual of incentive-based compensation in the third quarter of 1996.
The achievement of a UVT under the Company's Long-Term Incentive
Plan and Key Employee Long-Term Incentive Plan resulted in $5.4 million
of expense in the third quarter of 1997, the majority of which was
included in selling, general and administrative expenses. Interest
expense increased by $3.7 million, or 33%, to $15.0 million, for the
quarter ended September 30, 1997, compared to $11.3 million for the
quarter ended September 30, 1996, primarily due to the issuance of $200
million of senior notes in the fourth quarter of 1996 related to the
Southern Region Acquisition.
The income allocated to the General Partner increased by $1.7
million to $8.3 million for the quarter ended September 30, 1997,
compared to $6.6 million for the quarter ended September 30, 1996. This
increase was due to higher quarterly distributions to Unitholders and
the issuance of 5.7 million additional Limited Partner Units in the
fourth quarter of 1996. The General Partner's incentive distribution is
based on the number of outstanding Units times a percentage of the per
Unit distribution paid to Limited Partners, which was $0.55 per Unit
during the third quarter of 1997, compared to $0.51 per Unit during the
third quarter of 1996. Net income is allocated to the General Partner
based on 2 percent of the Company's net income (after adjusting for the
incentive distribution), plus the incentive distribution.
NINE MONTHS 1997 COMPARED TO NINE MONTHS 1996
The following table compares operating income by segment for the
nine months ended September 30, 1997 and 1996.
Operating Income by Segment
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(In Thousands)
1997 1996
--------- ---------
<S> <C> <C>
Resources Segment $ 119,335 $ 106,230
Manufacturing Segment 36,148 17,697
Other Costs and Eliminations (21,912) (15,330)
--------- ---------
Total $ 133,571 $ 108,597
========= =========
</TABLE>
Resources Segment revenues increased by $45.0 million, or 18%, to
$291.9 million for the nine months ended September 30, 1997, compared to
$246.9 million for the nine months ended September 30, 1996. This
increase was primarily due to revenues of $85.5 million from the
Southern Timberlands acquired in the fourth quarter of 1996 and a $5.9
million increase in land sales revenue, offset in part by lower
Northwest domestic and export log sales volumes. Northwest domestic log
sales volume decreased by 22% compared to the first nine months of 1996,
primarily due to the October 1996 sale of 107,000 acres of timberlands
in the Rocky Mountain Region and planned harvest level reductions in the
Cascades Region. Export log sales volume decreased by 22% compared to
the first nine months of 1996, primarily due to the diversion of lower
quality export logs to the domestic market in response to weaker
Japanese demand.
Resources Segment operating income was 41% and 43% as a percentage
of revenues for the nine months ended September 30, 1997 and 1996,
respectively. Resources Segment costs and expenses increased by $31.8
million, or 23%, to $172.5 million for the nine months ended September
30, 1997, compared to $140.7 million for the nine months ended September
30, 1996. This increase was primarily due to $48.2 million of costs
related to the Southern Region and increased log and haul expenses in
the Northwest, offset in part by lower Northwest domestic and export
sales volume. Northwest log and haul expenses increased by 9% as a
result of longer hauling distances and more costly logging methods
required in the areas harvested.
Manufacturing Segment revenues increased by $97.8 million, or 35%,
to $374.7 million for the nine months ended September 30, 1997, compared
to $276.9 million for the nine months ended September 30, 1996. This
increase was primarily due to revenues of $113.6 million from the
Southern Conversion Facilities, increased lumber sales prices, and
higher Northwest plywood and MDF sales volumes, offset in part by
decreased lumber and wood chip sales volume and decreased MDF sales
prices. Lumber sales prices in the Northwest increased by 7% compared
to the first nine months of 1996 primarily due to the continued strength
of both the housing sector and the retail repair and remodel market as a
result of a robust U.S. economy and strong consumer confidence. In
addition, the supply of lumber for the retail board markets declined due
to the targeting of production by numerous mills toward the strong
housing sector and a decline in the availability of preferred western
species. Plywood sales volumes in the Northwest increased by 6%
compared to the prior year primarily as a result of increased production
due to capital improvements and additional production shifts. MDF sales
volume increased by 14% compared to the prior year period, primarily due
to greater efficiencies from high energy refiners that were installed in
the third quarter of 1995. Northwest lumber sales volume decreased by
17% compared to the prior year period, primarily due to the October 1996
sale of the Arden sawmill in Colville, Washington. Wood chip sales
volume decreased compared to the prior year period due to the sale of
the Arden sawmill and the continued temporary closure of the Cle Elum
chip plant. The chip plant has been closed since the spring of 1996 as
a result of weak pulp and paper markets. MDF sales prices decreased by
5% primarily as a result of continued industry capacity expansion and
aggressive pricing by start-up mills attempting to gain market share.
Manufacturing Segment operating income was 10% and 6% as a
percentage of revenues for the nine months ended September 30, 1997 and
1996, respectively. The increase was primarily a result of higher
lumber sales prices. Manufacturing Segment costs and expenses increased
by $79.3 million, or 31%, to $338.5 million for the nine months ended
September 30, 1997, compared to $259.2 million for the nine months ended
September 30, 1996. This increase was primarily due to $103.7 million of
costs related to the Southern Region and increased Northwest plywood and
MDF sales volumes, offset in part by lower Northwest lumber sales volume
and lower Northwest plywood raw material costs. Northwest plywood raw
material costs decreased by 9% as a result of lower log costs and better
log recoveries due to capital projects.
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $21.9 million in the first nine months of
1997, compared to $15.3 million in the first nine months of 1996. The
variance of $6.6 million is primarily due to increased corporate
overhead. The increase in corporate overhead is primarily due to an
expense resulting from the achievement of a UVT under the Company's
Long-Term Incentive Plan and Key Employee Long-Term Incentive Plan
during the third quarter of 1997.
The achievement of a UVT under the Company's Long-Term Incentive
Plan and Key Employee Long-Term Incentive Plan resulted in $5.4 million
of expense in the first nine months of 1997, the majority of which was
included in selling, general and administrative expenses. Interest
expense increased by $11.1 million, or 32%, to $45.5 million, for the
nine months ended September 30, 1997, compared to $34.4 million for the
nine months ended September 30, 1996, primarily due to the issuance of
$200 million of senior notes in the fourth quarter of 1996 related to
the Southern Region Acquisition.
The income allocated to the General Partner increased by $5.7
million to $23.8 million for the nine months ended September 30, 1997,
compared to $18.1 million for the nine months ended September 30, 1996.
This increase was due to higher quarterly distributions to Unitholders
and the issuance of 5.7 million additional Limited Partner Units in the
fourth quarter of 1996. The General Partner's incentive distribution is
based on the number of outstanding Units times a percentage of the per
Unit distribution paid to Limited Partners, which was $1.61 per Unit
during the first nine months of 1997, compared to $1.49 per Unit during
the first nine months of 1996. Net income is allocated to the General
Partner based on 2 percent of the Company's net income (after adjusting
for the incentive distribution), plus the incentive distribution.
