<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
____________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-24976
CROWN PACIFIC PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 93-1161833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 SW MORRISON STREET, SUITE 1500, PORTLAND, OREGON 97204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 503-274-2300
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON UNITS, REPRESENTING LIMITED NEW YORK STOCK EXCHANGE
PARTNER INTERESTS
Securities registered pursuant to Section 12(g) of the Act: NONE
____________________
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ X ]
The aggregate market value of the voting Units of the Registrant held by
non-affiliates of the Registrant was $550,881,502 as of January 30, 1998
based upon the last sales price as reported by the New York Stock Exchange.
As of January 30, 1998 there were 21,541,189 Common Units and 5,773,088
Subordinated Units outstanding.
____________________
Documents Incorporated by Reference
NONE.
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CROWN PACIFIC PARTNERS, L.P.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 2
Item 2. Properties 13
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
PART II
Item 5. Market for Registrant's Common Equity and Related
Unitholder Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 23
Item 8. Financial Statements and Supplementary Data 23
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 23
PART III
Item 10. Directors and Executive Officers of the Managing General
Partners 24
Item 11. Executive Compensation 27
Item 12. Security Ownership of Certain Beneficial Owners and Management 30
Item 13. Certain Relationships and Related Transactions 32
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 33
Signatures 36
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PART I
ITEM 1. BUSINESS
GENERAL
Crown Pacific Partners, L.P. ("Crown Pacific" or the "Partnership"), a
Delaware limited partnership, through its 99% owned subsidiary, Crown Pacific
Limited Partnership (the "Operating Partnership"), was formed in 1994 to
acquire, own and operate timberlands and wood product manufacturing
facilities located in the northwest United States. The Partnership's business
consists primarily of growing and harvesting timber for sale as logs in
domestic and export markets and the manufacturing and selling of lumber and
other wood products.
Crown Pacific Management Limited Partnership (the "Managing General Partner")
manages the businesses of the Partnership and the Operating Partnership. The
Managing General Partner owns a 0.99% general partner interest in the
Partnership and the remaining 1% general partner interest in the Operating
Partnership. Crown Pacific, Ltd. ("CPL"), which is the Special General
Partner of the Partnership, and the Managing General Partner, comprise the
General Partners of the Partnership. The Special General Partner owns a
0.01% general partner interest and a 10% limited partnership interest in the
Partnership. All management decisions related to the Partnership are made by
the Managing General Partner, but Unitholders have voting rights for certain
issues as described in the Partnership Agreement.
For a discussion of the Partnership's timberlands, see "Business-Timberlands"
and "Business-Timberland Management." For a discussion of the Partnership's
manufacturing facilities ("Manufacturing Facilities"), see "Properties
- -Manufacturing Facilities."
The Partnership has pursued a plan of growth through strategic acquisitions
of timberlands and other assets since its inception. The following table
summarizes the significant acquisitions, net of asset resales, during the
Partnership's history:
<TABLE>
<CAPTION>
Acquisition Date Consideration
- ----------- ------------- -------------
<S> <C> <C>
Central Oregon timberlands April 1988 $35.6 million
Prineville, Oregon sawmill November 1988 $6.3 million
Hamilton timberlands July 1989 $237.8 million
Central Oregon timberlands and Gilchrist, Oregon sawmill October 1991 $131.5 million
Central Oregon timberlands June 1992 $8.8 million
Eastern Washington timberlands December 1992 $10.1 million
Redmond, Oregon plywood and remanufacturing facilities September 1993 $29.4 million
Inland Region timberlands and sawmills October 1993 $238.0 million
Western Washington, Tract 17 timberlands July 1995 $18.0 million
Olympic timberlands and Eastside timberlands May 1996 $205.0 million
Bellingham, Washington timberlands October 1997 $153.0 million
</TABLE>
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RECENT ACQUISITIONS
In January 1998, the Partnership acquired Alliance Wholesale Lumber, Inc.
("Alliance") for $29.5 million. Alliance operates three contractor service
yards in the Phoenix, Arizona area, which provide a variety of wood products
to residential and commercial contractors.
In October 1997, the Partnership acquired 65,000 acres of timberland from
Trillium Corp. of Bellingham, Washington for $153.0 million. The timberlands
are located in Whatcom, Skagit and Snohomish counties and include
approximately 590 million board feet ("MMBF") of merchantable hemlock,
Douglas fir, cedar and hardwoods.
RECENT DISPOSITION
Crown Pacific has historically engaged in the sale or disposal of timberland
and other manufacturing facilities not integral to its forest products
operations and strategies. In March 1997, the Partnership sold substantially
all of the assets of its Redmond, Oregon remanufacturing facility for $7.4
million. In conjunction with the sale, the Partnership entered into a
long-term supply agreement with the purchaser to supply lumber at market
prices. Proceeds from the sale of these assets have been used to fund a
portion of the Partnership's mill expansion and capital improvement program.
TIMBERLANDS
The Partnership owns or controls approximately 800,000 acres of timberlands,
which contain a total merchantable timber inventory of approximately 5.0
billion board feet, located in Oregon, Washington, Idaho and Montana.
The following table summarizes the estimated volume and acreage of the
Partnership's timberlands:
<TABLE>
<CAPTION>
Volume
Timberlands (MMBF) Acreage
- ---------------------------------------------- ------- -------
<S> <C> <C>
Oregon Timberlands 1,164 356,000
Washington Timberlands 2,218 234,000
Inland Timberlands 1,643 202,000
------- -------
5,025 792,000
------- -------
------- -------
</TABLE>
The Partnership believes it is one of the largest non-governmental holders of
mature Ponderosa pine in the United States. The Partnership's Ponderosa
pine, as well as substantial quantities of export-quality Douglas fir and
hemlock located on the Hamilton and Olympic timberlands, have historically
commanded premium prices over other softwood species. The Partnership also
has significant holdings of other softwood species, including white fir,
lodgepole pine, cedar and sugar pine. Most of the timber on the timberlands
is softwood. Due to its long fiber, strength, flexibility and other
characteristics, softwood is generally preferred over hardwood for
construction lumber and plywood.
The timberlands are comprised principally of mature stands, with over 50% of
the Partnership's merchantable timber in the Oregon and Inland Regions being
at least 80 years old. In northwest Washington, where timber is harvested at
a much earlier age because of high growth rates, over 70% of the
Partnership's merchantable timber is at least 40 years old.
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The Partnership's substantial timber resources reduce its reliance on
third-party log sources to supply its manufacturing facilities, which the
Partnership believes gives it a significant competitive advantage over lumber
manufacturers without a supply of fee timber. During 1997, 1996 and 1995,
Crown Pacific's timberlands provided the Oregon manufacturing facilities with
42%, 54% and 35%, respectively, and the Inland manufacturing facilities with
63%, 47% and 40%, respectively, of their log requirements. The decrease at
the Oregon manufacturing facilities in 1997 is primarily a result of
substantially more logs being obtained in the form of purchased stumpage and
logs as a greater quantity of high quality logs were available for purchase.
The increase at the Inland manufacturing facilities in 1997 resulted from the
closure of two Inland Region manufacturing facilities and capital
improvements to the remaining manufacturing facilities that have reduced
dependence on outside log sources through more efficient processing.
TIMBERLAND MANAGEMENT
Particular forestry practices vary by geographic region and depend on factors
such as soil productivity, weather, terrain, tree size, age and stocking.
Crown Pacific actively manages its timber operations based on these factors
and other relevant information in order to maximize the long-term value of
its timber assets. The Partnership's management practices begin with the
development of harvest plans for each of its tree farms. These plans are
regularly reviewed and updated to reflect forestry considerations, market
conditions, contractual and financing obligations and regulatory limitations.
Consistent with prudent forestry practices, Crown Pacific attempts to harvest
any trees that are dead, dying, downed, diseased or deformed. Prudent
forestry practices also indicate that "thinning," a process by which smaller
trees are selectively removed from among larger trees or the number of trees
of equal size on a tract is reduced, helps to increase the overall growth
rate of the remaining stand of trees. Commercial thinning is generally
performed when the trees that are harvested produce merchantable timber, but
pre-commercial thinning is also practiced on the Partnership's timberlands.
Although the majority of Crown Pacific's timberlands regenerate naturally due
to selective harvesting practices, the Partnership is engaged in active
reforestation programs that generally exceed reforestation requirements
applicable to the timberlands. These programs are designed to promote better
health and growth rates and facilitate greater future harvest flexibility.
Active reforestation is practiced primarily in the Washington timberlands due
to the Partnership's even aged forestry management in that region, an
approach made necessary by the difficult logging conditions and uniform ages
and species of trees harvested in that region. The Partnership maintains a 40
acre seed orchard on Whidbey Island in Washington to support these programs.
Legal title to the Partnership's timberlands is subject to existing
easements, rights of way, flowage and flooding rights, servitudes,
cemeteries, camping sites, hunting and other leases, licenses and permits,
none of which materially adversely affect the value of the timberlands or
materially restrict the harvesting of timber or other operations of the
Partnership. In addition, under the terms of the Partnership's senior notes
and bank credit facilities, the Partnership's ability to pledge, assign or
transfer its timberlands is subject to certain restrictions.
Forests are subject to a number of hazards, including damage by fire, insects
and disease. These hazards, along with severe weather conditions and other
natural disasters, can reduce the productivity of the Partnership's
timberlands. Such hazards are unpredictable and there can be no assurance
that Crown Pacific's losses, if any, will be limited. Consistent with
practices of other forest products companies, the Partnership does not
maintain insurance against losses to standing timber on the timberlands.
Even if such insurance were available, the cost would likely be prohibitive
to the Partnership.
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PRODUCTS, COMPETITION AND SEASONALITY
Most of the timber harvested by Crown Pacific is utilized by its
manufacturing facilities for the production of lumber. The remainder,
primarily from the Washington timberlands, is sold in third party domestic
and export log markets. The Partnership's markets are highly competitive with
respect to price, quality of products, distribution and other factors. Crown
Pacific expects its products to experience increasing competition from
engineered wood products and other substitute products. During 1997, total
sales to customers involved in exporting activities were $16.3 million, or
3.2% of revenues, and no customer accounted for 10% or more of total revenues.
LOGS
The Partnership competes in the domestic market with other log suppliers,
including numerous private land and timber owners in the northwest United
States, many of whom have significantly greater financial resources than
Crown Pacific, as well as with the states of Idaho, Montana and Washington
and United States government agencies, such as the United States Forest
Service (the "USFS"), the Bureau of Land Management (the "BLM") and the
Bureau of Indian Affairs (the "BIA"). Competitive factors with respect to
the domestic log market generally include price, species and grade, proximity
to wood processing facilities and ability to meet current and future delivery
requirements.
Crown Pacific competes in the export log market with other U.S. companies, as
well as those in Chile, New Zealand, Mexico, Russia and Scandinavia, many of
whom have abundant timber resources. Principal competitive factors in the
export market are quality, size and species.
Domestic log sales volumes are generally at their lowest point in the second
quarter of each year during spring breakup, when warming weather thaws and
softens roadbeds, restricting access to harvest sites. Export log sales are
affected by variations in inventory, both domestically and in the countries
where such logs are sold, as well as by weather conditions. Total log sales,
including stumpage sales, were 24.1% of revenues for the year ended December 31,
1997.
LUMBER
Crown Pacific produces an array of lumber products at its five mills in
Oregon, Idaho and Washington (see Item 2. Properties). The Partnership's
two Oregon facilities produce shop-grade lumber products primarily for
industrial remanufacturers who produce doors, windows and other specialty
products. Products produced at the Oregon facilities generally command
premium prices due to the higher quality timber in that region.
