SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
(X) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PLUM CREEK TIMBER COMPANY, L.P.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of filing fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date Filed:
Contact: Michelle D. Monfor
Director, Investor Relations
(206) 467-3613 or 1-800-858-5347
WWW.PLUMCREEK.COM
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PLUM CREEK REACHES SETTLEMENT IN LITIGATION RELATING TO REIT CONVERSION
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SEATTLE, WASHINGTON - April 9, 1999 - Plum Creek Timber Company, L.P.
(NYSE:PCL) announced today that the Company and its general partner have
entered into an agreement settling all litigation relating to the proposed
conversion of the Company into a real estate investment trust (REIT).
Under the terms of the settlement, which remains subject to court
approval, Plum Creek's general partner would be obligated to pay up to an
aggregate of $30 million, which shall be paid into a fund to be
administered by plaintiff's counsel and overseen by the court for
distribution to eligible Unitholders if certain five-year financial targets
of the Company are not met. Payments, if any, would be scheduled to be made
following the end of the five-year period, on or about April 15, 2004. Such
payments, less court approved attorney fees, would be made to Unitholders
who are beneficial owners as of the REIT conversion date.
The Company said that the settlement provides a benefit to
Unitholders, halts the substantial expense, uncertainty and distraction of
continued litigation, and enables the Company to move forward with the
process of converting to a REIT. Rick Holley, Plum Creek's President and
Chief Executive Officer, said "The Board and management continue to believe
that the proposed conversion will help us achieve important strategic
business objectives that will benefit all of our Unitholders."
As previously announced, the Company intends to hold the Unitholder
vote on the proposed conversion on April 19, 1999. If Unitholder approval
is obtained, the Company expects to convert to a REIT as soon as
practicable following final court approval of the settlement. Court
approval will be sought at a hearing scheduled for June 21, 1999.
Plum Creek is one of the largest private timberland owners in the
nation with timberlands and mills located in the Pacific Northwest,
Southern and Northeastern United States.
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
JERROLD M. SONET, )
)
Plaintiff, )
)
v. ) C.A. No. 16931
)
PLUM CREEK TIMBER COMPANY, )
L.P., PLUM CREEK MANAGEMENT )
COMPANY, L.P., and P.C. ADVISORY )
CORP. I, )
)
Defendants. )
NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED
SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING
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TO: ALL RECORD AND BENEFICIAL OWNERS OF UNITS OF PLUM CREEK TIMBER
COMPANY, L.P. FROM AND INCLUDING JUNE 8, 1988 THROUGH AND
INCLUDING THE DATE ON WHICH THE CONVERSION OF PLUM CREEK FROM A
MASTER LIMITED PARTNERSHIP TO A REAL ESTATE INVESTMENT TRUST,
PURSUANT TO THE TERMS OF THE CONVERSION PROPOSAL, IS
CONSUMMATED INCLUDING THEIR SUCCESSORS IN INTEREST,
PREDECESSORS, REPRESENTATIVES, TRUSTEES, EXECUTORS,
ADMINISTRATORS, HEIRS, ASSIGNS OR TRANSFEREES, IMMEDIATE AND
REMOTE, AND EXCLUDING DEFENDANTS AND THEIR AFFILIATES.
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS
WILL BE AFFECTED BY THE LEGAL PROCEEDINGS IN THIS LITIGATION. IF YOU
WERE NOT THE BENEFICIAL HOLDER OF UNITS OF PLUM CREEK, BUT HELD PLUM
CREEK UNITS FOR A BENEFICIAL HOLDER, PLEASE TRANSMIT THIS DOCUMENT TO
SUCH BENEFICIAL HOLDER.
1. This notice to all record and beneficial owners of units of Plum
Creek Timber Company, L.P. (the "Partnership") from and including the close
of business on June 8, 1988, through and including the date on which the
Conversion is consummated pursuant to the terms of the Conversion Proposal,
including any and all of their successors in interest, predecessors,
representatives, trustees, executors, administrators, heirs, assigns or
transferees, immediate and remote, and any person or entity acting for or
on behalf of, or claiming under any of them, and each of them, and
excluding the defendants in the Action, and all persons or entities related
to or affiliated with the defendants (collectively, the "Class"), is given
pursuant to Rule 23 of the Rules of the Court of Chancery of the State of
Delaware and pursuant to an Order of the Court of Chancery of the State of
Delaware in and for New Castle County (the "Court") entered in the
above-captioned action (the "Action").