FINANCIAL CONDITION AND LIQUIDITY
During the first nine months of 1997, net cash provided by
operating activities totaled $156.7 million compared to $106.2 million
for the same period in 1996. The increase of $50.5 million was
primarily due to favorable working capital changes of $24.8 million,
higher net income of $13.7 million, and a $10.0 million increase in
depreciation, depletion and amortization compared to the prior year
period. The favorable working capital variance is primarily due to $11.9
million and $6.0 million fluctuations in Other Current Assets and
Accounts Payable, respectively. The change in Other Current Assets is
primarily due to the collection of an installment note receivable during
the first quarter of 1997 related to a fourth quarter 1996 higher and
better use land sale. The accounts payable fluctuation is primarily due
to an increase in logger payables as a result of significantly higher
harvest levels in September 1997 compared to December 1996, while
harvest levels in September 1996 were comparable to December 1995
levels. The increase in depreciation, depletion and amortization is
primarily due to increased harvest activity as a result of the Southern
Region Acquisition. During the third quarter of 1997, the Partnership
used $7.6 million of cash generated from operations to fund certain unit
award benefit plans as a result of achieving a UVT on July 10, 1997.
The Partnership has an unsecured revolving line of credit ("Line of
Credit") with a group of banks that permits the Partnership to borrow up
to $225 million for general corporate purposes, including up to $20
million of standby letters of credit issued on behalf of the Partnership
or Manufacturing. The Line of Credit matures on December 13, 2001 and
bears a floating rate of interest. As of September 30, 1997, the
Partnership had $161.0 million outstanding under the Line of Credit. As
of October 3, 1997, $146 million of borrowings on the line of credit
were repaid.
The Company's borrowing agreements contain certain restrictive
covenants, including limitations on harvest levels, sales of assets,
cash distributions and the amount of future indebtedness. In addition,
the Line of Credit requires the maintenance of a required interest
coverage ratio. The Company was in compliance with its debt covenants
as of September 30, 1997.
The Partnership will distribute $0.55 per Unit for the third
quarter of 1997. The distribution will equal $34.0 million (including
$8.5 million to the General Partner), and will be paid on November 26,
1997 to Unitholders of record on November 14, 1997. 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 cash distributions will
be funded from cash on hand and cash generated from operations. It is
anticipated that all debt service and 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 nine months of 1997 totaled
$14.2 million, which is equivalent to capital expenditures for the same
period in 1996. Total 1997 capital expenditures are expected to be
approximately $31 million, compared to $19.3 million (excluding $560.7
million related to the Southern Region Acquisition) expended in 1996.
Planned capital expenditures for the Resources Segment in 1997 are
primarily for road construction and reforestation. The Manufacturing
Segment's 1997 principal projects include reconfiguration of the Pablo
sawmill in western Montana to allow for more efficient processing of
small logs, various lumber and plywood projects to improve productivity
and increase log recovery, as well as replacements and upgrades of
equipment in several of the Conversion Facilities. The Company expects
total capital expenditures for 1998 to be approximately $48 million,
including $20 million for the reconfiguration of the manufacturing
facilities in Joyce, Louisiana.
OTHER INFORMATION
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Common Share" ("FAS 128"). FAS 128 simplifies the standards for
computing earnings per share and makes them comparable to international
earnings per share standards. The implementation of FAS 128 is required
for financial statements issued for periods ending after December 15,
1997; earlier application is not permitted. The impact of the adoption
of this standard is not expected to materially change the Company's
earnings per Unit presentation.
FEDERAL AND STATE REGULATIONS
THREATENED AND ENDANGERED SPECIES. The Endangered Species Act
("ESA") protects species threatened with possible extinction. Protection
of endangered species may include the imposition of restrictions on
timber harvesting and road building activities in areas containing the
affected species. A number of species indigenous to the Company's
timberlands have been listed as threatened or endangered or have been
proposed or are candidates for such status under the ESA, including the
northern spotted owl, marbled murrelet, gray wolf, red cockaded
woodpecker, mountain caribou, grizzly bear, bald eagle, bull trout and
various salmon species.
In December 1995, the Partnership entered into an agreement to
conserve grizzly bears (the "Grizzly Bear Agreement") with the United
States Fish and Wildlife Service ("USFWS"), the United States Forest
Service ("USFS") and the state of Montana covering 83,000 acres of the
Partnership's timberlands in the Swan Valley in western Montana. Under
the Grizzly Bear Agreement, the Partnership has agreed to protect
certain habitat and to minimize the impact of the Partnership's forestry
activities on the grizzly bear. In consideration for this mitigation,
the USFWS authorized forestry practices in the Swan Valley that are
consistent with the agreement.
In November 1996, several organizations filed a lawsuit against the
Secretary of the Interior and certain USFWS and USFS officials in
Federal District Court for the District of Montana challenging the
Grizzly Bear Agreement under the ESA and the National Environmental
Policy Act ("NEPA"). Plum Creek subsequently became a party to the
lawsuit in order to defend the Grizzly Bear Agreement. On October 10,
1997, the Court ruled in favor of Plum Creek and the government,
upholding the Grizzly Bear Agreement under both the ESA and NEPA. An
appeal of this decision is pending before the Ninth Circuit Court of
Appeals.
On June 13, 1997, the USFWS proposed a rule to list certain
population segments of the bull trout under the ESA. Bull trout are
present in numerous streams and rivers which flow across the
Partnership's lands in Montana, Idaho and Washington. Should listing of
the bull trout occur, timber harvesting and road building in riparian
areas could be subject to additional regulation. The Partnership is
unable at this time to predict the outcome of the listing proposal or
the nature or scope of any land management restrictions that might be
imposed to protect the bull trout as a result of any such listing.
At this time, the Partnership believes that federal and state laws
and regulations related to the environment and the protection of
endangered species will not have a material adverse effect on the
Partnership's financial position, results of operations or liquidity.
The Partnership anticipates, however, that increasingly strict laws and
regulations relating to the environment, natural resources and forestry
operations, as well as increased social concern over environmental
issues, may result in additional restrictions on the Partnership leading
to increased costs, additional capital expenditures and reduced
operating flexibility.
LEGISLATION RESTRICTING LOG EXPORTS. Federal legislation
currently prohibits the sale of unprocessed logs harvested from federal
lands located in the western half of the U.S. if such logs will be
exported from the 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 obtain 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 Partnership applied for and obtained an
approved sourcing area for the Partnership's Northwest conversion
facilities. Under the legislation, sourcing areas are subject to review
and renewal at least every five years.
In October 1995, the USFS issued final regulations implementing the
export legislation that could have made it more difficult to obtain
sourcing areas. These regulations, along with regulations providing for
periodic review of sourcing areas, 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 export law were recently approved by Congress and
are pending final approval by President Clinton. The Partnership
believes these revisions would eliminate the uncertainty caused by the
final regulations and would favorably affect the Partnership's ability
to obtain subsequent approvals of its sourcing area. The Partnership is
unable to predict, however, whether President Clinton will sign the
legislation into law. Whether or not the amendments to the export law
are enacted, however, the Partnership 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, the full
ban is being maintained. The amendments to the export law approved by
Congress would make Washington state's full ban permanent. Proposals
have also been made from time to time to either ban or tax the export of
unprocessed logs harvested from private lands. To date, such proposals
have been unsuccessful.