The Partnership's two facilities in Idaho produce 1" boards and 2" dimension
commodity-grade lumber for various construction applications, including stud
walls, roof trusses and joists, decking, laminated beams and remanufactured
items. Crown Pacific's Washington facility produces commodity-grade studs for
the construction industry. Total lumber sales, excluding sales of lumber
products through the Partnership's wholesale division, were 38.7% of revenues
for the year ended December 31, 1997.
Domestic demand for lumber and manufactured wood products is directly
affected by the level of residential construction activity. In the winter,
demand generally subsides, increasing in the spring as construction activity
resumes.
Crown Pacific competes in the domestic lumber markets primarily with other
U.S. and Canadian companies. Competitive factors in the commodity-grade
lumber market are based on pricing strategies, while sales of shop grade
lumber are based on quality, species and price.
5
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WHOLESALE PRODUCTS
In September 1996, the Partnership acquired substantially all of the assets
of a company located in Eugene, Oregon, which operates as a trader and
wholesaler of lumber and other wood products. Many of the products sold from
the wholesale operation are manufactured by the Partnership; however, a
substantial amount of the sales are products manufactured by other parties.
During the year ended December 31, 1997, sales from the wholesale operation
were approximately 25.3% of total revenues. This operation generates lower
margins than the other parts of the Partnership's business. In January 1998,
the Partnership acquired Alliance Wholesale Lumber, Inc., an operator of
three contractor supply yards in the Phoenix area. 1997 sales for Alliance
Wholesale Lumber, Inc. were approximately $100 million. Crown Pacific
competes in the wholesale sales market with other wholesale companies and
forest products companies.
REMANUFACTURED PRODUCTS
Crown Pacific sold its Redmond, Oregon remanufacturing facility in March
1997. Sales of remanufactured products were 2.7% of revenues for the year
ended December 31, 1997.
CHIPS AND BY-PRODUCTS
All of Crown Pacific's manufacturing facilities produce wood chips and other
by-products during their conversion processes. Chips are typically sold to
regional pulp and paper mills, while other by-products are sold to particle
board manufacturers or used as fuel in the Partnership's manufacturing
facilities. Sales of chips and other by-products were 2.4% of revenues in
1997.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The supply of Pacific Northwest timber provided by the USFS has decreased
significantly from the late 1980s as a result of environmental regulations
and endangered species concerns by federal authorities (see "Federal and
State Regulation"). Reductions in timber supply have resulted in a number of
regional mill closures, including some by the Partnership and its predecessor
entities during the past several years. Crown Pacific believes that these
supply reductions will continue and give the Partnership a competitive
advantage over many smaller forest products companies due to the ability of
the Partnership to supply its manufacturing facilities with timber harvested
from its timberlands.
For the year ended December 31, 1997, logs from Crown Pacific's timberlands
represented 65.1% of all logs used in the Partnership's manufacturing
facilities or sold to third parties, compared to 60.9% in 1996 and 44.6% in
1995. Crown Pacific supplements logs from its timberlands with logs
purchased from third parties, including private landowners, the states of
Idaho, Montana and Washington, certain United States government agencies and
foreign sources for use in its manufacturing facilities. The Partnership
expects its domestic sources to remain fairly stable in the face of the
decline in the supply of federal timber. Reductions in federal timber
supplies have also increased demand and pricing for privately owned timber.
As of December 31, 1997, Crown Pacific had approximately 159 MMBF of timber
under contract from external sources, principally the USFS, which may be
harvested primarily over the next two years. In addition, the Partnership
imports logs, primarily Radiata pine from New Zealand as a lower quality
substitute for Ponderosa pine in its Oregon sawmills. During 1997, Crown
Pacific imported 8.1 MMBF of Radiata pine logs.
In 1996, the U.S. and Canadian governments announced a five-year lumber trade
agreement effective April 1, 1996. This agreement is intended to reduce the
volume of Canadian lumber exported into the U.S. through the assessment of an
export tariff on annual lumber exports to the U.S. in excess of certain base
level volumes. The Partnership believes that the agreement has had the
effect of limiting the amount of lumber imported from Canada.
6
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FEDERAL AND STATE REGULATION
GENERAL
Crown Pacific's operations are subject to numerous federal, state and local
laws and regulations, including those relating to its Timberland activities,
the environment, endangered species, health and safety, log exports and
product liability regulations. Although the Managing General Partner
believes that the Partnership is in material compliance with these
requirements, there can be no assurance that significant costs, civil and
criminal penalties, and liabilities will not be incurred, including those
relating to claims for damages to property or natural resources resulting
from Crown Pacific's operations. Crown Pacific maintains appropriate
compliance programs and periodically conducts internal regulatory audits of
its manufacturing facilities to monitor compliance with such laws and
regulations. In addition, appropriate due diligence with respect to
environmental compliance was conducted in connection with the acquisition of
the various manufacturing facilities and timberlands. The manufacturing
facilities have been, and may in the future be, the subject of compliance or
enforcement proceedings under environmental laws and regulations. Prior
compliance matters have been satisfactorily resolved without any material
expenditure or substantial impairment of activities or operations.
Environmental laws and regulations have changed substantially and rapidly
over the last 20 years, and the Managing General Partner anticipates there
will be continuing changes. The trend in environmental regulation is to place
more restrictions and limitations on activities that may affect the
environment, such as emissions of pollutants and the generation and disposal
of wastes. Increasingly strict environmental restrictions and limitations
have resulted in higher operating costs for Crown Pacific, and it is possible
that the costs of compliance with environmental laws and regulations will
continue to increase.
Crown Pacific's activities are also subject to federal and state laws and
regulations regarding forestry operations. In addition, the operations of the
manufacturing facilities and the timberlands are subject to the requirements
of the federal Occupational Safety and Health Act ("OSHA") and comparable
state statutes relating to the health and safety of the Partnership's
employees. Crown Pacific conducts internal safety audits to identify
potential violations of law or unsafe conditions. The Managing General
Partner believes that Crown Pacific is in material compliance with safety and
health laws and regulations.
There can be no assurance that future legislative, administrative or judicial
actions, which are becoming increasingly stringent, will not adversely affect
Crown Pacific or its ability to continue its activities and operations as
currently conducted. As of the date hereof, the Managing General Partner is
not aware of any pending legislative, administrative or judicial action that
could materially and adversely affect the Partnership.
TIMBERLANDS
In addition to federal environmental laws, the operation of the timberlands
is subject to specific laws and regulations in the states of Washington,
Oregon, Idaho and Montana which are intended to regulate and restrict the
growing, harvesting, processing and reforestation of timber on forest lands.
The states of Oregon, Idaho and Montana require prior notification before
beginning harvesting activities. The state of Washington is more
restrictive, requiring a rigorous regulatory review taking from 15 to 30 days
or more prior to harvesting, depending upon the environmental and other
sensitivities of the proposed logging site.
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Other state laws and regulations control timber slash burning, operations
during fire hazard periods, logging activities affecting or utilizing water
courses or in proximity to certain ocean and inland shore lines, water
anti-degradation and certain grading and road construction activities.
AIR QUALITY
Crown Pacific's manufacturing facilities emit regulated substances that are
subject to the requirements of the federal Clean Air Act, as amended, and
comparable state statutes. Most of the Partnership's manufacturing
facilities are required to obtain federal operating permits under Title V of
the 1990 Clean Air Act Amendments. Title V requires that major industrial
sources of air pollution obtain federally enforceable permits, which contain
the applicable air quality restrictions for the facility. All of the
required applications for Title V permits have been filed in a timely manner;
one has been issued and one is currently being processed by the regulatory
authorities. All other currently operating Partnership sources have been
determined to not require Title V permitting due to their volume of
emissions. During 1998, the new Bonners Ferry and Port Angeles mills (see
"Liquidity and Capital Resources" in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations") will be permitted
prior to operation. The cost of permitting is included in their capitalized
construction costs. The Managing General Partner believes that additional
costs associated with these requirements at existing facilities will be
incidental to ongoing operating expenses.
WATER QUALITY AND WASTEWATER
The federal Clean Water Act and comparable state statutes regulate discharges
of process wastewater, and require National Pollutant Discharge Elimination
System ("NPDES") permits for discharge of industrial wastewater and
stormwater into regulated public waters. All of the Partnership's lumber
manufacturing facilities have secured the necessary permits and are operating
in material compliance with NPDES wastewater and stormwater requirements.
Because of the Partnership's method of containing runoff water resulting from
washing vehicles, it believes its operations will not require additional
capital investment to meet Clean Water Act Standards. Due to changes in
water discharge requirements in Oregon, an estimated $60,000 capital
investment may be required for containment of sprinkler runoff on log decks
in the summer of 1998.
The Partnership's facilities, at which mobile and vehicular equipment are
based, are currently installing systems to collect the runoff resulting from
the washing of vehicles. Capital costs associated with this project are
estimated not to exceed $50,000 for concrete wash pads and catch basins in
Marysville, Washington and Coeur d'Alene, Idaho. When this project is
completed, Crown Pacific will be able to collect and dispose of this
wastewater at minimal operating cost. These steps will make all Crown
Pacific facilities compliant with the requirements of the Clean Water Act.
SOLID AND HAZARDOUS WASTE DISPOSAL
Crown Pacific's manufacturing facilities generate hazardous and non-hazardous
solid wastes, including wood waste and boiler ash, which are subject to the
Resource Conservation and Recovery Act and comparable state statutes. Crown
Pacific periodically reviews its waste disposal practices to ensure
compliance with applicable laws. The Partnership's manufacturing facilities
have in the past utilized off-site facilities, including landfills, for the
disposal of hazardous wastes. The Managing Partner does not believe that the
results of any regulatory involvement at any such disposal sites will have a
material adverse effect on the Partnership's operations or financial
position; however, there can be no assurance that Crown Pacific will not
incur future environmental expenditures for remedial activities associated
with any of these sites.
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SUPERFUND
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as Superfund, and comparable state laws impose liability, without
regard to fault or the legality of the original act, on certain classes of
persons who contributed to the release of a "hazardous substance" into the
environment. These persons include the owner or operator of a site and
companies that disposed of or arranged for the disposal of hazardous
substances found at a site. Those statutes also authorize government
environmental authorities such as the U.S. Environmental Protection Agency
and, in some instances, third parties, to take actions in response to threats
to the public health or the environment and to seek recovery of the costs
incurred from the responsible persons.
In the course of its ordinary operations, the Partnership's manufacturing
facilities have disposed of and are expected to continue disposing of
hazardous wastes, consisting primarily of wood waste and boiler ash, at
various off-site disposal facilities. Crown Pacific has not received
notification that it may be potentially responsible for any cleanup costs
under Superfund. Based on environmental compliance auditing programs, the
Managing General Partner is not aware of any activities by Crown Pacific or
any conditions on the timberlands or at its manufacturing facilities that
would be likely to result in Crown Pacific being named a potentially
responsible party under Superfund regulations.
REMEDIATION AND COMPLIANCE ACTIVITY
While Crown Pacific maintains a comprehensive environmental program designed
to prevent the discharge of materials that could cause contamination to soil
or water, contamination of soil and water has occurred in the past and may
occur in the future. As Crown Pacific becomes aware of these sites, it
cooperates with the appropriate environmental agencies to design and
implement necessary response measures. All known contamination sites at the
Partnership's facilities have been addressed to the extent required by
applicable law.
In connection with the acquisition of the studmill in Marysville, Washington
in 1996, the Partnership completed soil remediation efforts and monitoring of
groundwater for five quarters. Based on the results of these actions, the
Managing General Partner estimates that future remediation costs will not
exceed $40,000.
ENDANGERED SPECIES
The federal Endangered Species Act and counterpart state legislation protect
species threatened with possible extinction. Protection of endangered species
may include restrictions on timber harvesting, road building and other
silvicultural activities in areas containing the affected species. A number
of species indigenous to the Pacific Northwest have been protected under the
Endangered Species Act, including the northern spotted owl (the "Owl"),
marbled murrelet, mountain caribou, grizzly bear, bald eagle and various
anadromous fish species.