SETTLEMENT HEARING
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2. Members of the Class have an interest in these proceedings and are
hereby notified that a hearing will be held before the Court of Chancery,
in the Daniel L. Herrmann Courthouse, 10th & King Streets, Wilmington,
Delaware 19899 on June 21, 1999, at 11:00 a.m. (the "Settlement Hearing"),
to (i) determine whether a Stipulation of Settlement dated April 9, 1999
(the "Stipulation"), and the terms and conditions of the Settlement
proposed in the Stipulation (the "Settlement"), are fair, reasonable and
adequate and in the best interests of the Class; (ii) determine whether a
class should be certified in the Action; (iii) determine whether the Class
was adequately represented by plaintiff and his attorneys; (iv) determine
whether final judgment should be entered dismissing the Action as to all
defendants named herein and their affiliates and with prejudice as against
the plaintiff and all members of the Class (the "Order and Final
Judgment"); (v) hear and determine any objections to the Settlement; and
(vi) if the Court approves the Stipulation and the Settlement and enters
the Order and Final Judgment, to determine whether it should award
attorneys' fees and expenses to plaintiff's attorneys pursuant to the
application described herein.
3. The Court has reserved the right to adjourn the Settlement
Hearing, including consideration of the application for attorneys' fees and
expenses, by oral announcement at such hearing or any adjournment thereof,
and without further notice of any kind. The Court also has reserved the
right to approve the Settlement at or after the Settlement Hearing with
such modifications as may be consented to by the parties to the Stipulation
and without further notice to the Class.
SUMMARY OF SETTLEMENT
---------------------
The Action and the Settlement address claims arising out of the
Conversion of Plum Creek from a master limited partnership to a REIT. As a
result of the prosecution of the Actions by plaintiff and the Settlement,
(i) the Partnership has issued supplemental disclosures to Unitholders and
(ii) defendants have agreed to pay up to $30 million to a fund, depending
upon Plum Creek's financial performance over the next five years, for the
benefit of those persons who were beneficial owners of Plum Creek units at
the time of the Conversion. In consideration for these substantial
benefits, plaintiff has agreed, subject to consummation of the Conversion
and the approval of the Settlement by the Court, to dismiss all claims made
by and that could have been made by plaintiff and any Unitholders relating
to the Conversion -- including all claims in this Action, in a prior action
that plaintiff had filed but that was dismissed by the Court, and is now on
appeal, and in a federal court action that plaintiff was preparing to file
at the time the Settlement was negotiated.
A. Plaintiff's Separate Statement.
Plaintiff brought two lawsuits attacking the Conversion. In the
first, he challenged the substantive terms of the Conversion, and the
process by which such terms were determined. In the second, he challenged
the adequacy of disclosure to Unitholders about the Conversion. As the
result of plaintiff's second lawsuit, that disclosure was revised and
supplemented.
Although the claims he asserted are broader, plaintiff's main focus
has been on the fairness of allotting 27% of the equity of the REIT to the
General Partner, in light of the fact that its share of current
distributions is only 25.5%. The General Partner contends that since the
terms of the Partnership Agreement entitle it to receive 37% of any
increases in distributions over the current distribution levels and a
step-up on the issuance of additional equity by the Partnership, based upon
Plum Creek's projected future performance, the General Partner would
receive more than 27% of Plum Creek's future distributions if Plum Creek
remained a limited partnership. Because the General Partner is giving up
its right to that projected increased share of distributions in the
conversion of Plum Creek into a REIT, and is also giving up other rights it
has under the Partnership Agreement, the General Partner argued that the
27% equity interest it agreed to accept in the REIT is below the value of
the rights in the Partnership it is giving up.
Plaintiff contended that whether Plum Creek would be able, over the
next five years, to increase distributions was speculative. In plaintiff's
view, the General Partner ought not to be compensated now for future
events, such as assumed acquisitions which have not been identified, and
might not occur. Accordingly, plaintiff would not agree to a settlement of
any of the claims he has asserted that allowed the General Partner to
receive a 27% equity interest at this time, unless the settlement provided
that the value of the increase in the General Partner's interest from 25.5%
to 27% would be returned to the Unitholders if Plum Creek fails to perform
as projected over the next five years. If Plum Creek's five year projected
earnings are met, plaintiff's position is that the Conversion will be shown
to have been fair, and thus, he and his fellow Unitholders will not be
entitled to additional consideration. The cash equivalent of the difference
in the value of REIT shares, based on the present market value of the
units, between a 27% and 25.5% General Partner interest, inclusive of
distributions at the current rate and after adjustment for taxes and
transactional costs, is approximately $30 million.
Under the terms of the settlement, the General Partner will be
required to turn over $30 million to a fund, the net proceeds of which will
be distributed to persons who were Unitholders at the time of the
Conversion, if the five year average of Plum Creek's net cash flow before
taxes on a per share basis does not increase, i.e., is less than $2.26 on a
per share basis, the average of Plum Creek's net cash flow before taxes
over the last three years, 1996-1998. If the five year average on a per
share basis of net cash flow before taxes is $2.84 or more, the plaintiff
and all other Unitholders will receive no additional consideration. If the
net cash flow before taxes falls within the range of $2.84 and $2.26, the
General Partner will pay a ratable portion of $30 million. Thus, if the
average net cash flow before taxes is $2.55, the plaintiff and all other
persons who were Unitholders at the time of the Conversion will receive a
share in $15 million less the percentage of the fund awarded as fees to
plaintiff's counsel.