PART II -OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As reported in the Company's Form 10-Q for the quarter ended March
31, 1997, the Company initiated arbitration proceedings against Stone
Container Corporation ("Stone") on May 2, 1997 to enforce the pricing
and volume provisions of a long-term chip supply agreement, which Stone
had disputed. On September 10, 1997, the arbitration panel ruled in
favor of Plum Creek on all issues and ordered Stone to pay Plum Creek
the contract price for wood chips.
As reported most recently in the Company's Form 10-K for the year
ended December 31, 1996, the Company received a Compliance Order
("Order") in June of 1995 from the Environmental Protection Agency
("EPA") under the Clean Air Act. The Order alleged 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 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 took
the position that the new rules applied. In December 1995, the Company
voluntarily installed a pollution control device and an opacity monitor
on the boiler at a cost of $700,000 without waiving any defenses to the
EPA claim. On March 12, 1996, the Department of Justice, on behalf of
the EPA, filed suit in federal court seeking civil penalties and
injunctive relief for the alleged violation of NSPS in accordance with
the Clean Air Act which contemplates civil penalties. In August of
1997, the parties reached a settlement in the form of a Consent Decree
in which the Company agreed to continue to comply with the NSPS, pay a
$300,000 civil penalty, and pay $75,000 toward a project to reduce road
dust and other airborne particulate matter in Pablo, Montana and the
surrounding area. The Consent Decree was formally accepted by the court
on October 22, 1997.
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
Exhibit
Designation Nature of Exhibit
- ----------- -----------------
3.1 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,
File No. 1-10239, for the quarter ended September 30,
1995).
3.2 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).
4.3* 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, for the quarter ended June
30, 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, for
the year ended December 31, 1990). Amendment No. 2,
consent and waiver dated September 1, 1993 to the Senior
Note Agreement (Form 10-K/A, Amendment No. 1, for the
year ended December 31, 1993). Amendment No. 3, Senior
Note Agreement Amendment dated May 20, 1994 (Form 10-K/A,
Amendment No. 1, for the year ended December 31, 1994).
Senior Note Agreement Amendment dated May 31, 1996 (Form
10-Q, No. 1-10239, for the quarter ended June 30, 1996).
Senior Note Agreement Amendment dated April 15, 1997.
See attached exhibit.
4.4* 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, for the
quarter ended June 30, 1989). Amendment No. 1, consent
and waiver dated January 1, 1991 to Mortgage Note
Agreement, dated May 31, 1989, 11 1/8 percent First
Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc., now Plum Creek Manufacturing, L.P.
(Form 8 Amendment No. 1, for the year ended December 31,
1990). Amendment No. 2, consent and waiver dated
September 1, 1993 to the Mortgage Note Agreement (Form
10-K/A, Amendment No. 1, for the year ended December 31,
1993). Amendment No. 3, Mortgage Note Agreement
Amendment dated May 20, 1994 (Form 10-K/A, Amendment No.
1, for the year ended December 31, 1994). Amendment to
Mortgage Note Agreement dated June 15, 1995 (Form 10-Q,
No. 1-10239, for the quarter ended September 30, 1995).
Mortgage Note Agreement Amendment dated May 31, 1996
(Form 10-Q, No. 1-10239, for the quarter ended June 30,
1996). Mortgage Note Agreement Amendment dated April
15, 1997. See attached exhibit.
4.5* 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, for the year ended
December 31, 1994). Senior Note Agreement Amendment
dated as of October 15, 1995 (Form 10-K, No. 1-10239, for
the year ended December 31, 1995). Senior Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for
the quarter ended June 30, 1996). Senior Note Agreement
Amendment dated April 15, 1997. See attached exhibit.
27* Financial Data Schedule.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PLUM CREEK TIMBER COMPANY, L.P.
(Registrant)
By: Plum Creek Management Company, L.P.
as General Partner
By: /s/ Diane M. Irvine
--------------------------
DIANE M. IRVINE
Vice President and
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
Date: November 10, 1997
Senior Note Agreements Amendment
PLUM CREEK TIMBER COMPANY, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of April 15, 1997
To each of the Noteholders listed on Schedule 1
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,
(iv) a Senior Note Agreement Amendment dated as of May 20, 1994, and
(v) a Senior Note Agreements Amendment dated as of May 31, 1996
(collectively the "Amendments," the Original Senior Note Agreement, as
amended by the Amendments, the "Senior Note Agreements");
WHEREAS, Senior Notes in the aggregate principal amount of $138,600,000
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 1;
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.
Section 2. Amendments to the Senior Note Agreements
2.1 Amendment to Paragraph 5C
Paragraph 5C shall be amended by deleting the period at the end thereof
and by adding the following:
; provided, that satisfaction of the foregoing requirements with
respect to any such Lien shall not remedy the Event of Default
resulting from such Lien.2.2 Amendment to Paragraph 6A
Subclause (x) of clause (i) of paragraph 6A shall be amended to read as
follows:
(x) 50% of the aggregate amount of all interest in respect of the
Notes, the 1994 Senior Notes and the 1996 Senior Notes to be paid
on the interest payment date immediately following such immediately
preceding calendar quarter and
2.3 Amendment to Paragraph 6B(1)
Paragraphs 6B(1)(ix) and 6B(1)(x) shall be renumbered 6B(1)(x) and
6B(1)(xi), respectively, and a new paragraph 6B(1)(ix) shall be added to
read as follows:
(ix) from and after the time that the Facilities Subsidiary becomes
a Restricted Subsidiary, Liens on the accounts, rights to payment
for goods sold or services rendered that are evidenced by chattel
paper or instruments, and rights against persons who guarantee
payment or collection of the foregoing, and on the Facilities
Subsidiary's inventory and on the proceeds (as defined in the
Uniform Commercial Code in any applicable jurisdiction) thereof
securing the obligations of the Facilities Subsidiary under the
Facilities Subsidiary's Revolving Credit Facility (and any
extension, renewal, refunding or refinancing thereof) permitted by
paragraph 6B(2)(x),
2.4 Amendment to Paragraph 6B(2)
Paragraph 6B(2)(iv) shall be amended to read as follows:
(iv) Debt incurred by the Company pursuant to (a) the Revolving
Credit Facility (and any extension, renewal, refunding or
refinancing thereof, including any refunding or refinancing in an
amount in excess of the principal amount then outstanding under the
Revolving Credit Facility), or (b) a bank credit facility which is
unsecured or is secured by Liens permitted by
paragraph 6B(1)(viii), provided that the aggregate outstanding
principal amount of all Debt permitted by this clause (iv) shall at
no time exceed $15,000,000, and, provided, further, that the
Company shall not suffer to exist any Debt permitted by this
clause (iv) on any day after June 8, 1990 unless there shall have
been a period of at least 45 consecutive days within the 12 months
immediately preceding such day during which the Company shall have
been free from all Debt permitted by this clause (iv),
Paragraph 6B(2)(x) shall be amended to read as follows:
(x) from and after the time that the Facilities Subsidiary becomes
a Restricted Subsidiary, Debt incurred by the Facilities Subsidiary