During 1994, Crown Pacific received reports from an independent consulting
firm regarding certain endangered species on the Inland timberlands and
regarding the Owl on the Hamilton and Central Oregon timberlands. The reports
indicated that the Owl was unlikely to be found on the Inland timberlands,
that only 3,500 acres of the Central Oregon timberlands were potentially
suitable Owl habitat and that the likelihood of the Owl inhabiting these
lands was very low and that only 1,640 acres of the current Hamilton
timberlands were suitable habitat for the Owl. An eagle management plan
will be required for the Olympic timberlands, but this is not expected to
significantly affect Crown Pacific's operations.
During 1995, Crown Pacific began developing a Habitat Conservation Plan (the
"HCP") for the Hamilton timberlands in conjunction with the United States
Fish and Wildlife Service (the "USFWS"). This plan was initiated by Crown
Pacific in order to allow for more predictable harvests
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in the area. After the HCP is completed and accepted by the USFWS, it will
serve as the basis for regulating the Partnership's harvesting activities in
that region. Crown Pacific believes that the HCP will be obtained by the end
of 1998 at a remaining cost not exceeding $100,000. Crown Pacific is not
currently considering the development of HCPs with respect to its other
timberlands.
During 1997, Crown Pacific acquired approximately 265 acres of old growth
timberland in the state of Washington from Trillium Corporation. This
acreage may be suitable habitat for listed or endangered species. Crown
Pacific has entered into an option with The Trust for Public Lands to sell
this acreage and other surrounding acreage during 1998.
In September 1997, Crown Pacific received a subpoena from the United States
Attorney for the Western District of Washington to produce documents in
connection with an investigation by the United States Fish & Wildlife Service
regarding the sale by Crown Pacific in 1996 of a 379 acre tract from the
Hamilton tree farm that contained Owl habitat, at least 160 acres of which
could be harvested without any significant adverse impact on the Owl. No
charges have been brought against Crown Pacific or any of its employees, and
Crown Pacific is cooperating with the investigation and is still producing
documents requested in the September subpoena.
Anadromous fish species are being analyzed by the USFWS and the State of
Washington as potentially endangered or threatened. Certain of these species
are found in rivers or streams that cross or border the timberlands,
particularly in Washington. The presence of these species has not materially
affected, and is not expected to materially affect, Crown Pacific's
operations and related financial results even if they are considered
endangered or threatened. The Partnership anticipates that the listing of
anadromous or other fish species as threatened or endangered will primarily
affect the availability of timber from federal lands, a resource the
Partnership has already assumed will be in decline.
Based on the reports described above and management's knowledge of the
timberlands, the Partnership does not believe that there are any species
protected under the Endangered Species Act that would materially and
adversely affect Crown Pacific's ability to harvest the timberlands in
accordance with its current harvest plans. There can be no assurance however,
that species within the timberlands may not subsequently receive protected
status under the Endangered Species Act or that currently protected species
may not be discovered within the timberlands.
LOG EXPORTS
Federal laws prohibit the export of unprocessed timber acquired from federal
lands in the western United States, or the substitution of unprocessed
federal timber from the western United States for unprocessed private timber
that is exported. Persons owning timber-processing facilities may seek
authorization from the United States Department of Agriculture for a
"sourcing area," within which the person may purchase federal timber while
exporting unprocessed private timber originating from outside the sourcing
area. A sourcing area for timber processing facilities in states other than
the state of Washington must be geographically and economically separate from
any geographic areas where the person or its affiliates harvest private
timber for export. Crown Pacific has been granted sourcing areas which allow
it to purchase available federal timber to supply its manufacturing
facilities located in Oregon and Idaho, while selling logs for export from
its Washington timberlands. These sourcing areas are reviewed by the federal
government every five years. The next regular review of Crown Pacific's
sourcing areas is scheduled in 1999.
Various parties, including one of the Partnership's competitors, initiated
litigation in July 1995 in U.S. District Court in Idaho seeking to overturn
the federal government's approval of Crown Pacific's sourcing areas. These
parties' principal contention is that the sourcing areas are not
geographically and economically separate from the region from which Crown
Pacific sells logs for export. Although not named as a defendant, the
Partnership has intervened in the proceeding. In November 1996, the
plaintiffs and the federal government as defendant entered into a Stipulation
of Settlement. As part of the settlement, the USFS agreed that Crown
Pacific's previously-approved sourcing areas would be remanded for review by
the USFS. Pending the review, the remand does not affect the status of the
sourcing areas granted.
10
<PAGE>
In November 1997, Congress amended the governing law and the USFS is required
to promulgate new implementing regulations. The Partnership believes that
the USFS will not review its previously approved sourcing areas until after
the new regulations are in place and that, if and when its sourcing areas are
reviewed by the USFS, the outcome will be favorable to the Partnership.
However, even if the USFS review of Crown Pacific's previously-approved
sourcing areas is resolved against Crown Pacific and any administrative
and/or judicial appeal of the USFS's adverse ruling is upheld, the
Partnership believes that its ability or inability to acquire federal timber
would not have a material impact on its financial results or operations
because it has previously assumed that federal timber would not be available
in significant quantities to supply its manufacturing facilities.
Congress has also prohibited the USFS from adopting any policies that would
restrain domestic transportation or processing of timber from private lands,
except that it has authorized the USFS to prohibit timber-processing
facilities in the state of Idaho from bringing private logs harvested from
outside their sourcing areas into such facilities for conversion. If the
USFS exercises its authority to adopt such a prohibition, it would restrict
the Partnership's ability to bring logs harvested from private lands outside
its sourcing area into its Idaho manufacturing facilities for conversion.
Even if the USFS does adopt the prohibition, the Partnership does not expect
it to adversely affect its financial results or operations since the
Partnership rarely, if ever, has purchased private logs outside of its
sourcing area for processing in its Idaho manufacturing facilities.
PRODUCT LIABILITY AND REGULATION
All of the states in the United States and many foreign jurisdictions in
which Crown Pacific sells its products have, through some combination of
legislation and judicial decision, provided for the liability of the
manufacturer and supplier of defective materials for resulting personal
injury and property damage. The operations of Crown Pacific entail exposure
to product liability in connection with both the export and domestic sales of
logs and lumber products. Crown Pacific has not been subject to any material
litigation relating to product liability.
INCOME TAX CONSIDERATIONS
PARTNERSHIP STATUS
Beneficial owners of Units in the Partnership are considered partners for
federal income tax purposes. Accordingly, the Partnership pays no federal
income taxes, and Unitholders are required to report their share of the
Partnership's income, gains, losses and deductions in their federal income
tax returns. Cash distributions to Unitholders are taxable only to the
extent that they exceed the tax basis in their Units.
LIMITATIONS ON DEDUCTIBILITY OF PARTNERSHIP LOSSES
Under the passive loss limitations, Partnership losses are available to
offset future income generated by the Partnership and cannot be used to
offset income from other activities, including other passive activities or
investments. Any losses unused by virtue of the passive loss rules may be
deducted when the Unitholder disposes of all of his or her Units in a fully
taxable transaction with an unrelated party.
STATE TAX INFORMATION
The Partnership conducts significant operations in six states, five of which
(Arizona, California, Idaho, Oregon and Montana) have a state income tax. The
Partnership also has a minor amount of income allocable to the state of New
York. A Unitholder may be required to file state income tax returns in
Arizona, California, Idaho, Oregon, Montana and New York if their share of
the Partnership's income attributable to those states exceeds de minimis
filing exceptions.
11
<PAGE>
SECTION 754 ELECTION
The Partnership has made an election under Section 754 of the Internal
Revenue Code (the "Code"), which generally permits a Unitholder to adjust his
or her share of the basis in the Partnership's properties ("Inside Basis")
pursuant to Section 743(b) of the Code to fair market value (as reflected by
his or her Unit price), as if he or she had acquired a direct interest in the
Partnership's assets. A Unitholder's allocable share of Partnership income,
gains, losses and deductions is determined in accordance with the
Unitholder's unique basis under this election. In the case of the
Partnership Units, the Section 743(b) adjustment acts in concert with the
Section 704(c) allocation (and curative allocations) in providing the
purchaser with a fair market value Inside Basis. Such election is
irrevocable and may not be changed without the consent of the Internal
Revenue Service ("IRS"). The Section 743(b) adjustment is attributed solely
to a purchaser of Units and is not added to the basis of the Partnership's
assets associated with all of the Unitholders.
TAX-EXEMPT ENTITIES
Certain entities otherwise exempt from federal income taxes (such as
individual retirement accounts ("IRAs"), employee benefit plans and other
charitable or exempt organizations) may be subject to federal income tax if
their Unrelated Business Taxable Income ("UBTI") for their taxable year
exceeds $1,000. The majority of a Unitholders' allocable share of taxable
income from the Partnership will be classified as UBTI.
TIMBER INCOME - CAPITAL GAIN BENEFIT
Section 631 of the Code provides special rules by which gains from the sale
of timber or cut logs, which would otherwise be taxable as ordinary income,
are treated as capital gains from the sale of property used in a trade or
business. Effective May 6, 1997, the maximum capital gain rate was lowered to
20% from 28% for most assets. It is estimated that substantially all of the
Partnership's income will qualify for Section 631, the effect of which
characterizes the income generated from the Partnership as capital gain to
the Unitholder.
EMPLOYEES
At December 31, 1997, the Partnership had 199 salaried and 857 hourly
employees. The Managing General Partner believes that the Partnership's
employee relations are good. The Partnership's wage scale and benefits are
generally competitive with other forest products companies.
FORWARD-LOOKING STATEMENTS
The information throughout this Form 10-K includes certain forward-looking
statements, including statements regarding the Partnership's expectations,
hopes, beliefs, intentions or strategies regarding the future. These
statements and the Partnership's business and prospects are subject to a
number of risks. These risks include the volatility of timber and lumber
prices, factors limiting harvesting of timber - including contractual
obligations, governmental restrictions, weather and access limitations - as
well as capital expenditures required to supply its operations. Additional
factors include environmental risks, operating risks normally associated with
the timber industry, competition, government regulation, economic changes in
regions where the Partnership has customers, including Southeast Asia and
Japan, the value of the U.S. dollar against foreign currencies such as the
Japanese yen, and the ability of the Partnership to implement its business
strategy. These and other risks are described in this report and other of
the Partnership's reports and registration statements that are available from
the United States Securities and Exchange Commission.
12
<PAGE>
ITEM 2. PROPERTIES
TIMBERLANDS
The Partnership's timberlands are described above under "Timberlands" in Item 1.
Business.
MANUFACTURING FACILITIES
The Partnership currently operates five lumber mills that are located in
Oregon, Idaho and Washington. The two Oregon facilities are located in
central Oregon and are two of the largest producers of premium grade pine
boards in the United States. The two Idaho mills are located in northern
Idaho near the Inland timberlands and produce a diverse line of lumber
products, including 1" boards and 2" dimension lumber products. The
Washington mill in Marysville produces studs. The Partnership also owns a
chip plant, which is located in Central Oregon.
The following table summarizes the annual production and capacity of the
Partnership's lumber and remanufacturing facilities (amounts in MMBF):
<TABLE>
<CAPTION>
1998
Production 1997 1996 1995
Description of Facility Capacity Production Production Production
- ----------------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Oregon lumber mills 196 164 145 146
Inland lumber mills (1) 210 189 218 243
Washington lumber mill(s) (2)(4) 142 32 5 -
Remanufacturing facility (3) - 7 22 19
</TABLE>
- --------------
(1) 1996 and 1995 amounts include production at facilities no longer operated
by the Partnership.