The formula is modified in the event of a sale of Plum Creek. If Plum
Creek is sold, at any time over the next three years, for $34 or more per
share, or if Plum Creek's performance during such period is on target, no
payment will be made. If Plum Creek is sold for less than $34 per share,
but Plum Creek is on target, no payment will be made. If Plum Creek is sold
for less than $34 per share, then the formula will apply to the abbreviated
period and payment will be made to the extent Plum Creek's performance is
below target. In the fourth and fifth years, the formula alone will
control and payment will be made regardless of the per share sale's price.
Plaintiff has no reason to believe and does not believe that there is any
present intention to sell Plum Creek. The adjustment to the formula was
devised by attorneys to cover every eventuality.
Plaintiff's attorneys will apply for a fee equal to 25% of the cash
actually paid by the General Partner into the fund for distribution to
former Unitholders. If Plum Creek reaches or exceeds the target figure of
$2.84 per share, plaintiff's attorneys will receive no fee on this aspect
of the settlement. Thus, plaintiff's attorneys are placed in the same
position as class members: if the class does not receive cash, the
attorneys receive no fee. The defendants will not oppose the plaintiff's
attorneys' fee request. The Court, however, may grant or deny in whole or
in part, the plaintiff's attorneys' fee request in its sole discretion. Any
class member may contest the plaintiff's attorneys' entitlement to any fee
or to a fee in a lesser amount than 25% by following the procedure set
forth in this notice under the heading RIGHT TO APPEAR AT SETTLEMENT
HEARING.
At this time, plaintiff's attorneys are applying, inter alia, for a
fee for their work in connection with the supplemental disclosure they
caused to be made by Plum Creek to Unitholders. Plaintiff obtained a
preliminary injunction from the Chancery Court based upon his challenge to
the disclosure contained in the combined Proxy Statement and Prospectus,
dated January 28, 1999. As a result of that injunction, a supplemental
Proxy Statement and Prospectus dated March 29, 1999, along with the
decision of the Honorable Jack Jacobs, Vice Chancellor of the Court of
Chancery in New Castle County, Delaware, were sent to all class members.
Plaintiff believes that the quality of the additional disclosure obtained
through the efforts of his attorneys set a high water mark for disclosure
and that, based upon established Delaware and United States Supreme Court
authorities, his attorneys are entitled to a fee for those efforts.
Plaintiff's attorneys are seeking fees of $1.5 million and
reimbursement of actual expenses of $125,000. If and to the extent awarded
by the Court, those fees and expenses will be paid by Plum Creek. The
defendants will not oppose such a request. However, the Court may, in its
discretion, grant or deny, in whole or in part, the fee and expense
request. Any class member may oppose plaintiff's attorneys' application for
fees and expenses by following the procedure in this notice under the
heading RIGHT TO APPEAR AT SETTLEMENT.
B. Defendants' Separate Statement.
Defendants believe that the Conversion presents compelling benefits
for Plum Creek and all of its Unitholders. Since September 1998, the
defendants have been responding to litigation initiated by plaintiff, which
has involved two lawsuits in Delaware Chancery Court and a possible third
lawsuit in the United States District Court. Plaintiff's substantive
challenge to the Conversion was dismissed by the Chancery Court, and is now
on appeal. Plaintiff's ability to continue to prosecute his other claims,
as well as his continued ability to appeal the dismissal of his substantive
challenge, threatens to interfere with the timely consummation of the
Conversion.
Defendants believe that the continued uncertainty and potential delay
occasioned by plaintiff's continuing litigation is contrary to the
interests of Plum Creek and all of its partners, including the Unitholders
and the General Partner. Accordingly, although defendants firmly believe
that none of plaintiff's pending, threatened or previously asserted and
dismissed claims has any merit, they have negotiated this settlement in
order to put all of this litigation behind them and to enable the
Conversion to proceed at the earliest possible date.
* * *
A more complete summary of the Settlement is set forth on pages ____
of this Notice.
THE FACTUAL BACKGROUND
----------------------
THE DESCRIPTION OF THE ACTION AND THE SETTLEMENT WHICH FOLLOW HAVE BEEN
PREPARED BY COUNSEL FOR THE PARTIES. THE COURT HAS MADE NO FINDINGS WITH
RESPECT TO SUCH MATTERS, AND THIS NOTICE IS NOT AN EXPRESSION BY THE COURT
OF FINDINGS OF FACT.
A. Defendant Plum Creek Timber Company, L.P. (the "Partnership") is a
publicly traded Delaware limited partnership. The Partnership and its
subsidiaries own, manage and operate 3.3 millions of acres of timberland
and various wood products conversion facilities in various parts of the
United States.