pursuant to (a) the Facilities Subsidiary's Revolving Credit
Facility (and any extension, renewal, refunding or refinancing
thereof, including any refunding or refinancing in an amount in
excess of the principal amount then outstanding under the
Facilities Subsidiary's Revolving Credit Facility), or (b) a bank
credit facility which is unsecured or is secured by Liens permitted
by paragraph 6B(1)(ix), provided that the aggregate outstanding
principal amount of all Debt permitted by this clause (x) shall at
no time exceed $20,000,000, and, provided, further, that to the
extent that the Facilities Subsidiary is a Restricted Subsidiary,
the Facilities Subsidiary shall not suffer to exist any Debt
permitted by this clause (x) on any day after June 8, 1990 unless
there shall have been a period of at least 45 consecutive days
within the 12 months immediately preceding such day during which
the Facilities Subsidiary shall have been free from all Debt
permitted by this clause (x), and
2.5 Amendment to Paragraph 6B(3)(ix)
Paragraph 6B(3)(ix) shall be amended to read as follows:
(ix) make Investments not otherwise permitted by this
paragraph 6B(3) in entities engaged solely in a Permitted Business,
provided that the cumulative aggregate amount of such Investments
(calculated at original cost and including the principal amount of
any obligations guaranteed to the extent such guarantees are not
otherwise permitted by this paragraph 6B(3)) outstanding from time
to time made pursuant to this clause (ix) between the date of
closing and any date thereafter shall not exceed the greater of
$30,000,000 or 60% of the average annual Pro Forma Free Cash Flow
for the two fiscal years preceding such date;
2.6 Amendments to Paragraph 6B(5)
Paragraph 6B(5)(vii) shall be amended to read as follows:
(vii) the Company and its Restricted Subsidiaries may sell
properties for not less than the fair value thereof as determined
in good faith by the Responsible Representatives, provided that the
aggregate net proceeds of such sales in any calendar year do not
exceed an amount equal to one percent (1%) of Consolidated Total
Assets, determined as of the last day of the immediately preceding
calendar year, and
Paragraph 6B(5)(viii) shall be deleted in its entirety.
Paragraph 6B(5)(ix) shall be renumbered as 6B(5)(viii) and shall be
amended to read as follows:
(viii) the Company and its Restricted Subsidiaries may otherwise
sell for cash properties in an amount not less than the fair value
thereof as determined in good faith by the Responsible
Representatives if and only if (a) immediately after giving effect
to such proposed sale, no condition or event shall exist which
constitutes an Event of Default or Material Default, (b) the net
proceeds of any such sale (x) are applied, within 180 days after
such sale, to the repayment of Qualified Debt pro rata based upon
outstanding principal balances at the time of such repayment,
which, in the case of the Notes, shall be a prepayment pursuant to
paragraph 4A or 4B, as the case may be, or (y) are applied, within
180 days after such sale, to the purchase of productive assets in
the same line of business, and (c) immediately after giving effect
to such sale (giving effect on a pro forma basis to any proposed
retirement of Qualified Debt out of the proceeds thereof), the
Company could incur $1 of additional Funded Debt pursuant to
paragraph 6B(2)(ix); provided that, if (I) the net proceeds of any
such sale exceed $50,000,000 (and such proceeds are not immediately
applied in accordance with clause (b) above), or (II) the unapplied
net proceeds of all such sales exceed $100,000,000 in the aggregate
at any time, all the net proceeds of any such sale described in
clause (I) and/or all the unapplied net proceeds of such sales
described in clause (II), as the case may be, shall be placed
immediately in an escrow or cash collateral account or accounts,
pursuant to an agreement or agreements in form and substance
reasonably satisfactory to the holders of greater than 66 2/3% of
the outstanding principal amount of Qualified Debt, for the purpose
of application in accordance with clause (b) above;
2.7 Amendments to Paragraph 6B(6)
Paragraph 6B(6) shall be amended to read as follows:
6B(6) Harvesting Restrictions. In any calendar year, harvest
Timber on the Timberlands then owned by the Company in excess of
the amount set forth for such calendar year in the following table:
Calendar Year Maximum Cunits to be Harvested
1996 1,470 MCCF
1997 through 2000 1,970 MCCF
2001 and each calendar year thereafter 1,910 MCCF
plus, in each year, the amount, if any, by which (a) the sum of (x) the
cumulative amount set forth in the table above for the years preceding
such year of determination and (y) 2,130 MCCF, exceeds (b) the
cumulative amount actually harvested in such years preceding such year
of determination;unless the net cash proceeds from such excess harvest
are either (i) applied, within 180 days after any such excess harvest,
to the repayment of Qualified Debt pro rata based upon outstanding
principal balances at the time of such repayment, which, in the case of
the Notes, shall be a prepayment pursuant to paragraph 4A or 4B, as the
case may be, or (ii) applied, within 180 days after any such excess
harvest, to purchase Timber (including Timber on Timberlands purchased)
having a fair value (in the good faith judgment of the Responsible
Representatives) not less than the fair value of the Timber subject to
such excess harvest; provided that, if the net proceeds of any such
excess harvest exceed $50,000,000 (and such proceeds are not immediately
applied in accordance with clause (i) or (ii) above), all the net
proceeds of such excess harvest shall be placed immediately in an escrow
or cash collateral account or accounts, pursuant to an agreement or
agreements in form and substance reasonably satisfactory to the holders
of greater than 66-2/3% of the outstanding principal amount of Qualified
Debt, for the purpose of application in accordance with clause (i) or
(ii) above;
2.8 Amendments to Paragraph 10B
Paragraph 10B shall be amended by adding or substituting, as
appropriate, the following definitions:
"Consolidated Total Assets" shall mean the total amount of all the
assets of the Company and its Restricted Subsidiaries, determined on a
combined basis in accordance with generally accepted accounting
principles. "Cunit" shall mean 100 cubic feet of wood. For purposes of
conversion of Timber in the Company's northwest region, one MMBF shall
equal 2.1 MCCF.
"Designated Acres" shall mean up to an aggregate of 150,000 acres
owned by the Company which (based on the good faith determination of the
Responsible Representatives that such acres have at the time such
determination is made a higher value as recreational, residential,
grazing or agricultural property than for timber production) may be
reasonably designated by the General Partner at the time of the sale
thereof as constituting Designated Acres (such aggregate number of acres
to be determined from November 13, 1996 through the remaining term of
this Agreement).
"MCCF" shall mean one thousand Cunits.
"Mortgage Note Agreements" shall mean the Note Agreements, dated as
of May 31, 1989 and amended as of January 1, 1991, April 22, 1993,
September 1, 1993, May 20, 1994, June 15, 1995, May 31, 1996 and
April 15, 1997, providing for the issuance and sale by the Facilities
Subsidiary of its 11 1/8% First Mortgage Notes to the purchasers listed
in the schedule of purchasers attached thereto.
"1994 Senior Note Agreements" shall mean the Note Agreements, dated
as of August 1, 1994 and amended as of October 15, 1995, May 31, 1996
and April 15, 1997, providing for the issuance and sale by the Company
of its 8.73% Senior Notes to the purchasers listed in the schedule of
purchasers attached thereto.