(2) The facility at Marysville, Washington was purchased on September 16, 1996
and the 1996 amount includes production from that date.
(3) The assets and related inventories of the Partnership's remanufacturing
facility in Redmond, Oregon were sold in March 1997, and 1997 amounts
reflect production through the date of sale.
(4) Estimated 1998 capacity includes a mill currently under construction in
Port Angeles, Washington, which will have an estimated capacity of
100 MMBF.
ITEM 3. LEGAL PROCEEDINGS
There is no pending litigation involving the Partnership, and to the
knowledge of the Managing General Partner there is no threatened litigation,
the unfavorable resolution of which would have a material adverse effect on
the business, the financial position or results of operations of the
Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the vote of the limited partners in the fourth
quarter of 1997.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS
The Partnership's Common Units are traded principally on the New York Stock
Exchange. As of December 31, 1997, there were approximately 27,000
beneficial owners of 21,331,189 outstanding Common Units. The Subordinated
Units are not publicly traded. As of December 31, 1997, there were five
beneficial owners of 5,773,088 outstanding Subordinated Units.
Trading price data for the Common Units, as reported by the New York Stock
Exchange, and declared distribution information for 1997 and 1996 was as
follows:
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1997 Quarter Quarter Quarter Quarter
- ---------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
High $23.38 $24.25 $26.25 $27.00
Low $20.75 $20.13 $23.38 $22.88
Cash Distribution Per Unit $0.538 $0.538 $0.538 $0.538
1st 2nd 3rd 4th
1996 Quarter Quarter Quarter Quarter
- ---------------------------- ------- ------- ------- -------
High $21.00 $21.38 $21.75 $22.38
Low $18.13 $19.50 $19.00 $20.50
Cash Distribution Per Unit $0.524 $0.524 $0.524 $0.524
</TABLE>
Cash distributions, if any, are expected to be paid quarterly from "Available
Cash" as defined in the Partnership Agreement. In addition, the Partnership's
debt agreements have certain restrictive covenants limiting cash distribution
amounts.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994
Partnership 1993
1997 1996 1995 and Former Former
IN MILLIONS, EXCEPT PER UNIT AMOUNTS Partnership Partnership Partnership Entities (10) Entities
- --------------------------------------------------- ----------- ----------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues (1) 505.6 $401.6 $383.4 $397.3 $220.6
Depreciation, depletion and amortization (2 and 4) 47.6 39.8 35.0 40.9 31.2
Operating income (2 and 3) 68.4 61.0 48.2 47.3 58.8
Income before extraordinary item (2 and 3) 27.7 20.5 17.3 19.7 38.9
Income per Unit before extraordinary item (2 and 3) 1.01 0.94 0.94 1.07 N/A
Extraordinary item - loss on debt extinguishment (4) - - - (16.2) -
Net income (2, 3 and 4) 27.7 20.5 17.3 3.6 38.9
Net income per Unit (2, 3, 4 and 11) $1.01 $0.94 $0.94 $0.19 N/A
Cash distribution per Unit (4 and 5) $2.152 $2.096 $2.040 $0.055 N/A
CASH FLOW AND OTHER DATA
EBITDDA (6) 114.4 $99.2 $83.3 $87.0 $85.9
Additions to timber and timberlands (7) 189.0 227.6 31.2 15.8 11.2
Additions to equipment 11.6 14.7 10.4 14.8 1.9
Cash flow from operating activities 64.7 65.1 21.9 57.5 59.7
BALANCE SHEET DATA
Working capital $75.2 $65.2 $66.7 $51.7 $2.3
Total assets (7) 839.1 675.8 476.5 461.5 738.4
Long-term debt (7) 574.5 392.0 326.0 300.0 480.4
Partners' Capital (8) 208.2 240.0 107.1 119.4 98.6
OPERATING DATA (UNAUDITED)
Fee timber harvest (MMBF) 332 297 202 215 152
External log sourcing (MMBF) (9) 210 191 251 269 106
Lumber production (MMBF) (9) 385 333 390 421 199
Plywood production (MMSF 3/8" basis) (9) N/A 76 113 142 45
</TABLE>
15
<PAGE>
Footnotes for Item 6. Selected Financial Data:
(1) Included in revenues are revenues from closed or sold operations. Total
revenues from these operations were $13.9 million in 1997, $68.7 million
in 1996, $78.7 million in 1995, $90.0 million in 1994 and $69.9 million in
1993.
(2) See effect of update of timber inventory system in Note 4 of Notes to
Consolidated Financial Statements.
(3) See effect of LIFO liquidation in Note 2 of Notes to Consolidated
Financial Statements.
(4) In conjunction with the 1994 refinancing of the former entities' (Crown
Pacific Limited Partnership, Crown Pacific Inland Limited Partnership,
Crown Pacific, Ltd., Crescent Creek Logging, Inc., and Crown Pacific
Leasing Limited Partnership) borrowings, $16.2 million, or $0.88 per Unit
on a pro forma basis, of deferred debt issuance costs were written off as
an extraordinary charge.
(5) Amount in 1994 represents distributions for the Partnership's 10-day
period ended December 31, 1994.
(6) EBITDDA is defined as net income before interest, amortization of debt
issuance costs, income taxes, depreciation, depletion and amortization and
extraordinary items. EBITDDA is provided because management believes
EBITDDA provides useful information for evaluating the Partnership's
ability to service debt and support its future cash distributions to
Unitholders. EBITDDA should not be construed as an alternative to
operating income, as an indicator of the Partnership's operating
performance, as an alternative to cash flows from operating activities
or as a measure of liquidity.
(7) See 1997 acquisition of Trillium timberlands and 1996 acquisition of
Cavenham timberlands in Note 4 of Notes to Consolidated Financial
Statements. Included in total assets and long-term debt at December 31,
1993 was $220 million related to the purchase of certain timberlands in
1989. The Former Entities issued twenty-two $10 million installment notes
to the seller secured by unconditional letters of credit. The deposited
funds were restricted such that they could only be used to repay the notes.
As a result, both the assets and liabilities remained on the Former
Entities' balance sheet.
(8) See effects of the Partnership's public offerings at Note 6 of Notes to
Consolidated Financial Statements.
(9) See Note 3 of Notes to Consolidated Financial Statements related to
closures of mill and plywood facilities.
(10) Certain of the 1994 information relates to combination of the Former
Entities and the Partnership.
(11) Per Unit amounts in 1994 are on a pro-forma basis for the entire year. See
Note 1 of Notes to Consolidated Financial Statements for discussion of the
implementation of Financial Accounting Standards No 128, "Earnings per
Share."
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INDUSTRY CONDITIONS
Crown Pacific's principal operations consist of the growing and harvesting of
timber, the sale of logs and the processing and sale of lumber and other wood
products (see Item 1. Business).
The Partnership's ability to implement its business strategy over the long
term and its results of operations depend upon a number of factors, many of
which are beyond its control. These factors include general industry
conditions, domestic and international prices and supply and demand for logs,
lumber and other wood products, seasonality and competition from other
supplying regions and substitute products.
SUPPLY
Environmental and other similar concerns and governmental policies have
substantially reduced the volume of timber under contract to be harvested
from federal lands. The resulting supply decrease caused prices for logs and
lumber to increase significantly, reaching peak levels during late 1993 and
early 1994. Even though prices have declined from these record levels,
current prices still exceed pre-1993 levels. The low supply of timber from
federal lands, which is expected to continue for the foreseeable future, has
benefited forest products companies with private timber holdings, such as the
Partnership, through higher stumpage and log prices. Additionally, many
manufacturing facilities without a sufficient supply of fee timber were
forced to close, including, in 1996, two Crown Pacific sawmills in the Inland
Region that were closed or sold. Increased supplies of logs harvested from
private lands and logs imported from foreign countries have only partially
offset the lost volume from federal lands and have not replaced the mature,
high-quality timber found in greater quantities on federal lands.
Historically, Canada has been a significant source of lumber for the U.S.
market. In 1996, the U.S. and Canadian governments announced a five-year
lumber trade agreement effective April 1, 1996. This agreement is intended to
reduce the volume of Canadian lumber exported into the U.S. through the
assessment of an export tariff on annual lumber exports to the U.S. in excess
of 14,700 MMBF from the four major producing provinces.
DEMAND
Changes in general demographic and economic factors, including interest rates
for home mortgages and construction loans, have historically caused
fluctuations in housing starts and in turn in demand, and therefore prices,
for lumber and commodity wood products. Domestic demand for lumber and
manufactured wood products is directly affected by the level of residential
construction activity. In addition to housing starts, demand for wood
products is also significantly affected by repair and remodeling activities
and industrial uses, demand for which has historically been less cyclical.
Domestic demand for logs, lumber and other wood products is seasonal. In the
winter, demand generally subsides, increasing in the spring as construction
activity resumes. Severe weather conditions, storms, floods and natural
disasters can also affect demand. The Partnership is also affected by
international demand factors, which are cyclical and seasonal as well. The
strength of the economy in Japan and other Asian countries and the relative
strength of the United States dollar directly affect the demand for exported
logs from the Partnership's Washington Region.
17
<PAGE>
EFFECTS OF INFLATION
Crown Pacific has experienced increased costs due to the effect of inflation
on the cost of labor, materials, supplies, energy, plant and equipment.
Certain of these increases directly affect income through increased operating
costs. During the period from 1992 through early 1994, raw material
(primarily logs) prices increased significantly and exceeded inflation.
Conversely, raw material prices have generally decreased from early 1994 and
operating costs have increased at approximately the same rate as inflation.
Improved operating efficiencies as a result of recent capital expenditures
have partially offset these cost increases.
EFFECTS OF ACQUISITIONS
Each of Crown Pacific's acquisitions has been accounted for using the
purchase method of accounting. Accordingly, the historical financial and
operating data from one period to the next are not necessarily comparable and
are not indicative of future operating results.
YEAR 2000 ISSUES
As the year 2000 approaches, Crown Pacific recognizes the need to ensure its
operations will not be adversely impacted by Year 2000 software failures.
The Partnership is addressing this issue to ensure the availability and
integrity of its financial systems and the reliability of its operational
systems. The Partnership has made, and will continue to make, certain
investments in its software systems and applications to ensure the
Partnership is Year 2000 compliant. The cost to the Partnership has not
been, and is not anticipated to be, material.
RESULTS OF OPERATIONS (1997 COMPARED TO 1996)
Net sales in 1997 increased $104.0 million, or 25.9%, over sales in 1996, to
$505.6 million. The $104.0 million increase was principally due to a $94.6
million sales increase in 1997 from the wholesale operation, which was
acquired in September 1996, as well as increased sales of lumber and log
products due to higher prices during the first six months of 1997. Sales
increases during 1997 were partially offset by decreases in plywood and
millwork products subsequent to the sale of the associated facilities and
decreases in the prices of wood chips and other residuals.
Lumber sales, excluding sales of lumber products through the wholesale
division, represented 38.7% of sales in 1997, compared to 43.8% in 1996.
Average external prices received for lumber in the Inland region increased
10.7% to $467 per thousand board feet ("MBF") for 1997 compared to prices
received in 1996, while average external lumber prices in the Oregon region
decreased 3.4% to $626/MBF in 1997. Lumber prices decreased in Oregon during
the third and fourth quarters of 1997 as the U.S. millwork industry worked
off existing inventory levels. Price increases in the Inland Region were due
to strong U.S. housing and residential and commercial remodeling markets.
Prices for lumber products sold from the Partnership's studmill in
Marysville, Washington, acquired in September 1996, were $320/MBF in 1997.
Moderate increases in lumber prices are expected beginning in the early part
of the first quarter of 1998, as a result of higher seasonal demand.