B. Defendant Plum Creek Management Company, L.P. ("PCMC"), a Delaware
limited partnership, is the general partner of the Partnership. Defendant
PC Advisory Corp. I ("Corp. I"), a Delaware corporation, is the indirect
general partner of PCMC. PCMC Intermediate Holdings, L.P. is the sole
limited partner of PCMC. PCMC Intermediate Holdings, L.P. and its
successors are referred to as "Holdings." Defendants PCMC and Corp. I are
referred to collectively as the "General Partner."
C. On June 8, 1998, the Partnership announced that it had entered
into an agreement with the General Partner (the "Conversion Proposal")
pursuant to which the Partnership would convert from a master limited
partnership into a real estate investment trust (the "Conversion"). The
newly formed real estate investment trust will be Plum Creek Timber
Company, Inc. (the "REIT"). The term "Plum Creek" shall be used to refer as
applicable to the Partnership (prior to the Conversion) and/or the REIT
(after the Conversion). The Conversion was expressly conditioned upon the
affirmative vote of 66-2/3% of the outstanding units of the Partnership. If
the Conversion Proposal were approved by the unitholders of the Partnership
(the "Unitholders"), the General Partner would exchange its current
interest in the Partnership for a 27% equity interest in the REIT.
Following the Conversion, 99% of the General Partner's economic interest in
the REIT will be held through Holdings.
D. On September 11, 1998, plaintiff filed a class action complaint,
purportedly on behalf of all Unitholders, in the Court styled Sonet v. Plum
Creek Timber Co., L.P. et al., Del. Ch., C.A. No. 16639, against Plum
Creek, PCMC and Corp. I alleging that the General Partner violated certain
of its fiduciary duties to the Unitholders by virtue of the terms of the
Conversion and the process by which it was determined, including the duty
of due care (the "First Action"). On November 17, 1998, plaintiff filed an
amended complaint in the First Action which also challenged the General
Partner's alleged breach of fiduciary duties in connection with the
Conversion Proposal. Defendants moved to dismiss the First Action.
E. While defendants' motion to dismiss the First Action was pending,
plaintiff's counsel engaged in extensive discovery including the review of
documents produced by defendants and their respective financial advisors.
Plaintiff's counsel also deposed Rick Holley (President and CEO of PCMC),
Ian B. Davidson and David D. Leland (members of the Special Committee of
the Corp I board of directors), William J. Patterson (director of Corp. I
and one of three principals who collectively own 100% of the capital stock
of Corp. I), and representatives of Salomon Smith Barney, Inc. (a financial
advisor to the Special Committee) and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (a financial advisor to Plum Creek).
F. On December 17, 1998, the Court granted defendants' motion to
dismiss the First Action. On January 11, 1999, Plaintiff filed a notice of
appeal in the Supreme Court of the State of Delaware with respect to the
First Action. Plaintiff's appeal to the Supreme
Court is pending.
G. On or about January 29, 1999, Plum Creek distributed its Proxy
Statement/Prospectus (the "Proxy Statement") setting a March 22, 1999 date
for a special meeting of Unitholders in connection with the Conversion
Proposal. Shortly thereafter, plaintiff filed a new class action complaint,
purportedly on behalf of all Unitholders, in the Court styled Sonet v. Plum
Creek Timber Company, L.P. et al., Del. Ch., C.A. No. 16931 (the "Action"
or the "Second Action"). The Second Action alleged that the Proxy Statement
contained material omissions and misstatements and asserted claims based
upon the General Partner's alleged breach of its duties of candor and due
care. Along with his complaint, plaintiff also filed in the Second Action a
motion seeking to preliminarily enjoin the Unitholder vote on the
Conversion.
H. Following expedited briefing by the parties, plaintiff's motion
for preliminary injunction was argued to the Court on March 2, 1999. On
March 18, 1999, the Court issued an opinion finding that certain of the
disclosures about which plaintiff complained were deficient and granting
plaintiff's motion to preliminarily enjoin the Unitholder vote on the
Conversion until appropriate corrective disclosures were made and properly
disseminated (the "Opinion"). Sonet v. Plum Creek Timber Company, L.P., et
al., Del. Ch., C.A. No. 16931, Jacobs, V.C. (March 18, 1999) .
I. On March 19, 1999, the Court entered an order in the Second Action
(the "Order") which provided, in pertinent part, that:
1. The Unitholder vote on the Conversion shall not occur
until [supplemental disclosures (the "Supplement")] in
substantially the form attached is mailed to the
Unitholders, as of the record date of January 22, 1999,
of the Partnership.
2. The Partnership may count the proxies already received as
long as it provides all of its Unitholders with a new
proxy, and clearly informs them that the last previously
submitted proxy will be counted unless a new proxy is
submitted. The Partnership shall not hold its meeting
sooner than 15 days from the mailing of the Supplement.
Such a meeting shall be treated as an adjournment of the
March 22, 1999 meeting and no new record date need be
set.
3. The entry of this Order shall not foreclose any claims
based on, or preclude any action by the Securities and
Exchange Commission with respect to federal disclosure
and/or proxy rules and regulations.