"1994 Senior Notes" shall mean the 8.73% Senior Notes Due August 1,
2009 of the Company issued and sold pursuant to the 1994 Senior Note
Agreements.
"1996 Senior Note Agreement" shall mean the Note Agreement, dated
as of November 13, 1996, providing for the issuance and sale by the
Company of its Series A 7.74% Senior Notes, Series B 7.87% Senior Notes,
Series C 7.97% Senior Notes and Series D 8.05% Senior Notes to the
purchasers listed in the schedule of purchasers attached thereto.
"1996 Senior Notes" shall mean the Series A 7.74% Senior Notes Due
November 13, 2006, the Series B 7.87% Senior Notes Due November 13,
2008, the Series C 7.97% Senior Notes Due November 13, 2011 and the
Series D 8.05% Senior Notes Due November 13, 2016 of the Company issued
and sold pursuant to the 1996 Senior Note Agreement.
Paragraph 10B shall be further amended by deleting the definitions of
"Actual Percentage" and "Desired Percentage."
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, and,
after giving effect to the amendments contemplated hereby, no Default or
Event of Default will exist.
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 described in this section 3.4 and except as contemplated by
this Agreement, since December 31, 1996, 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. On January 21, 1997, the Board of Directors
of the General Partner authorized the Partnership to make a distribution
of $0.51 per Unit for the fourth quarter of 1996, payable on
February 28, 1997 to Unitholders of record on February 14, 1997. On
April 15, 1997, the Board of Directors of the General Partner authorized
the Partnership to make a distribution of $0.55 per Unit for the first
quarter of 1997, payable on May 29, 1997 to Unitholders of record on
May 16, 1997.
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, condition 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
contemplated herein.
3.6 Compliance with Other Instruments, etc.
The Company is not in violation of any provision of its 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 term or result in the creation of
(or impose any obligation on the Company to create) any Lien upon any of
the properties or assets of the Company, pursuant to any such term
except for Liens permitted by paragraph 6B(1) of the 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.
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 Noteholders holding not less than 55% of the aggregate
principal amount of Senior Notes outstanding as of April 15, 1997
according to Schedule 1 ($76,230,000).
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.
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., its general partner
By: /s/ Diane M. Irvine
Title: Vice President and Chief Financial Officer
ALLSTATE LIFE INSURANCE COMPANYBy:
/s/ Patricia W. Wilson
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
Title: Authorized Signatory
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Patricia W. Wilson
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
Title: Authorized Signatory
AMERICAN MUTUAL LIFE INSURANCE COMPANY (formerly Central Life Assurance
Company)
By:
Title:
FARM BUREAU LIFE INSURANCE COMPANY
By:
Title:
FBL INSURANCE COMPANY
By:
Title:
FIRST COLONY LIFE INSURANCE COMPANY
By:
Title:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /s/ Ken Hines, Jr.
Title: Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By: /s/ David M. Munro
Title: Second Vice President
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/ Kerry Nelson
Title: Vice President
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/ Kerry Nelson
Title: Vice President
MODERN WOODMEN OF AMERICA
By:
Title:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Jeff Dickson
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/ Allan McCray
Title: Vice President & Assistant Treasurer
SCHEDULE OF NOTEHOLDERS
Noteholder - 11 1/8% Senior Notes As of 4/15/97
Allstate Life Insurance Company $ 8,400,000
Allstate Life Insurance Company of New York 1,680,000
American Mutual Life Insurance Company (formerly Central Life Assurance
Company) 2,520,000
Farm Bureau Life Insurance Company 1,680,000
FBL Insurance Company 2,520,000
First Colony Life Insurance Company 4,200,000
John Hancock Mutual Life Insurance Company 26,460,000
John Hancock Variable Life Insurance Company 1,260,000
Massachusetts Mutual Life Insurance Company 8,400,000
Mellon Bank, N.A., as Trustee for AT&T Master Pension Trust 840,000
Mellon Bank, N.A., as Trustee for NYNEX Master Pension Trust 840,000
Modern Woodmen of America 2,100,000
The Prudential Insurance Company of America 66,360,000
Teachers Insurance and Annuity Association of America 10,500,000
Woodmen Accident and Life Company 840,000
Aggregate Principal Amount of Senior Notes $138,600,000
Mortgage Note Agreement Amendment
PLUM CREEK MANUFACTURING, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of April 15, 1997
To each of the Noteholders
listed on Schedule 1
attached hereto
Dear Noteholder:
WHEREAS, the purchasers of the Mortgage Notes (as hereinafter defined),
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,
(v) an Amendment to Mortgage Note Agreement dated as of June 15, 1995,
and (vi) a Mortgage Note Agreements Amendment dated as of May 31, 1996
(collectively, the "Amendments," and the Original Mortgage Note
Agreements, as amended by the Amendments, the "Mortgage Note
Agreements");
WHEREAS, Mortgage Notes in the aggregate principal amount of
$131,200,000 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 1;
WHEREAS, the Company, the Partnership, Plum Creek Marketing, Inc.
("Marketing") and the Noteholders wish to enter into this agreement
(this "Agreement") in order to further amend certain provisions of the
Mortgage Note Agreements;
NOW, THEREFORE, the Company, the Partnership and Marketing 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 Amendment to Paragraph 5C
Paragraph 5C shall be amended by deleting the period at the end thereof
and by adding the following:
; provided, that satisfaction of the foregoing requirements
with respect to any such Lien shall not remedy the Event of
Default resulting from such Lien.