External lumber sales volumes, excluding sales from the wholesale operation,
increased 7.3% in 1997 to 369.8 MMBF, from 344.5 MMBF in 1996. Sales volumes
of Oregon lumber increased 16.7% to 151.3 MMBF in 1997 due to increases in
capacity at the Partnership's Gilchrist and Prineville, Oregon facilities
subsequent to capital improvements made in the first quarter of 1997.
External lumber sales volumes in the Inland region decreased by 9.9% to 188.6
MMBF in 1997 primarily due
18
<PAGE>
to the closure of the Albeni Falls, Idaho sawmill in June 1996. External
sales volumes from the Marysville studmill were 29.8 MMBF during 1997.
Total log sales represented approximately 24.1% of sales in 1997, compared to
26.9% in 1996. Average external domestic prices received for logs sold in
the Olympic and Hamilton tree farms increased 36.5% and 4.2%, respectively,
to $441/MBF and $467/MBF over prices experienced in 1996. Average external
prices received for logs sold from the Oregon tree farm decreased 9.4% to
$405/MBF from prices experienced during 1996. The average external prices
received for logs sold in the Inland tree farm decreased 6.4% to $423/MBF
from 1996. Overall decreases in domestic pricing were primarily due to
increased sales of less expensive hemlock and lower grade cedar.
Sales of logs to customers involved in exporting activities (included in
total log sales above) were $16.3 million, or 3.2% of sales in 1997, compared
to $20.3 million, or 5.0% of sales in 1996. Prices received for export logs
remained stable at $646/MBF while sales volumes decreased 19.6% to 25.2 MMBF
in 1997 from levels experienced in 1996. Export pricing remained stable
primarily as a result of a shift in sales of mid-grade species from the
export to the domestic market, elevating the export sales mix to higher
grades.
The current economic downturn in Southeast Asia is not expected to have a
material impact on the Partnership's results of operations. Historically,
only about 3% of the Partnership's log sales have been to customers for
delivery to Asia. Given the current economic situation in this region, sales
will continue to be directed primarily to the domestic markets. Export
volume is expected to decline because some of the logs that would previously
have gone to export sales will instead be utilized by the Partnership at the
new Port Angeles, Washington mill when it is completed in the third quarter
of 1998.
Domestic log sales volumes increased 8.3% in 1997 to 223.4 MMBF, compared to
206.2 MMBF in 1996. Domestic sales volumes from the Oregon and Hamilton tree
farms increased 18.5% and 58.7%, respectively, to 44.3 MMBF and 47.5 MMBF,
respectively, over volumes experienced in 1996. Volumes sold from the Inland
tree farm decreased 8.7% to 78.6 MMBF in 1997, while volumes sold from the
Olympic tree farm acquired in May 1996 remained flat at 52.9 MMBF.
Sales from the Partnership's wholesale operations acquired in September 1996
consisted of lumber and other wood products, most of which were not
manufactured by the Partnership, and represented 25.3% of sales in 1997.
Sales of timberlands were 4.3% of sales in 1997, compared to 3.1% of sales in
1996. Timberland sales resulted in a $6.9 million gain in 1997 and an $8.6
million gain in 1996.
By-product and other revenues accounted for 2.4% of sales in 1997, compared
to 3.4% of sales in 1996.
Cost of sales as a percentage of sales increased slightly to 81.7% in 1997,
compared to 80.2% in 1996. Higher margin sales of the Partnership's lumber
and log products in the 1997 period were offset by lower margin sales from
the Partnership's wholesale operation. Without the effect of sales from the
wholesale operation, cost of sales decreased to 76.6% of total sales in 1997
from 78.7% in 1996, reflecting higher product prices and the closure of less
profitable sawmill, plywood and remanufacturing facilities.
19
<PAGE>
Selling, general and administrative expenses increased $5.5 million to $24.1
million in 1997, from $18.6 million in 1996. Selling, general and
administrative expenses represented 4.8% of sales in 1997 and 4.6% in 1996.
Increases were primarily due to increased marketing expenses associated with
the Partnership's wholesale operation and additional salaries, wages and
other benefits needed to support the current level of sales and marketing
activities, as well as increased compensation costs related to equity-based
executive compensation plans.
Interest expense remained stable at approximately $39 million in 1997 and
1996.
The Partnership pays no significant income taxes and does not include a
provision for income taxes in its financial statements.
RESULTS OF OPERATIONS (1996 COMPARED TO 1995)
Net sales in 1996 increased $18.2 million, or 4.7%, over sales in 1995, to
$401.6 million. The $18.2 million increase was principally due to increased
sales of logs, including stumpage, and sales related to the Partnership's
wholesale operations, which were acquired in September 1996. Sales increases
in 1996 were partially offset by decreases in prices of plywood, wood chips
and other residuals and the closure of mills.
Lumber sales represented 43.8% of sales in 1996, compared to 47.9% in 1995.
External lumber prices in the Oregon and Inland regions increased 3.1% and
18.5%, respectively, in 1996 from 1995 price levels. Price increases were
due to strong U.S. housing and residential and commercial remodeling markets.
Total lumber sales volumes decreased 11.2% in 1996, compared to 1995. Sales
volumes of Oregon lumber decreased slightly to 129.7 MMBF in 1996, compared
to 131.3 MMBF in 1995. Sales volumes in the Inland region decreased by 18.4%
to 209.4 MMBF in 1996, due to closures of two of the Partnership's mills in
1996. Sales volumes of lumber from the Partnership's newly acquired studmill
in Marysville, Washington were 5.3 MMBF for 1996 (see Note 3 of Notes to
Consolidated Financial Statements).
External log sales represented approximately 26.9% of sales in 1996, compared
to 22.4% in 1995. Pricing for external logs sold domestically decreased
approximately 7.3%. Decreases in pricing were offset by increases in sales
volumes, including stumpage, of 66.8% in 1996, compared to 1995. Volume
increases were attributed to log sales from the newly acquired Cavenham
timberlands (see Note 4 of Notes to Consolidated Financial Statements).
Increases in total revenues for 1996 were partially offset by a 37.0%
decrease in plywood sales as a result of the sale of the Partnership's
plywood manufacturing facility in September 1996. Revenues from wood chips
and other residual products also declined by approximately 60% due to
declining market prices of wood chips.
Sales from the Partnership's newly acquired wholesale operations were 8.3% of
sales in 1996 and primarily include sales of lumber and other wood products.
Cost of sales as a percentage of sales decreased slightly to 80.2% in 1996,
compared to 81.8% in 1995, due to a higher utilization of fee timber in 1996,
compared to 1995, which was partially offset by lower margin sales from the
Partnership's wholesale operation.
20
<PAGE>
Selling, general and administrative expenses decreased 13.9% in 1996 from
1995 levels principally due to reductions related to plant closures in 1996
and other miscellaneous decreases in 1996 compared to 1995.
Interest expense increased 25.1% in 1996, due to increases in long-term debt
related to the acquisition of the Cavenham timberlands in May 1996 (see Notes
4 and 5 of Notes to Consolidated Financial Statements).
The Partnership pays no significant income taxes and does not include a
provision for income taxes in its financial statements.
Weighted average Units outstanding in 1996 increased by 3.6 million due to
the Partnership's second public offering of 8.97 million Common Units in
August 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of liquidity have been cash provided by
operating activities as well as debt and equity financings. Cash provided by
operating activities was relatively consistent for both 1997 and 1996 at
approximately $65 million.
Working capital increased to $75.2 million at December 31, 1997 compared to
$65.2 million at December 31, 1996. The current ratio decreased to 2.3:1 at
December 31, 1997 from 2.5:1 at December 31, 1996.
Net cash used in investing activities of $174.1 million resulted from
additions to timberlands, equipment and timber cutting rights, which was
partially offset by proceeds from notes receivable and sales of properties.
The most significant addition to timberlands was the $153 million acquisition
of 590 MMBF of timber from Trillium Corporation. The acquisition was
financed with a combination of bank debt and seller provided financing.
On July 22, 1997, the Board of Control of the Managing General Partner
ratified the Partnership's previously announced plans to build a new
high-technology studmill in Port Angeles, Washington. The Port Angeles mill
will allow the Partnership to add value to the logs harvested from its
Olympic Tree Farm. Total costs are expected to be approximately $18 million.
Also on July 22, 1997, Crown Pacific announced plans to construct a new $17
million state-of-the-art sawmill at its existing mill site at Bonners Ferry,
Idaho. The Partnership believes it can realize sizable efficiency and fiber
recovery improvements from this new facility. Both mills are expected to be
completed in the third quarter of 1998.
Net cash provided by financing activities of $114.9 million resulted
primarily from $182.5 million of net proceeds from long-term debt, offset by
distributions to partners of $59.1 million and payments on the Partnership's
working capital line of $6.2 million.
On January 27, 1998, the Board of Control authorized the Partnership to make
a distribution of $0.538 per unit, the Second Target Distribution as defined
by the Partnership Agreement. The total distribution was $15.0 million
(including $.30 million to the General Partners) and was paid on February 13,
1998 to Unitholders of record on February 6, 1998.
Cash required to meet the Partnership's quarterly cash distributions (as
required by the Partnership Agreement), to pay for capital expenditures and
to satisfy interest and principal payments on indebtedness, will be
significant. Capital expenditures, excluding purchases of timber and
21
<PAGE>
timberlands, acquisitions of businesses and any costs incurred in connection
with new mills, are expected to be approximately $16.0 million in 1998. The
Managing General Partner expects that capital expenditures will be funded by
property sales, cash generated from operations, current funds and/or bank
borrowings. The new mills will be financed using operating leases. Debt
service is expected to be funded from current operations. The Partnership
expects to make cash distributions from its current funds and cash generated
from operations. Capital expenditures during 1997 were funded by property
sales, proceeds from note collections, cash provided by operations and
additional debt.
The Partnership has a $40 million revolving credit facility with a group of
banks for working capital purposes and stand-by letters of credit that
expires on September 30, 2000. The credit facility bears a floating rate of
interest, 6.875% at December 31, 1997, and among other provisions, requires
the Partnership to repay all outstanding indebtedness under the facility for
at least 30 consecutive days during any twelve-month period. The line of
credit is secured by the Partnership's inventories and receivables. At
December 31, 1997 the Partnership had $9.0 million outstanding under this
facility.
On October 10, 1997, the Partnership renegotiated the terms of its
Acquisition Facility with a group of banks to provide for a $150 million
revolving line of credit for the acquisition of additional timber,
timberlands and related assets. The Acquisition Facility is unsecured, bears
a floating rate of interest, 7.49% at December 31, 1997, and expires
September 30, 2000. At the end of the revolving period, the Partnership may
elect to convert any outstanding borrowings under this facility to a
four-year term loan, requiring quarterly principal payments equal to 6.25% of
the outstanding principal balance on the conversion date. Borrowings against
this facility were $61.0 million at December 31, 1997.
On October 15, 1997, the Partnership used $107.5 million of seller provided
financing to fund the Trillium acquisition. The notes to Trillium require
monthly interest payments, at variable rates, with principal payments of $55
million in January 1998 and $52.5 million in 1999. The $55 million payment
in January 1998 was paid with the proceeds from a new senior note offering
issued in January 1998.
On December 30, 1997, the Partnership issued $15 million of new senior notes
and on January 13, 1998, the Partnership issued an additional $80 million of
new senior notes. The $95 million of combined notes have an average interest
rate of 7.80%, with principal payments of varying amounts due 2010 to 2018.
The proceeds of these notes were used to refinance indebtedness associated
with the Trillium acquisition and to finance a portion of the Alliance
acquisition.