4. By entry of this Order, the Court is neither approving or
disapproving the adequacy of the Supplement attached to
this Order.
J. As a result of the Opinion and the Order, the scheduled March 22,
1999 special meeting of Unitholders was convened and then adjourned until
March 24, 1999 and again until March 29, 1999. At the reconvened March 29,
1999 special meeting of Unitholders, the meeting was adjourned again until
April 19, 1999.
K. Following the entry of the Order, the parties commenced
discussions with respect to a possible settlement of the Second Action.
Those discussions also contemplated that as part of any settlement,
Plaintiff would withdraw his appeal of the dismissal of the First Action.
L. While settlement discussions were ongoing, the Partnership
finalized and prepared to mail the Supplement. In connection with that
process, counsel for plaintiff expressed to the Partnership, to the
Securities and Exchange Commission and to the Court his views about the
inadequacy of various aspects of the proposed supplemental disclosure, as a
result of which certain changes were made. In addition, plaintiff's counsel
made known to the Partnership his intention to commence in the United
States District Court for the District of Washington a third action against
the General Partner and the Partnership (the "Third Action") and, for
purposes of discussing settlement, provided portions of the draft complaint
to counsel for the General Partner. The contemplated Third Action would
have asserted claims under the Securities Act of 1933 challenging the
adequacy of the contents of the disclosures made in connection with the
Conversion. (The First, Second and Third Actions shall be referred to
collectively as the "Actions").
M. On or about March 29, 1999, the Supplement was mailed to all
Unitholders of record as of January 22, 1999. Over the course of several
days, the parties engaged in intensive settlement discussions in an effort
to reach a settlement on a mutually acceptable basis in time to avoid
further litigation (the "March-April Settlement Discussions"). The parties
had previously held settlement discussions in December 1998, but those
discussions had been unsuccessful. Counsel for the Plaintiff conducted the
March-April Settlement Discussions with the participation of his retained
financial advisor directly with counsel for the General Partner. The
resulting agreement was the product of multiple exchanges of proposals by
both parties and embodies terms that reflect compromises by both sides on
all issues.
N. In light of the events, negotiations and agreements described
above, the facts that had been developed in discovery, and analysis of
applicable law, counsel for plaintiff in the Action has concluded that the
terms and conditions of the settlement provided for in the Stipulation (the
"Settlement") are fair, reasonable, adequate, and in the best interests of
the plaintiff and the class of Unitholders represented in the Action.
O. Plaintiff enters into this Stipulation after taking into account
(i) the substantial benefits to the members of the Class (as defined
below), (ii) the risk of continued litigation, (iii) the desirability of
permitting the Settlement to be consummated as provided by the terms of
this Stipulation, and (iv) the conclusion of counsel for plaintiff that the
terms and conditions of the Settlement are fair, reasonable, adequate and
in the best interests of the Unitholders. Plaintiff and plaintiff's counsel
have agreed to the terms of the Settlement because, in their view, the
Settlement achieves plaintiff's principal objectives in the Actions, which
were to provide the Unitholders with full disclosure of all material
information so that they could make an informed decision with respect to
the Conversion, and to provide compensation to Unitholders in the event the
actual economic performance of Plum Creek does not equal or exceed the
amounts set forth in the financial information referenced in a letter from
Sidney B. Silverman, Esquire to Srinivas M. Raju, Esquire dated April 7,
1999 (the "Financial Information").
P. Defendants in the Action have denied and continue to deny
vigorously any liability with respect to all claims alleged in the Actions.
While denying any fault or wrongdoing, and relying on the provision of the
Stipulation that it shall in no event be construed as or deemed to be
evidence of an admission or concession on the part of defendants or any
Released Person (as defined below) of any fault or liability whatsoever,
and without conceding any infirmity in their defenses against the claims
alleged in the Actions, defendants consider it desirable that the Action be
settled and dismissed, subject to the terms and conditions of the
Stipulation, because the Settlement will (i) be beneficial to the
Unitholders; (ii) halt the substantial expense, inconvenience and
distraction of continued litigation of plaintiff's claims; (iii) finally
put to rest those claims; and (iv) dispel any uncertainty that may exist as
a result of the Actions.
THE SETTLEMENT TERMS
--------------------
1. In consideration for the full settlement, satisfaction, compromise
and release of the Settled Claims, the parties agree as follows:
a. On April 15, 2004, or such earlier date in 2004 as the final
audited financial results for calendar year 2003 are available, Holdings
shall make a payment to a settlement fund (the "Fund") to be established by
plaintiff's counsel, subject to the jurisdiction of the Court, in the
following amount:
i. In the event Plum Creek's five-year average earnings
before taxes, depreciation and amortization on a consolidated basis
including all its subsidiaries whether or not such subsidiaries are
required to be consolidated pursuant to generally accepted accounting
principles ("EBTDA") during the fiscal years ending December 31, 1999 -
December 31, 2003 (the "Period") is less than $2.26 per share, Holdings
shall pay $30 million into the Fund;
ii. In the event Plum Creek's five-year average EBTDA
during the period is $2.84 per share (the "Upper Target") or greater,
Holdings shall make no payment into the Fund; and
iii. In the event Plum Creek's five-year average EBTDA
during the Period is between $2.26 and $2.84 per share, Holdings shall pay
into the Fund $517,241.38 for each $.01 by which Plum Creek's five-year
average EBTDA is below $2.84 per share, up to a maximum of $30 million.