2.2 Amendment to Paragraph 6B(3)(vii)
Paragraph 6B(3)(vii) shall be amended to read as follows:
(vii) make Investments not otherwise permitted by this
paragraph 6B(3) in entities engaged solely in a Permitted
Business, provided that the cumulative aggregate amount of
such Investments (calculated at original cost and including
the principal amount of any obligations guaranteed to the
extent such guarantees are not otherwise permitted by this
paragraph 6B(3)) outstanding from time to time made pursuant
to this clause (vii) between the date of closing and any date
thereafter shall not exceed the greater of $30,000,000 or 60%
of the average annual Pro Forma Free Cash Flow for the two
fiscal years preceding such date;
2.3 Amendments to Paragraph 6B(5)(vi)
Paragraph 6B(5)(vi) shall be amended to read as follows:
(vi) the Company and its Restricted Subsidiaries may otherwise
sell for cash properties in an amount not less than the fair
value thereof as determined in good faith by the Responsible
Representatives if (a) immediately after giving effect to such
proposed sale, no condition or event shall exist which
constitutes an Event of Default or Material Default, (b) the
net proceeds of any such sale (x) are applied, within 180 days
after such sale, to the prepayment of the Notes pursuant to
paragraph 4A or 4B or (y) are applied, within 180 days after
such sale, to the purchase of productive assets in the same
line of business, (c) immediately after giving effect to such
sale (giving effect on a pro forma basis to any proposed
retirement of Debt out of the proceeds thereof), the Company
could incur $1 of additional Funded Debt pursuant to
paragraph 6B(2)(vi), and (d) in the case of any properties
constituting part of the Mortgaged Properties, (x) any escrow
funds referred to in the proviso to this clause (vi) shall be
held in a security account by the Trustee under the Trust
Agreement for the equal and ratable securing of all Debt
secured by the Security Documents, and (y) the productive
assets purchased as provided in subclause (b) shall become
part of the Mortgaged Properties securing such Debt by a
supplemental mortgage or deed of trust satisfactory in form
and substance to the Required Holder(s) entered into and
delivered by the Company or Restricted Subsidiary, as the case
may be, not later than 90 days after acquisition of such
assets (and, in connection with the mortgaging of such assets,
the Trustee and the holders shall receive such supporting
documentation as the Required Holders shall reasonably
request, which, in any event, shall include with respect to
any real estate, title insurance reasonably acceptable to the
Required Holders); provided that, if (I) the net proceeds of
any such sale exceed $25,000,000 (and such proceeds are not
immediately applied in accordance with subclause (b) above),
or (II) the unapplied net proceeds of all such sales exceed
$25,000,000 in the aggregate at any time, all the net proceeds
of any such sale described in clause (I) and/or all the
unapplied net proceeds of such sales described in clause (II),
as the case may be, shall be placed immediately upon receipt
thereof in escrow, pursuant to an escrow agreement reasonably
satisfactory in form and substance to the Required Holder(s),
for the purpose of application in accordance with subclause
(b) above;
In order to carry out the intention of the parties hereto in making the
foregoing amendment to paragraph 6B(5)(vi), the Noteholders hereby,
without any further required action or direction, instruct the Trustee
to issue any written consent that may be necessary under section 8 of
each Mortgage Document, subject only to receipt by the Trustee of an
Officers' Certificate stating that the conditions of clauses (a) and (c)
of paragraph 6B(5)(vi) have been complied with, and under any
corresponding provision of any supplemental or additional mortgage or
deed of trust entered into in accordance with the provisions of the
Mortgage Note Agreements, in order to exempt from the requirements of
the proviso to clause (a) of such section 8 the net proceeds of any sale
of properties governed by paragraph 6B(5)(vi) that are not required by
the terms of the proviso thereto to be placed in escrow.
2.4 Amendments to Paragraph 7J
Paragraph 7J shall be amended by deleting that portion of the paragraph
beginning with the heading and continuing through the words "(herein,
collectively, the "Incorporated Provisions")," and by inserting in lieu
thereof the following:
7J Incorporated Covenants. The provisions of paragraphs 5
and 6 of the Senior Note Agreements as originally in effect
(except as amended to and as of April 15, 1997 between the
Partnership and the Senior Noteholders (collectively, the
"Amendments")) and the definitions set forth or specified by
reference in the Senior Note Agreement as originally in effect
(except as amended by the Amendments) of terms used in such
paragraphs 5 and 6 or in such definitions (herein,
collectively, the "Incorporated Provisions"),
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, and,
after giving effect to the amendments contemplated hereby, no Default or
Event of Default will exist.
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,
properties 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 described in this section 3.4 and except as contemplated by
this Agreement, since December 31, 1996, the date of the most recent
combined 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. On January 21, 1997, the Board of Directors of the
General Partner authorized the Partnership to make a distribution of
$0.51 per Unit for the fourth quarter of 1996, payable on February 28,
1997 to Unitholders of record on February 14, 1997. On April 15, 1997,
the Board of Directors of the General Partner authorized the Partnership
to make a distribution of $0.55 per Unit for the first quarter of 1997,
payable on May 29, 1997 to Unitholders of record on May 16, 1997.
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 that 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, condition 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 after giving effect to
the transactions contemplated hereby.
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 the violation of or be in conflict with or constitute
a default of 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(1)
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 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, Marketing 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, Marketing and the Partnership (in the case of the Mortgage Note
Agreements), legally binding upon and enforceable against the Company,
Marketing and the Partnership (in the case of the Mortgage Note
Agreements) in accordance with their terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
reorganization or other similar law affecting the enforcement of
creditors' rights generally and (b) 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, properties 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.
Section 4. 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 5. Miscellaneous
5.1 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 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.
5.2 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.
5.3 Effectiveness
This Agreement shall become effective upon its execution and delivery by
the Company, the Partnership and Marketing and Noteholders holding not
less than 55% of the aggregate principal amount of Mortgage Notes
outstanding as of April 15, 1997 according to Schedule 1 ($72,160,000).
5.4 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.
5.5 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.
5.6 Counterparts
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which 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.
5.7 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 and Chief Financial Officer
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company, L.P.,
its general partner
By: /s/ Diane M. Irvine
Title: Vice President and Chief Financial Officer
ALLSTATE LIFE INSURANCE COMPANY
By: /s/ Patricia W. Wilson
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
Title: Authorized Signatory
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
By: /s/ Patricia W. Wilson
Title: Authorized Signatory
By: /s/ Jerry D. Zinkula
Title: Authorized Signatory
AMERICAN MUTUAL LIFE INSURANCE COMPANY (formerly Central Life Assurance
Company)
By:
Title:
CUNA MUTUAL LIFE INSURANCE COMPANY
By CIMCO Inc.
By: /s/ Donald Heltner
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
Title:
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By:
Title:
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/ Kerry Nelson
Title: Vice President
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/ Kerry Nelson
Title: Vice President
MODERN WOODMEN OF AMERICA
By:
Title:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Jeff Dickson
Title: Vice President
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Angela Brock-Kyle
Title: Associate Director - Private Placements
Receipt of the instructions from the Noteholders set forth in
Section 2.3 above is hereby acknowledged:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
Title:
SCHEDULE OF NOTEHOLDERS
Noteholder -- 11 1/8% Mortgage Notes As of 4/15/97
Allstate Life Insurance Company $ 8,200,000
Allstate Life Insurance Company of New York 1,640,000
American Mutual Life Insurance Company
(formerly Central Life Assurance Company) 2,460,000
CUNA Mutual Life Insurance Company 2,460,000
John Hancock Mutual Life Insurance Company 29,110,000
John Hancock Variable Life Insurance Company 1,230,000
Massachusetts Mutual Life Insurance Company 8,200,000
Mellon Bank, N.A., as Trustee for AT&T
Master Pension Trust 820,000
Mellon Bank, N.A., as Trustee for NYNEX
Master Pension Trust 2,460,000
Modern Woodmen of America 2,050,000
The Prudential Insurance Company of America 62,320,000
Teachers Insurance and Annuity Association
of America 10,250,000
Aggregate Principal Amount of Mortgage Notes $ 131,200,000
Senior Note Agreements
Amendment
PLUM CREEK TIMBER COMPANY, L.P.
999 Third Avenue
Seattle, Washington 98104
Dated as of April 15, 1997
To each of the Noteholders
listed on Schedule 1
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% Notes due August 1,
2009 (the "Senior Notes");
WHEREAS, the Original Senior Note Agreements were amended and affected
by (i) a Senior Note Agreement Amendment dated as of October 15, 1995
and (ii) a Senior Note Agreements Amendment dated as of May 31, 1996
(collectively, the "Amendments," the Original Senior Note Agreements, as
amended by the Amendments, the "Senior Note Agreements");
WHEREAS, the 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 1;
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.