The Partnership's 9.78%, 9.60% and 8.17% senior notes, issued in 1994, 1995
and 1996, respectively, are unsecured and require semi-annual interest
payments through 2013. The senior note agreements require the Partnership to
make an aggregate annual principal payment of $37.5 million on December 1,
2002, and principal payments in various amounts from December 1, 2003 through
2013.
All of the Partnership's senior note agreements and bank lines of credit
contain certain restrictive covenants, including limitations on harvest
levels, land sales, cash distributions and the amount of future indebtedness.
The Partnership was in compliance with such covenants at December 31, 1997.
22
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement
establishes standards for reporting and displaying comprehensive income and
its components in a full set of general purpose financial statements. The
objective of SFAS 130 is to report a measure of all changes in equity of an
enterprise that result from transactions and other economic events of the
period other than transactions with owners. The Partnership expects to adopt
SFAS 130 in the first quarter of 1998 and does not expect comprehensive
income to be materially different from currently reported net income.
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This Statement establishes standards
for public business enterprises to report financial and descriptive
information about operating segments in annual financial statements on the
basis that is used internally for evaluating segment performance and deciding
how to allocate resources to segments. SFAS No. 131 also establishes the
standards for related disclosures about products and services, geographic
areas and major customers. This Statement is effective for periods beginning
after December 15, 1997. Management is currently evaluating the requirements
of SFAS No. 131.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data filed as part of this report
follow the signature page of this report and begin on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER
Set forth below is certain information concerning the directors and executive
officers of the Managing General Partner. As the general partners of the
Managing General Partner, Fremont Investors, Inc. and a corporation owned by
Messrs. Stott and Krage elect directors of the Managing General Partner on an
annual basis. All officers of the Managing General Partner serve at the
discretion of the directors of the Managing General Partner.
DIRECTORS
ROBERT JAUNICH II, 57, Chairman of the Board of Control of the Managing
General Partner since its formation. Mr. Jaunich has been Chairman of the
Board of Directors of the Special General Partner since 1991. Mr. Jaunich is
a member of the Managing General Partners' Executive Committee. Since 1991,
he has been Managing Director of direct investments of Fremont Investors,
Inc. From 1986 until he joined Fremont Investors, Inc., Mr. Jaunich was a
member of the chief executive office and Executive Vice President of
Swiss-based Jacob Suchard AG, one of the world's top four chocolate, sugar
confectionery and coffee companies. Mr. Jaunich currently serves on the board
of directors of Consolidated Freightways, Inc. and on the boards of various
other private companies.
PETER W. STOTT, 53, Director of the Board of Control since its formation and
a member of the Executive Committee. He has been President and Chief
Executive Officer of the Managing General Partner since its inception in
1994. Mr. Stott served as Chief Executive Officer and in various other
capacities for predecessors of the Partnership from 1988 until 1994. Mr.
Stott is also Chairman and founder of Market Transport, Ltd., a temperature
controlled regional motor carrier company located in Portland, Oregon, which
employs over 350 people. Mr. Stott has been involved in the ownership and
operations of timberlands since 1983. Mr. Stott is a member of the Board of
Trustees for the Nature Conservancy and a member of the Board of Directors
for Liberty Northwest Insurance Company.
JAMES A. BONDOUX, 58, Director of the Board of Control since its formation
and of the Special General Partner since 1991. Mr. Bondoux is a member of the
Managing General Partner's Executive Committee and Compensation Committee. He
has been a Managing Principal of Fremont since December 1984 concentrating on
private ventures and special situation equity investments.
CHARLES E. CARLBOM, 63, was elected Director of the Board of Control in
December 1997 and is a member of the audit committee. Mr. Carlbom is the
President and Chief Executive Officer of United Grocers, Inc. and has more
than 20 years of forest industry experience with Willamette Industries and
Western Kraft Corporation.
RICHARD B. KELLER, 69, was elected Director of the Board of Control in
January 1995 and is a member of the Compensation Committee. Mr. Keller has
been President of Keller Enterprises, Inc. since 1975. He was Senior Vice
President of Western Kraft Corporation, a division of Willamette Industries,
Inc. from 1970 to 1975 and held various positions with Western Kraft from
1954. Mr. Keller started his career in the forest products industry at
Georgia-Pacific Corporation where he served as an Assistant to the Vice
Chairman. Mr. Keller currently serves on the Board of Directors of Northwest
Natural, a publicly owned natural resource service provider.
24
<PAGE>
JOHN W. LARSON, 60, was elected Director of the Board of Control in January
1995 and is a member of the Audit Committee. He was Chief Operating Officer
of Chronicle Publishing from 1990 to 1993. Since 1993, Mr. Larson has been a
private investor. He was a General Partner in J.H. Whitney and Company from
1984 to 1989 and served as a Director of McKinsey and Company from 1965 to
1984.
CHRISTOPHER G. MUMFORD, 52, was elected Director of the Board of Control in
January 1995 and is a member of the Audit Committee. He has been a General
Partner of Scarff, Sears & Associates in San Francisco since 1986 and a
Managing Director of Questor Partners Fund, L.P., since 1996. In addition to
his duties with these private investment partnerships, Mr. Mumford was
Executive Vice President and Chief Financial Officer of Arcata Corporation
from 1982 to 1994, and has served as a director of several other privately
owned companies.
WILLIAM L. SMITH, 56, was elected Director of the Board of Control in January
1995 and is a member of the Compensation Committee. Mr. Smith is President of
William Smith Properties, Inc., which he founded in 1983. Mr. Smith has 25
years of experience managing timberland and developing recreational
properties, including his service as President of Brooks Resources
Corporation, a publicly owned real estate development company formed as a
spin-off from Brooks Scanlon, Inc., a publicly owned timber and sawmill
company, from 1973 to 1983.
EXECUTIVE OFFICERS
For a description of Peter W. Stott's background, the President and Chief
Executive Officer of the Managing General Partner, see "Directors" above.
ROGER L. KRAGE, 50, was promoted to Senior Vice President of Corporate
Affairs, General Counsel and Corporate Secretary of the Managing General
Partner in January 1998. From 1994 until January 1998, Mr. Krage was
Secretary and General Counsel of the Managing General Partner and served in
comparable capacities for the Partnership's predecessors from 1988 to 1994.
Mr. Krage has been involved in the legal, administrative, financial and risk
management aspects of the forest products business for over 16 years. In
addition to overseeing the legal affairs of Crown Pacific, he is closely
involved with the development and implementation of corporate planning.
RICHARD D. SNYDER, 50, Vice President and Chief Financial Officer of the
Managing General Partner. Mr. Snyder joined Crown Pacific in 1992 as
Treasurer and Chief Financial Officer and has served as Assistant to the
President. Mr. Snyder has over 26 years experience in the accounting and
finance profession focusing extensively on the forest products industry.
From 1981 through 1992, Mr. Snyder was Vice President of Finance for Gregory
Forest Products. Mr. Snyder worked for seven years as a CPA with the
accounting firm of Arthur Andersen & Co. before serving five years at
Georgia-Pacific as Director of Corporate Finance.
G.P. ("PAT") HANNA, 69, Senior Vice President of the Managing General
Partner, oversees Crown Pacific's timberland and manufacturing operations.
Mr. Hanna, who joined Crown Pacific in 1989 from Willamette Industries, Inc.,
has over 35 years experience in managing timberlands. He was the Raw
Materials Manager for Willamette Industries, Inc. from 1974 to 1989; and from
1969 until 1974, he was the Timber Contract Supervisor and Resident Forester
for that company.
25
<PAGE>
W. R. ("RAY") JONES, 45, Vice President of Land and Timber of the Managing
General Partner. Mr. Jones joined Crown Pacific in 1992 as Procurement and
Acquisition Forester and as Divisional Land and Timber Manager in Central
Oregon. Mr. Jones has over 20 years of experience in timberland management,
procurement and acquisitions. From 1985 through 1992 Mr. Jones was Timber
Manager for Triangle Veneer, Inc., and was a log buyer and woodlands forester
for Pope and Talbot from 1979 through 1984. Prior to 1979, Mr. Jones was a
service forester and Forest Practices officer for the Oregon Department of
Forestry.
L. JAMES WEEKS, 56, Vice President of Marketing and Sales of the Managing
General Partner. Mr. Weeks joined Crown Pacific in 1996 to oversee all
marketing and sales activities of the Partnership. Mr. Weeks has over 27
years experience in the forest products industry, primarily in sales and
marketing related functions. Mr. Weeks was formerly President of
Maywood-Anderson Forest Products Company, a wholesale sales company, and was
with that firm from 1982 through 1996 in several executive capacities. Crown
Pacific acquired Maywood-Anderson in September 1996. Mr. Weeks was President
of Mallery-Weeks Lumber Company from 1979 through 1982 and held various
management positions with Wickes Forest Industries from 1969 through 1978.
Mr. Weeks is a past member of the Board of Governors of the Western Wood
Products Association.
P.A. ("TONY") LEINEWEBER, 53, Vice President of the Managing General Partner,
joined Crown Pacific in 1990 to oversee its administrative, personnel, risk
management and public relations functions. Mr. Leineweber has over 20 years
experience in managing these corporate functions.
MARK B. CONAN, 37, Controller and Treasurer of the Managing General Partner.
Mr. Conan joined Crown Pacific in 1993 as Tax Director and Assistant
Treasurer. Mr. Conan has over 15 years experience in the accounting and
finance profession, focusing primarily on taxation, mergers and acquisitions.
Mr. Conan was formerly a Senior Manager at the accounting firm of Price
Waterhouse LLP, and was with that firm from 1983 though 1993.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Managing General Partner's
directors and executive officers, and persons who own more than ten percent
of the Partnership's Common Units, to file reports of ownership and changes
in ownership with the Commission and the NYSE. Based on the Partnership's
review of the copies of such reports received by the Partnership and on
written representations received by the Partnership, the Partnership believes
that no director, officer or holder of more than ten percent of the Common
Units failed to file on a timely basis the reports required by Section 16(a)
of the Exchange Act during fiscal 1997.
26
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------- ------------
Securities
Name and Principal Underlying
Position Year Salary($) Bonus($) Options (#)
- ------------------ ---- --------- -------- ------------
<S> <C> <C> <C> <C>
Peter W. Stott 1997 600,000 420,000 57,000
President and Chief 1996 600,000 120,000 26,000
Executive Officer 1995 600,000 250,000 188,335
Roger L. Krage 1997 275,191 175,000 40,000
Secretary and General 1996 250,000 50,000 15,000
Counsel 1995 250,000 100,000 188,335
Richard D. Snyder 1997 225,000 35,000 25,000
Vice President and 1996 175,000 45,000 15,000
Chief Financial Officer 1995 130,733 6,000 8,000
G. Pat Hanna 1997 191,551 30,000 25,000
Senior Vice President 1996 167,885 25,000 15,000
1995 125,000 18,000 8,000
L. James Weeks 1997 250,000 15,000 8,000
Vice President, 1996 (A) 83,333 -- --
Marketing and Sales 1995 -- -- --
</TABLE>
(A) Includes compensation earned from the time Mr. Weeks joined the Partnership
on September 1, 1996 through December 31, 1996.
STOCK OPTION GRANTS
The following table contains information concerning the grant of unit options
under the Company's 1994 Unit Option Plan to the named executive officers in
1997.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants (A) Option Term (B)
- ----------------------------------------------------------------------- --------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted (1) Fiscal Year Price ($/Sh.) Date 5% ($) 10% ($)
- ----------------------------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Peter W. Stott 57,000 22.4% 22.00 01/01/07 788,634 1,998,553
Roger L. Krage 40,000 15.7% 22.00 01/01/07 553,427 1,402,493
Richard D. Snyder 25,000 9.8% 22.00 01/01/07 345,892 876,558
G. Pat Hanna 25,000 9.8% 22.00 01/01/07 345,892 876,558
L. James Weeks 8,000 3.1% 22.00 01/01/07 110,685 280,498
</TABLE>
27
<PAGE>
(1) Options granted in 1997 vest as to 10%, 20%, 30% and 40% on each of the
first through fourth anniversaries of the grant date, respectively, with
full vesting occurring on the fourth anniversary date.