b. In determining EBTDA for purposes of the foregoing
sub-section, extraordinary items shall be excluded -- provided, however,
that the acquisition by Plum Creek of additional timberlands or facilities
shall not be considered an extraordinary item, nor shall the sale of higher
and better use land, up to the aggregate limit contained in the Financial
Information, be considered an extraordinary item. The $2.26 per share and
$2.84 per share targets in the foregoing sub-section shall be subject to
downward adjustment in the event of a sale, transfer or other disposition
of a substantial portion of Plum Creek's timberlands or other significant
assets if the consideration received in connection with such sale, transfer
or other disposition is distributed to shareholders. In the event of any
unresolved disagreement between the parties as to whether a particular item
constitutes an extraordinary item or whether a sale requires an adjustment
in the thresholds, the matter shall be submitted for resolution to an
independent Big Five accounting firm to be identified by plaintiff's
counsel at the time a dispute arises.
c. In the event the REIT is sold to or acquired by another
company or person prior to the end of the Period (a "Sales Transaction"),
any obligation on the part of Holdings to make a payment to the Fund shall
be determined as of the date of closing of the Sales Transaction as
follows:
i. if the Sales Transaction occurs on or prior to the
close of business on December 31, 2001 and is at a price (or equivalent
price in a non-cash transaction) equal to or greater than $34 per share,
then Holdings shall have no obligation to make any payment to the Fund; or
ii. if the Sales Transaction is either at a price (or
equivalent price in a non-cash transaction) less than $34 per share or
occurs after the close of business on December 31, 2001, then Holdings'
payment obligation, if any, shall be determined based on Plum Creek's
average EBTDA measured from January 1, 1999 through the last full quarter
on a calendar year basis (prorating any partial year from the full year
number) immediately preceding the Sales Transaction (the "Revised Period")
and Holdings' payment obligation shall be:
(1) in the event Plum Creek's average EBTDA
during the Revised Period is less than $2.26 per share, Holdings shall pay
$30 million into the Fund;
(2) in the event Plum Creek's average EBTDA
during the Revised Period equals or exceeds the Revised Upper Target (as
defined below), Holdings shall make no payment into the Fund; and
(3) in the event Plum Creek's average EBTDA
during the Revised Period is between $2.28 and the Revised Upper Target (as
defined below), Holdings shall make a payment into the Fund ratably
apportioned between $0 and $30 million. The "Revised Upper Target" shall be
determined pursuant to the same calculation that is used to determine the
Upper Target, except that the calculation shall be performed for the
Revised Period.
d. The Fund shall be established by plaintiff's counsel prior
to the date the payment, if any, by Holdings to the Fund shall be due. The
Fund shall be for the benefit of beneficial owners of units of the
Partnership as of the date of the Conversion (the "Entitled Unitholders"),
and shall be subject to the jurisdiction of the Court. The proceeds of the
Fund, after payment of fees as may be awarded by the Court and expenses of
administration and distribution, shall be distributed to the Entitled
Unitholders. Other than Holdings' obligation, as set forth in this
paragraph, to make a payment to the Fund, none of the defendants shall have
any responsibility for or involvement in the establishment or
administration of, or any other matter relating to, the Fund.
e. During the Period or Revised Period, whichever is shorter,
Holdings shall maintain unencumbered stock of the REIT or other assets
reasonably acceptable to plaintiff's counsel in an amount no less than $40
million to secure compliance with its obligations under this paragraph. At
least annually, Holdings shall provide to plaintiff's counsel a statement
from an independent auditor or accounting firm certifying Holdings'
compliance with this sub-section.
f. No later than April 15 of each calendar year, Plum Creek
shall provide to plaintiff's counsel a statement of Plum Creek's EBTDA per
share for the immediately preceding calendar year and an average for the
Period to date. Counsel for plaintiff shall have the right to request such
additional information from Plum Creek as may reasonably be necessary to
enable him, or an independent financial advisor retained by him, to verify
the calculation.
g. Although the parties do not believe that the provisions of
this paragraph 1 create a security, in the event anyone were to deem it to
do so, such security would be exempt from registration pursuant to Section
3(a)(10) of the Securities Act of 1933.