Section 2. Amendments to the Senior Note Agreements
2.1 Amendment to Paragraph 5C
Paragraph 5C shall be amended by deleting the period at the end thereof
and by adding the following:
; provided, that satisfaction of the foregoing requirements with
respect to any such Lien shall not remedy the Event of Default
resulting from such Lien.
2.2 Amendment to Paragraph 6A
Clause (i) of paragraph 6A shall be amended by deleting the words
beginning "50% of the aggregate amount" through the end of clause (i)
and by inserting in lieu thereof the following:
(x) 50% of the aggregate amount of all interest in respect of the
Notes, the 11-1/8% Senior Notes and the 1996 Senior Notes to be
paid on the interest payment date immediately following such
immediately preceding calendar quarter and (y) 25% of the aggregate
amount of all principal in respect of the 11-1/8% Senior Notes
scheduled to be paid during the 12 calendar months immediately
following such immediately preceding calendar quarter, and the
Company will not reduce the amount of the reserves so included, in
determining Available Cash for any calendar quarter subsequent to
such immediately preceding calendar quarter pursuant to
clause (a)(iii) of the definition of Available Cash unless and
until the amount of interest or principal, as the case may be, in
respect of which such amount has been reserved has in fact been
paid, and
2.3 Amendment to Paragraph 6B(2)
Paragraph 6B(2)(iv) shall be amended to read as follows:
(iv) Debt incurred by the Company pursuant to (a) the Revolving
Credit Facility (and any extension, renewal, refunding or
refinancing thereof, including any refunding or refinancing in an
amount in excess of the principal amount then outstanding under the
Revolving Credit Facility), or (b) a bank credit facility which is
unsecured or is secured by Liens permitted by
paragraph 6B(1)(viii), provided that the aggregate outstanding
principal amount of all Debt permitted by this clause (iv) shall at
no time exceed $15,000,000, and, provided, further, that the
Company shall not suffer to exist any Debt permitted by this
clause (iv) on any day unless there shall have been a period of at
least 45 consecutive days within the 12 months immediately
preceding such day during which the Company shall have been free
from all Debt permitted by this clause (iv),
Paragraph 6B(2)(x) shall be amended to read as follows:
(x) from and after the time that the Facilities Subsidiary becomes a
Restricted Subsidiary, Debt incurred by the Facilities Subsidiary
pursuant to (a) the Facilities Subsidiary's Revolving Credit Facility
(and any extension, renewal, refunding or refinancing thereof, including
any refunding or refinancing in an amount in excess of the principal
amount then outstanding under the Facilities Subsidiary's Revolving
Credit Facility), or (b) a bank credit facility which is unsecured or is
secured by Liens permitted by paragraph 6B(1)(ix), provided that the
aggregate outstanding principal amount of all Debt permitted by this
clause (x) shall at no time exceed $20,000,000, and, provided, further,
that to the extent that the Facilities Subsidiary is a Restricted
Subsidiary, the Facilities Subsidiary shall not suffer to exist any Debt
permitted by this clause (x) on any day unless there shall have been a
period of at least 45 consecutive days within the 12 months immediately
preceding such day during which the Facilities Subsidiary shall have
been free from all Debt permitted by this clause (x), and
2.4 Amendment to Paragraph 6B(3)(ix)
Paragraph 6B(3)(ix) shall be amended to read as follows:
(ix) make Investments not otherwise permitted by this
paragraph 6B(3) in entities engaged solely in a Permitted Business,
provided that the cumulative aggregate amount of such Investments
(calculated at original cost and including the principal amount of
any obligations guaranteed to the extent such guarantees are not
otherwise permitted by this paragraph 6B(3)) outstanding from time
to time made pursuant to this clause (ix) between the date of
closing and any date thereafter shall not exceed the greater of
$30,000,000 or 60% of the average annual Pro Forma Free Cash Flow
for the two fiscal years preceding such date;
2.5 Amendments to Paragraph 6B(5)
Paragraph 6B(5)(iv) shall be amended by deleting the final proviso
thereto and by inserting in lieu thereof the following:
provided, that after giving effect on a pro forma basis to such
merger, consolidation or sale, the gross revenue contribution of
pulp and paper manufacturing activities of the merged or
consolidated entity and its Subsidiaries on a combined basis for
the 12 months preceding such merger, consolidation or sale does not
exceed 33% of total revenues of the Company or such merged or
consolidated entity, as the case may be, and its Subsidiaries on a
combined basis,
Paragraph 6B(5)(vii) shall be amended to read as follows:
(vii) the Company and its Restricted Subsidiaries may sell
properties for not less than the fair value thereof as determined
in good faith by the Responsible Representatives, provided that the
aggregate net proceeds of such sales in any calendar year do not
exceed an amount equal to one percent (1%) of Consolidated Total
Assets, determined as of the last day of the immediately preceding
calendar year, and
Paragraph 6B(5)(viii) shall be amended to read as follows:
(viii) the Company and its Restricted Subsidiaries may otherwise
sell for cash properties in an amount not less than the fair value
thereof as determined in good faith by the Responsible
Representatives if and only if (a) immediately after giving effect
to such proposed sale, no condition or event shall exist which
constitutes an Event of Default or Material Default, (b) the net
proceeds of any such sale (x) are applied, within 180 days after
such sale, to the repayment of Qualified Debt selected by the
Company, which, in the case of the Notes, shall be a prepayment
pursuant to paragraph 4A, or (y) are applied, within 180 days after
such sale, to the purchase of productive assets in the same line of
business, and (c) immediately after giving effect to such sale
(giving effect on a pro forma basis to any proposed retirement of
Qualified Debt out of the proceeds thereof), the Company could
incur $1 of additional Funded Debt pursuant to paragraph 6B(2)(ix);
provided that, if (I) the net proceeds of any such sale exceed
$50,000,000 (and such proceeds are not immediately applied in
accordance with clause (b) above), or (II) the unapplied net
proceeds of all such sales exceed $100,000,000 in the aggregate at
any time, all the net proceeds of any such sale described in
clause (I) and/or all the unapplied net proceeds of such sales
described in clause (II), as the case may be, shall be placed
immediately in an escrow or cash collateral account or accounts,
pursuant to an agreement or agreements in form and substance
reasonably satisfactory to the holders of greater than 66 2/3% of
the outstanding principal amount of Qualified Debt, for the purpose
of application in accordance with clause (b) above;
2.6 Amendments to Paragraph 6B(6)
Paragraph 6B(6) shall be amended to read as follows:
6B(6) Harvesting Restrictions
In any calendar year, harvest Timber on the Timberlands then owned
by the Company in excess of the amount set forth for such calendar year
in the following table:
Calendar Year Maximum Cunits to be Harvested
1996 1,470 MCCF
1997 through 2000 1,970 MCCF
2001 and each calendar year thereafter 1,910 MCCF
plus, in each year, the amount, if any, by which (a) the sum of (x) the
cumulative amount set forth in the table above for the years preceding
such year of determination and (y) 2,130 MCCF, exceeds (b) the
cumulative amount actually harvested in such years preceding such year
of determination; unless the net cash proceeds from such excess harvest
are either (i) applied, within 180 days after any such excess harvest,
to the repayment of Qualified Debt selected by the Company, which, in
the case of the Notes, shall be a prepayment pursuant to paragraph 4A,
or (ii) applied, within 180 days after any such excess harvest, to
purchase Timber (including Timber on Timberlands purchased) having a
fair value (in the good faith judgment of the Responsible
Representatives) not less than the fair value of the Timber subject to
such excess harvest; provided that, if the net proceeds of any such
excess harvest exceed $50,000,000 (and such proceeds are not immediately
applied in accordance with clause (i) or (ii) above), all the net
proceeds of such excess harvest shall be placed immediately in an escrow
or cash collateral account or accounts, pursuant to an agreement or
agreements in form and substance reasonably satisfactory to the holders
of greater than 66 2/3% of the outstanding principal amount of Qualified
Debt, for the purpose of application in accordance with clause (i) or
(ii) above;
2.7 Amendments to Paragraph 10B
Paragraph 10B shall be amended by adding or substituting, as
appropriate, the following definitions:
"Consolidated Total Assets" shall mean the total amount of all the
assets of the Company and its Restricted Subsidiaries, determined on a
combined basis in accordance with generally accepted accounting
principles.