(2) These calculations are based on certain assumed annual rates of
appreciation as required by rules adopted by the Securities and Exchange
Commission requiring additional disclosure regarding executive
compensation. Under these rules, an assumption is made that the shares
underlying the stock options shown in this table could appreciate at rates
of 5% and 10% per annum on a compounded basis over the ten-year term of
the stock options. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Company's Common Stock and
overall stock market conditions. There can be no assurance that amounts
reflected in this table will be achieved.
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning the exercise of options
during 1997 and unexercised options held as of the end of the fiscal year, with
respect to the named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying
Unexercised Value of Unexercised
Shares Options In-The-Money Options
Acquired Value At FY-End (#) At FY-End ($) (B)
On Exercise Realized Exercisable/ Exercisable/
Name (#) ($) (A) Unexercisable Unexercisable
- ----------------- ------------- ---------- ------------------------ ------------------------
<S> <C> <C> <C> <C>
Peter W. Stott - - 2,600 / 261,735 14,612 / 639,262
Roger L. Krage - - 1,500 / 234,835 8,430 / 553,874
Richard D. Snyder 3,900 14,074 - / 44,100 - / 132,220
G. Pat Hanna 3,900 20,187 - / 44,100 - / 132,220
L. James Weeks - - - / 8,000 - / 14,000
</TABLE>
(A) Market value of the underlying securities at exercise date, minus exercise
price of the options.
(B) Market value of the underlying securities at December 31, 1997, $23.75 per
unit, minus exercise price of the unexercised options.
COMPENSATION OF DIRECTORS
Outside Directors of the Board of Control of the Managing General Partner
receive annual retainers of $12,000 and 600 Common Units of Crown Pacific plus
$1,000 for each Board of Control meeting and committee meeting attended. Mr.
Mumford receives $1,500 per quarter for his services as Chairman of the Audit
Committee of the Board of Control. Messrs. Jaunich, Stott and Bondoux were not
directly compensated by the Managing General Partner or the Partnership for
their services as directors of the Managing General Partner.
28
<PAGE>
EMPLOYEE CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Managing General Partner entered into employment agreements with Mr. Stott
and Mr. Krage in December 1994. Each agreement has a term of three years, which
expired December 31, 1997 and included confidentiality provisions and, in the
case of Mr. Stott's agreement, noncompete provisions and an involuntary
termination provision pursuant to which the executive officer would have
received severance pay equal to up to six months base salary. In Mr. Stott's
agreement, the confidentiality provisions continue for 18 months following the
later to occur of Mr. Stott's termination of employment or his resignation or
removal from the Board, and, unless Mr. Stott is terminated without cause, the
noncompete provisions continue until the earlier to occur of (i) December 31,
1999 or (ii) the later to occur of December 31, 1998 or the date on which
Fremont and its affiliates dispose of substantially all of their Subordinated
Units to an unaffiliated third party. In the case of Mr. Krage's agreement, the
confidentiality provisions continue for 18 months following Mr. Krage's
termination of employment. Extensions of the agreements are under negotiation
and expected to be finalized in April 1998.
29
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of January 30, 1998, certain information
furnished to the Company with respect to ownership of the Partnership's
Common and Subordinated Units of (i) each Director, (ii) the Chief Executive
Officer, (iii) the "named executive officers" other than the Chief Executive
Officer, (iv) all persons known by the Company to be beneficial owners of
more than 5 percent of its Common or Subordinated Units, and (v) all
executive officers and Directors as a group:
<TABLE>
<CAPTION>
COMMON UNITS (A) SUBORDINATED UNITS
-------------------------- -----------------------
PERCENT PRECENT
NUMBER OF UNITS NUMBER OF UNITS
SHAREHOLDER OF UNITS OUTSTANDING OF UNITS OUTSTANDING
- ------------------------------------ -------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Fremont Investors, Inc. (2) (3) - - 3,562,825 61.7%
SVE II, Inc. (1) - - 2,711,318 47.0%
Sequoia Ventures Inc. (2) - - 1,466,758 25.4%
Robert Jaunich II (4) 14,000 * 5,029,583 87.1%
Peter W. Stott (5) 297,694 1.4% 3,403,904 59.0%
James A. Bondoux (6) - - 2,711,318 47.0%
Richard B. Keller 607,318 2.8% - -
Roger L. Krage (7) 203,774 * 50,919 0.9%
John W. Larson 24,535 * - -
G. P. Hanna (8) 5,873 * - -
Richard D. Snyder (9) 3,948 * - -
L. James Weeks (10) 3,800 * - -
Christopher G. Mumford 2,026 * - -
Charles E. Carlbom - - - -
All executive officers and
directors as a group (12 persons) (11) 987,588 4.6% 5,773,088 100.0%
</TABLE>
- --------------
* Less than 1% of the class.
30
<PAGE>
(1) Current address is 121 S.W. Morrison Street, Suite 1500, Portland, Oregon
97204. Fremont controls SVE II.
(2) Current address is 50 Fremont Street, Suite 3700, San Francisco,
California 94105. Mr. Stephen D. Bechtel, Jr., through the ownership of
stock and his position as trustee of various trusts (in which he disclaims
any beneficial interest), is entitled to vote more than 50% of the stock in
Fremont. As a result of the foregoing, Mr. Bechtel may be deemed to
control Fremont. Mr. Bechtel is the largest single stockholder in Sequoia
Ventures Inc. ("Sequoia"). Accordingly, Mr. Bechtel may be deemed to
control Sequoia. Fremont controls SVE II.
(3) Subordinated Units beneficially owned includes 2,711,318 Subordinated
Units owned by SVE II, Inc.
(4) Includes (i) 851,507 Subordinated Units owned by Fremont Investors, Inc,
of which Mr. Jaunich serves as a director, (ii) 1,466,758 Subordinated
Units beneficially owned by Sequoia Ventures Inc., of which Mr. Jaunich is
a director, and (iii) 2,711,318 Subordinated Units beneficially owned by
SVE II, Inc., of which Mr. Jaunich is a director. Mr. Jaunich disclaims
beneficial ownership of all such Units other than 9,000 Common Units owned
directly by him. Current address is 50 Fremont Street, Suite 3700,
San Francisco, California 94105.
(5) Includes: (i) 2,711,318 Subordinated Units beneficially owned by SVE II,
Inc., of which Mr. Stott is a director and stockholder but disclaims
beneficial ownership with respect to such Units, (ii) 195,000 Common Units
beneficially owned by SK Partners, of which Mr. Stott is a general partner
and owns a 92% interest; (iii) 84,000 Common Units owned by Columbia
Investments II, LLC., a wholly owned company of Mr. Stott's; and (iv)
13,500 Units subject to options exercisable within 60 days of January 30,
1998. Current address is 121 S.W. Morrison Street, Suite 1500, Portland,
Oregon 97204.
(6) Includes 2,711,318 Subordinated Units beneficially owned by SVE II, Inc.,
of which Mr. Bondoux is a director. Mr. Bondoux disclaims beneficial
ownership of such Units. Current address is 50 Fremont Street, Suite 3700,
San Francisco, California 94105.
(7) Includes 195,000 Common Units owned by SK Partners, of which Mr. Krage is
a general partner and owns an 8% interest, and 4,000 Units subject to
options exercisable within 60 days of January 30, 1998. Current address is
121 S.W. Morrison Street, Suite 1500, Portland, Oregon 97204.
(8) Includes 2,500 Units subject to options exercisable within 60 days of
January 30, 1998.
(9) Includes 2,500 Units subject to options exercisable within 60 days of
January 30, 1998.
(10) Includes 800 Units subject to options exercisable within 60 days of
January 30, 1998.
(11) Includes: (i) 752,488 Units owned directly by the executive officers and
directors as a group; (ii) 195,000 Units beneficially owned by SK Partners,
of which Mr. Stott and Mr. Krage are general partners; and (iii) 40,100
Units subject to options exercisable within 60 days of January 30, 1998.
31
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As provided by the Partnership Agreement, the Partnership reimburses the
General Partners for the direct costs incurred to manage the Partnership.
These cost reimbursements totaled $5.3 million in 1997.
During 1997, the Partnership paid $100,000 to Freemont Investors, Inc. for
management services provided.
All related party transactions are conducted at arm's length.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The Consolidated Financial Statements, together with the report thereon of
Price Waterhouse LLP, are included on the pages indicated below:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F-1
Consolidated Statement of Income for the years ended
December 31, 1997, 1996 and 1995 F-2
Consolidated Balance Sheet - December 31, 1997 and 1996 F-3
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 F-4
Consolidated Statement of Changes in Partners' Capital -
December 31, 1997, 1996 and 1995 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
There are no schedules required to be filed with this report on Form 10-K.
REPORTS ON FORM 8-K
On October 28, 1997, the Partnership filed a report on Form 8-K, dated
October 15, 1997, under Items 2. And 7.
32
<PAGE>
EXHIBITS
The following exhibits are filed herewith and this list is intended to
constitute the exhibit index:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
*2.1 Agreement for the Sale and Purchase of Business Assets dated March
28, 1997 between Registrant and Team Millwork, LLC (filed with the
Registrant's Form 10-Q for the quarter ended March 31, 1997).
*2.2 Timberlands Purchase Agreement by and between Trillium Corporation,
a Washington corporation and Crown Pacific Limited Partnership, a
Delaware limited partnership, dated September 12, 1997 (filed with
the Registrant's Form 8-K dated October 15, 1997).
2.3 Stock Acquisition Agreement by and among Crown Pacific Partners, CP
Acquisition Co., True H. Carr as Trustee of Carr Revocable Living
Trust, Milan J. McMannis and Virginia McMannis as Trustees of
McMannis Revocable Living Trust and Alliance Wholesale Lumber, Inc.,
dated November 10, 1997.
*3.1 Form of Second Amended and Restated Agreement of Limited Partnership
of Crown Pacific Partners, L.P. (Filed as Exhibit A to Part I of
Registrant's Registration Statement on Form S-1 No. 83-85066).
*3.2 First Amendment to Second Amended and Restated Agreement of Limited
Partnership of Crown Pacific Partners, L.P. (filed with the
Registrant's Form 10-Q for the quarter ended March 31, 1997).
*3.3 Form of Agreement of Limited Partnership of Crown Pacific Limited
Partnership (Filed as Exhibit 3.2 to the Registrant's Statement on
Form S-1 No. 83-85066).
3.4 Amendment to Amended and Restated Agreement of Limited Partnership
of Crown Pacific Limited Partnership.
*4.1 Note Purchase Agreement relating to 9.78% Senior Notes due 2009
(Filed as Exhibit 10.3 to Registrant's Report on Form 10-K for the
year ended December 31, 1995).
*4.2 Note Purchase Agreement relating to 9.6% Senior Notes due 2009
(Filed as Exhibit 10.2 to Registrant's Report on Form 10-K for the
year ended December 31, 1995).
*4.3 Amended and Restated Facility B Credit Agreement dated as of May 13,
1996 (Filed as Exhibit 4.3 to the Registrant's Registration
Statement on Form S-3 No. 333-05099).
*4.4 Amended and Restated Credit Agreement dated as of May 13, 1996
(Filed as Exhibit 4.4 to the Registrant's Registration Statement on
Form S-3 No. 333-05099).
*4.5 Form of Amended and Restated Facility B Credit, dated as of July 31,
1996 (Filed as Exhibit 4.5 to the Registrant's Statement on Form S-3
No. 333-05099).