2. If the Stipulation and the Settlement are approved by the Court,
the Court will enter an Order and Final Judgment which, among other things,
will provide that subject to consummation of the Conversion, the Action and
any and all claims, demands, rights, actions or causes of action, whether
known or unknown that have been, could have been, or in the future can or
might be asserted in the Actions, or in any court, tribunal or proceeding
(including, but not limited to, any claims arising under federal or state
law relating to alleged fraud, breach of any duty, negligence, violations
of the federal securities laws or otherwise) by or on behalf of any member
of the Class, whether individual, class, derivative, representative, legal,
equitable or any other type or in any other capacity (collectively, the
"Releasing Parties") against defendants in the Actions or any of their
families, parent entities, associates, affiliates or subsidiaries and each
and all of their respective past, present or future officers, directors,
stockholders, principals, representatives, employees, attorneys, financial
or investment advisors, consultants, accountants, investment bankers,
commercial bankers, engineers, insurers and reinsurers, advisors or agents,
heirs, executors, trustees, general or limited partners or partnerships,
personal representatives, estates, administrators, predecessors, successors
and assigns (collectively, the "Released Persons") which have arisen, could
have arisen, arise now or hereafter arise out of, or relate in any manner
to, the allegations, facts, events, transactions, acts, occurrences,
statements, representations, misrepresentations, omissions or any other
matter, thing or cause whatsoever, or any series thereof, embraced,
involved, set forth or otherwise related, directly or indirectly, to any of
the complaints filed at any time in the Actions, the claims to be included
in the Third Action, the Conversion Proposal, the Conversion, and the Proxy
Statement, the Supplement and any proxy material, public filings or
statements by any of the defendants in the Action or any other Released
Persons in connection with the Conversion Proposal or the Conversion
(collectively, the "Settled Claims") shall be fully, finally, and forever
compromised, settled, discharged, dismissed with prejudice and released
pursuant to the terms and conditions set forth herein; provided however,
that the Settled Claims shall not include any claims or causes of action
that members of the Class may have (i) based solely upon the failure under
the Internal Revenue Code of Plum Creek to qualify as a real estate
investment trust and (ii) to enforce compliance with the terms of the
Settlement.
It is the intention of the parties to extinguish all Settled Claims
and consistent with such intention the Releasing Parties waive their
rights, to the extent permitted by law, from the provisions
of Section 1542 of the California Civil Code or any other similar state
law, federal law or principle of common law, which may have the effect of
limiting the release set forth above.
3. THE COURT HAS NOT FINALLY DETERMINED THE MERITS OF THE CLAIMS MADE
BY PLAINTIFF AGAINST, OR THE DEFENSES OF, THE DEFENDANTS. THIS NOTICE DOES
NOT IMPLY THAT THERE HAS BEEN OR WOULD BE ANY FINDING OF VIOLATION OF THE
LAW OR THAT RELIEF IN ANY FORM OR RECOVERY IN ANY AMOUNT COULD BE HAD IF
THE ACTIONS WERE NOT SETTLED.
DISMISSAL AND RELEASE
---------------------
4. It is the intent of the parties to the Action that the proposed
Settlement, if approved by the Court, shall extinguish for all time all
rights, claims and causes of action that are or relate to the Settled
Claims against any of the Released Persons.
5. The Settlement will become effective at such time as (i) the Order
and Final Judgment entered by the Court approving the Settlement shall
become final and not subject to further appeal or review, and (ii) the
Conversion, pursuant to the terms of the Conversion Proposal, is
consummated. In the event that the Settlement is not approved by the Court
or does not become effective, then the Settlement shall be of no further
force and effect and each party shall be restored to his, her or its
respective position prior to entering into the Stipulation, except that all
costs incurred in connection with notifying the Class of the proposed
Settlement shall be the obligation of Plum Creek.
6. If the Settlement is approved by the Court and the Conversion is
consummated, the Action will be dismissed on the merits with respect to all
defendants and with prejudice against plaintiff and all members of the
Class. In addition, upon the execution of this Settlement Agreement by all
parties, the parties shall file in the Supreme Court a stipulation staying
plaintiff's appeal of the dismissal of his complaint in the First Action.
Upon the date when this Settlement shall be Finally Approved (as defined in
the Stipulation), the parties shall file a stipulation in the Supreme Court
dismissing the appeal of the dismissal of the First Action with prejudice
and without costs. The Stipulation provides that the Settlement is a full
compromise, settlement and release of all claims, known or unknown, which
have been or which might have been asserted by plaintiff or any other
member of the Class against any of the Released Persons arising now or
hereafter from or relating to matters alleged in the Actions. Under the
terms of the Stipulation, such release and dismissal will bar the
institution or prosecution by plaintiff or any member of the Class of any
other action asserting any Settled Claim against any of the Released
Persons.
ATTORNEYS' FEES
---------------
7. At or before the hearing, plaintiff's counsel may apply for an
award of attorneys' fees and expenses, as follows: (i) an amount not to
exceed $1,500,000.00, with the amount awarded by the Court to be paid by
Plum Creek; (ii) actual expenses up to $125,000, the amount approved by the
Court to be paid by Plum Creek; and (iii) a fixed percentage, not to exceed
25%, of the Fund, to be paid solely from the Fund. Defendants agree they
will not object to such an application by plaintiff's counsel, and
plaintiff's counsel agrees not to make any other application for fees or
disbursements, but defendants retain the right to oppose any other
application for fees or disbursements by any other person. The fairness,
reasonableness and adequacy of the Settlement may be considered and ruled
upon by the Court independently of any award of attorneys' fees and
reimbursement of expenses.