"Cunit" shall mean 100 cubic feet of wood. For purposes of
conversion of Timber in the Company's northwest region, one MMBF shall
equal 2.1 MCCF.
"Designated Acres" shall mean up to an aggregate of 150,000 acres
owned by the Company which (based on the good faith determination of the
Responsible Representatives that such acres have at the time such
determination is made a higher value as recreational, residential,
grazing or agricultural property than for timber production) may be
reasonably designated by the General Partner at the time of the sale
thereof as constituting Designated Acres (such aggregate number of acres
to be determined from November 13, 1996 through the remaining term of
this Agreement).
"11-1/8% Senior Note Agreements" shall mean the Note Agreements,
dated as of May 31, 1989 and amended as of January 1, 1991, April 22,
1993, September 1, 1993, May 20, 1994, May 31, 1996 and April 15, 1997,
providing for the issuance and sale by the Company of its 11-1/8% Senior
Notes to the purchasers listed in the schedule of purchasers attached
thereto.
"MCCF" shall mean one thousand Cunits.
"Mortgage Note Agreements" shall mean the Note Agreements, dated as
of May 31, 1989 and amended as of January 1, 1991, April 22, 1993,
September 1, 1993, May 20, 1994, June 15, 1995, May 31, 1996 and
April 15, 1997, providing for the issuance and sale by the Facilities
Subsidiary of its 11-1/8% First Mortgage Notes to the purchasers listed
in the schedule of purchasers attached thereto.
"1996 Senior Note Agreement" shall mean the Note Agreement, dated
as of November 13, 1996, providing for the issuance and sale by the
Company of its Series A 7.74% Senior Notes, Series B 7.87% Senior Notes,
Series C 7.97% Senior Notes and Series D 8.05% Senior Notes to the
purchasers listed in the schedule of purchasers attached thereto.
"1996 Senior Notes" shall mean the Series A 7.74% Senior Notes Due
November 13, 2006, the Series B 7.87% Senior Notes Due November 13,
2008, the Series C 7.97% Senior Notes Due November 13, 2011 and the
Series D 8.05% Senior Notes Due November 13, 2016 of the Company issued
and sold pursuant to the 1996 Senior Note Agreement.
"Timberlands" shall mean the timberlands owned by the Company as of
the date of closing and any timberlands acquired by the Company or any
Subsidiary after the date of closing.
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, and,
after giving effect to the amendments contemplated hereby, no Default or
Event of Default will exist.
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 described in this section 3.4 and except as contemplated by
this Agreement, since December 31, 1996, 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. On January 21, 1997, the Board of Directors
of the General Partner authorized the Partnership to make a distribution
of $0.51 per Unit for the fourth quarter of 1996, payable on
February 28, 1997 to Unitholders of record on February 14, 1997. On
April 15, 1997, the Board of Directors of the General Partner authorized
the Partnership to make a distribution of $0.55 per Unit for the first
quarter of 1997, payable on May 29, 1997 to Unitholders of record on
May 16, 1997.
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, condition 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 its 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 term or result in the creation of
(or impose any obligation on the Company to create) any Lien upon any of
the properties or assets of the Company, pursuant to any such term
except for Liens permitted by paragraph 6B(1) of the 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.
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 Noteholders holding not less than 55% of the aggregate
principal amount of Senior Notes outstanding as of April 15, 1997
according to Schedule 1 ($82,500,000).
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.
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.,
its general partner
By: /s/ Diane M. Irvine
Title: Vice President and Chief Financial
Officer
AMERICAN MUTUAL LIFE INSURANCE COMPANY (formerly Central Life
Assurance Company)
By:
Title:
FARM BUREAU LIFE INSURANCE COMPANY
By:
Title:
FIRST COLONY LIFE INSURANCE COMPANY
By:
Title:
GUARANTEE LIFE INSURANCE COMPANY
By: /s/ Steven A. Scanlan
Title: Senior Investment Officer - Securities
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: /s/ Richard C. Morrison
Title: Managing Director
MUTUAL OF OMAHA INSURANCE COMPANY
By:
Title:
OHIO CASUALTY INSURANCE COMPANY
By: /s/ Bret Parrish
Title: Associate Portfolio Manager
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ John H. Bunz
Title: Counsel
By: /s/ Shabnam B. Miglani
Title: Counsel
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
By: /s/ Angela Brock-Kyle
Title: Associate Director - Private Placements
TRANSAMERICA LIFE AND ANNUITY INSURANCE COMPANY
By:
Title:
TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY
By:
Title:
UNITED OF OMAHA LIFE INSURANCE COMPANY
By:
Title:
SCHEDULE OF NOTEHOLDERS
Noteholder - 8.73% Senior Notes As of 4/15/97
American Mutual Life Insurance Company
(formerly Central Life Assurance Company) $ 6,000,000
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
Teachers Insurance and Annuity 25,000,000
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> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMBINED FINANCIAL
STATEMENTS OF PLUM CREEK TIMBER COMPANY, L.P. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 150,340
<SECURITIES> 0
<RECEIVABLES> 36,679
<ALLOWANCES> 1,901
<INVENTORY> 52,423
<CURRENT-ASSETS> 248,005
<PP&E> 1,189,275
<DEPRECIATION> 132,242
<TOTAL-ASSETS> 1,324,432
<CURRENT-LIABILITIES> 87,563
<BONDS> 745,000
0
0
<COMMON> 0
<OTHER-SE> 480,011
<TOTAL-LIABILITY-AND-EQUITY> 1,324,432
<SALES> 541,873
<TOTAL-REVENUES> 541,873
<CGS> 370,734
<TOTAL-COSTS> 408,302
<OTHER-EXPENSES> 930
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,511
<INCOME-PRETAX> 87,917
<INCOME-TAX> 534
<INCOME-CONTINUING> 87,383
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,383
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 0
</TABLE>