CLASS CERTIFICATION
-------------------
8. On April 9, 1999, the Court entered an order (the "Scheduling
Order") determining preliminarily and solely for purposes of the
Settlement, that the Action may be maintained as a class action, with no
opt out rights, by plaintiff as representative of the Class, and naming the
law firm of Rosenthal, Monhait, Gross & Goddess, P.A. as Delaware Liaison
Counsel and naming the law firm of Silverman, Harnes, Harnes, Prussin &
Keller as Lead Counsel for the Class ("Class Counsel"), pursuant to Court
of Chancery Rules 23(a), (b)(1) and (b)(2), on behalf of the Class. The
Court will consider these issues further at the Settlement Hearing to
determine whether (1) the Class contemplated in the Action is so numerous
that joinder of all members is impracticable, (2) there are questions of
law or fact common to the Class, (3) the claims of the representative
plaintiff are typical of the claims of the Class, and (4) the
representative plaintiff has fairly and adequately protected the interests
of the Class and whether the Action otherwise complies with Court of
Chancery Rules 23(a), (b)(1) and (b)(2).
RIGHT TO APPEAR AT SETTLEMENT HEARING
-------------------------------------
9. Any Class member who objects to the Stipulation, the Settlement,
the class action determination, the Order and Final Judgment to be entered
herein, and/or the application for attorneys' fees and expenses, or who
otherwise wishes to be heard, may appear in person or by his attorney at
the Settlement Hearing and present any evidence or argument that may be
proper and relevant; provided, however, that no person other than the named
plaintiff, defendants and counsel for defendants in the Action shall be
heard, and no papers, briefs, pleadings or other documents submitted by any
such person shall be received or considered by the Court (unless the Court
in its discretion shall thereafter otherwise direct, upon application of
such person and for good cause shown), unless no later than ten (10) days
prior to the Settlement Hearing, (i) a written notice of the intention to
appear; (ii) a detailed statement of such person's objections to any matter
before the Court; and (iii) the grounds therefor or the reasons why such
person desires to appear and to be heard, as well as all documents and
writings which such person desires the Court to consider, shall be filed by
such person with the Register in Chancery and, on or before such filing,
shall be served by hand or overnight mail on the following counsel of
record:
Joseph A. Rosenthal, Esquire
Rosenthal, Monhait, Gross & Goddess, P.A.
Mellon Bank Center, Suite 1401
P.O. Box 1070
Wilmington, Delaware 19899
Attorneys for Plaintiff
Jesse A. Finkelstein, Esquire
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
Attorneys for certain Defendants
Edward P. Welch, Esquire
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
Attorneys for certain Defendants
Any person who fails to object in the manner prescribed above shall be
deemed to have waived such objection and shall be forever barred from
raising such objection in this or any other action or proceeding.
INTERIM INJUNCTION
------------------
10. Pending final determination of whether the Stipulation should be
approved, the plaintiff and all members of the Class, and each of them, and
any of their respective representatives, trustees, successors, heirs and
assigns are barred and enjoined from commencing or prosecuting any action
either directly or in any other capacity which asserts Settled Claims
against any of the Released Persons.
SCOPE OF THIS NOTICE AND FURTHER INFORMATION
--------------------------------------------
11. This Notice does not purport to be a comprehensive description of
the Action, the allegations or transactions related thereto, the terms of
the Settlement or the Settlement Hearing. For a more detailed statement of
the matters involved in this litigation, you may inspect the pleadings, the
Stipulation, the Orders entered by the Court of Chancery and other papers
filed in these litigations, unless sealed, at the Office of the Register in
Chancery of the Court of Chancery of the State of Delaware, Daniel L.
Herrmann Courthouse, 10th & King Streets, New Castle County, Wilmington,
Delaware, during regular business hours of each business day. DO NOT WRITE
OR TELEPHONE THE COURT.
NOTICE TO PERSONS OR ENTITIES HOLDING
RECORD OWNERSHIP ON BEHALF OF OTHERS
-------------------------------------
12. Brokerage firms, banks and other persons or entities who are
members of the Class in their capacities as record owners, but not as
beneficial owners, are requested to send this Notice promptly to beneficial
owners. Additional copies of this notice for transmittal to beneficial
owners are available on request directed to
Georgeson & Company Inc.
Wall Street Plaza
88 Pine Street 30th Floor
New York, New York 10005
(212) 440-9800 (call collect)
or
(800) 223-2064 (call toll free)
BY ORDER OF THE COURT:
------------------------------
Register in Chancery
Dated: April 9, 1999