*4.6 Form of Amended and Restated Credit Agreement, dated as of July 31,
1996 (Filed as Exhibit 4.6 to the Registrant's Statement on Form S-3
No. 333-05099).
*10.1 Amended Credit Agreement with respect to a working capital credit
facility and acquisition credit facility among Crown Pacific Limited
Partnership and certain banks in the amount up to $40,000,000 and up
to $100,000,000, respectively (Filed as Exhibit 10.1 to Registrant's
Report on Form 10-K for the year ended December 31, 1995).
33
<PAGE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
*10.2 Second Amendment to Amended and Restated Credit Agreement dated as
of July 31, 1996 (filed with the Registrant's Form 10-Q for the
quarter ended March 31, 1997).
*10.3 Third Amendment to Amended and Restated Credit Agreement dated as of
July 31, 1996 (filed with the Registrant's Form 10-Q for the quarter
ended September 30, 1997).
10.4 Fourth Amendment to Amended and Restated Credit Agreement, dated as
of July 31, 1996.
*10.5 First Amendment to Amended and Restated Credit Agreement B dated as
of July 31, 1996 (filed with the Registrant's Form 10-Q for the
quarter ended March 31, 1997).
*10.6 Second Amendment to Amended and Restated Credit Agreement B dated as
of July 31, 1996 (filed with the Registrant's Form 10-Q for the
quarter ended September 30, 1997).
10.7 Third Amendment to Amended and Restated Credit Agreement B, dated as
of July 31, 1996.
*10.8 Form of Purchase Rights Agreement (Filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 No. 83-85066).
*10.9 1994 Unit Option Plan (Filed as Exhibit 10.5 to Registrant's Report
on Form 10-K for the year ended December 31, 1995).
10.10 1997 Distribution Equivalent Rights Plan
*10.11 $55 million Purchase Price Note due to Trillium Corporation, a
Washington corporation, dated October 15, 1997 (filed with the
Partnership's Form 8-K dated October 15, 1997).
*10.12 $52.5 million Purchase Price Note due to Trillium Corporation, a
Washington corporation, dated October 15, 1997 (filed with the
Partnership's Form 8-K dated October 15, 1997).
*10.13 Lumber Supply Agreement, dated March 28, 1997 between Registrant and
Team Millwork, LLC (filed with the Partnership's Form 10-Q for the
quarter ended March 31, 1997).
10.14 Ground Lease Agreement dated as of December 19, 1997 between Crown
Pacific Limited Partnership as Ground Lessor, and Selco Service
Corporation, as Ground Lessee
10.15 Lease agreement dated as of December 19, 1997 between Selco Service
Corporation, as Lessor and Crown Pacific Limited Partnership, as
Lessee and Construction Agent - Port Angeles Sawmill Complex
10.16 Ground Lease Agreement dated as of December 19, 1997 between Crown
Pacific Limited Partnership as Ground Lessor, and Selco Service
Corporation as Ground Lessee - Bonners Ferry, Idaho
10.17 Lease Agreement dated as of December 19, 1997 between Selco Service
Corporation as Lessor and Crown Pacific Limited Partnership as
Lessee and Construction Agent - Bonners Ferry Circle Mill
34
<PAGE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.18 Note Purchase Agreement dated as of December 15, 1997 - $95 million
Senior Notes, Series A, B and C
*21 List of Subsidiaries (Filed as Exhibit 21.1 to the Registrant's
Registration Statement on Form S-1 No. 33-85066).
23 Consent of Price Waterhouse LLP.
27 Financial Data Schedule.
</TABLE>
- --------------
* Incorporated herein by reference to the indicated filing.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CROWN PACIFIC PARTNERS, L.P.
(Registrant)
By: Crown Pacific Management
Limited Partnership,
as Managing General Partner
By: /s/ Peter W. Stott
------------------------------
Peter W. Stott
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on the behalf of the registrant
and, in the capacities indicated on February 18, 1998, on behalf of, as
applicable, Crown Pacific Management, L.P., the Registrant's Managing General
Partner.
By: /s/ Robert Jaunich II Chairman of the Board of Control
------------------------------
Robert Jaunich II
By: /s/ Peter W. Stott President and Chief Executive
------------------------------ Officer & Member, Board of Control,
Peter W. Stott Executive Committee, Crown Pacific
Management, L.P. (Principal Executive
Officer)
By: /s/ Richard D. Snyder Vice President & Chief Financial Officer
------------------------------ Crown Pacific Management, L.P.
Richard D. Snyder (Principal Financial and Accounting
Officer)
By: /s/ John W. Larson Member, Board of Control,
------------------------------ Audit Committee
John W. Larson
By: /s/ Christopher G. Mumford Member, Board of Control,
----------------------------- Audit Committee
Christopher G. Mumford
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Control of
Crown Pacific Management Limited Partnership
and the Partners of Crown Pacific Partners, L.P.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in partners' capital and of cash
flows present fairly, in all material respects, the financial position of Crown
Pacific Partners, L.P. and its subsidiaries at December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Portland, Oregon
January 26, 1998
F-1
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $ 505,588 $ 401,579 $ 383,383
Operating costs:
Cost of products sold 413,085 321,935 313,490
Selling, general and administrative expenses 24,070 18,636 21,653
---------- ---------- ----------
Operating income 68,433 61,008 48,240
Interest expense 39,083 38,852 31,053
Amortization of debt issuance costs 745 594 508
Other expense (income), net 922 1,021 (599)
---------- ---------- ----------
Net income $ 27,683 $ 20,541 $ 17,278
---------- ---------- ----------
---------- ---------- ----------
Net income per Unit $ 1.01 $ 0.94 $ 0.94
---------- ---------- ----------
---------- ---------- ----------
Weighted average Units outstanding 27,104,277 21,690,655 18,133,527
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT UNIT INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,384 $ 16,818
Accounts receivable 50,523 42,810
Notes receivable 4,063 5,605
Inventories 44,914 35,746
Deposits on timber cutting contracts 6,656 4,771
Prepaid and other current assets 2,421 2,674
--------- ---------
Total current assets 130,961 108,424
Property, plant and equipment, net 47,325 43,679
Timber, timberlands and roads, net 645,641 511,869
Other assets 15,217 11,789
--------- ---------
Total assets $ 839,144 $ 675,761
--------- ---------
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable $ 9,000 $ 15,000
Accounts payable 14,626 11,363
Accrued expenses 25,007 10,470
Accrued interest 6,144 5,369
Current portion of long-term debt 1,000 1,000
--------- ---------
Total current liabilities 55,777 43,202
Long-term debt 574,500 392,000
Other non-current liabilities 628 561
--------- ---------
630,905 435,763
--------- ---------
Commitments and contingent liabilities
Partners' capital:
General partners 2,093 2,708
Limited partners (27,104,277 Units outstanding
at December 31, 1997 and 1996) 206,146 237,290
--------- ---------
Total partners' capital 208,239 239,998
--------- ---------
Total liabilities and partners' capital $ 839,144 $ 675,761
--------- ---------
--------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 27,683 $ 20,541 $ 17,278
Adjustments to reconcile net income to
net cash provided by operating activities:
Depletion, depreciation and amortization 47,626 39,847 34,959
Gain on sale of property (7,430) (8,097) (6,816)
Other (134) (785) 5,034
Net change in current assets and current liabilities:
Accounts and notes receivable (5,682) (2,120) (17,406)
Inventories (14,259) 10,748 692
Prepaid and other current assets (1,439) 5,246 2,207
Accounts payable and accrued expenses 18,329 (314) (14,068)
--------- -------- ---------
Net cash provided by operating activities 64,694 65,066 21,880
--------- -------- ---------
Cash flows from investing activities:
Additions to timberlands (175,408) (214,761) (26,218)
Additions to timber cutting rights (13,585) (12,842) (4,993)
Additions to property, plant and equipment (11,561) (14,660) (10,437)
Proceeds from sales of property 20,129 9,060 11,538
Principal payments received on notes 6,196 11,516 1,096
Acquisition of businesses, net of cash -- (6,028) --
Other investing activities 156 (9) (617)
--------- -------- ---------
Net cash used in investing activities (174,073) (227,724) (29,631)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from sale of partnership interests -- 161,922 --
Retirement of equity interests -- (4,100) --
Net (decrease) increase in short-term borrowing (6,170) (5,517) 15,592
Proceeds from issuance of long-term debt 214,500 343,000 68,600
Repayments of long-term debt (32,000) (276,000) (42,600)
Distributions to partners (59,131) (41,294) (29,342)
Capital contributions -- 3,329 --
Debt and equity issuance costs (1,786) (11,883) --
Other financing activities (468) (273) (628)
--------- -------- ---------
Net cash provided by financing activities 114,945 169,184 11,622
--------- -------- ---------
Net increase in cash and cash equivalents 5,566 6,526 3,871
Cash and cash equivalents at beginning of year 16,818 10,292 6,421
--------- -------- ---------
Cash and cash equivalents at end of year $ 22,384 $ 16,818 $ 10,292
--------- -------- ---------
--------- -------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
CROWN PACIFIC PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL PARTNERSHIP LIMITED PARTNERSHIP
INTEREST INTEREST
-------- --------
<S> <C> <C>
Balances, December 31, 1994 $ (35) $ 119,432
Equity issuance costs (277)
Net income for the year 173 17,105
Distributions (290) (29,052)
-------- ----------
Balances, December 31, 1995 (152) 107,208
Equity issuance costs (7,456)
Issuance of partnership Units 161,922
Contribution of capital 3,329
Redemption of Special Allocation Units (4,100)
Net income for the year 205 20,336
Distributions (674) (40,620)
-------- ----------
Balances, December 31, 1996 2,708 237,290
Equity issuance costs and other (311)
Net income for the year 277 27,406
Distributions (892) (58,239)
-------- ----------
Balances, December 31, 1997 $ 2,093 $ 206,146
-------- ----------
-------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF OPERATIONS
Crown Pacific Partners, L.P. (the "Partnership"), a Delaware limited
partnership, through its 99% owned subsidiary, Crown Pacific Limited
Partnership (the "Operating Partnership"), was formed in 1994 to acquire, own
and operate timberlands and wood product manufacturing assets located in the
Northwest United States. The Partnership's business consists primarily of
growing and harvesting timber for sale as logs in domestic and export markets
and the manufacturing and marketing of lumber and other wood products.
Crown Pacific Management Limited Partnership (the "Managing General
Partner") manages the businesses of the Partnership and the Operating
Partnership. The Managing General Partner owns a 0.99% general partner
interest in the Partnership and the remaining 1% general partner interest in
the Operating Partnership. Crown Pacific, Ltd. ("CPL"), the Special General
Partner of the Partnership, and the Managing General Partner comprise the
General Partners of the Partnership. The Special General Partner owns a 0.01%
general partner interest and a 10% limited partnership interest in the
Partnership. All management decisions related to the Partnership are made by
the Managing General Partner. Unitholders have voting rights for certain
issues as outlined in the Partnership Agreement.
PRINCIPLES OF CONSOLIDATION
All significant intercompany balances and transactions have been eliminated
in the consolidated financial statements.
REVENUE RECOGNITION
The Partnership recognizes revenue from log sales upon delivery to the
customer. Revenue from lumber, plywood and millwork sales is recognized upon
shipment. Sales of real property, including standing timber, are recognized
when title transfers, upon receipt of a sufficient down payment and when the
collectibility of any outstanding receivable from the purchaser is assured.
The allowance for doubtful accounts was $0.45 million and $0.25 million at
December 31, 1997 and 1996, respectively.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of funds invested in overnight
repurchase agreements. The Partnership considers all liquid investments that
have original maturities of three months or less to be cash equivalents.
INVENTORIES
Inventories, consisting of lumber and logs, are stated at the lower of LIFO
cost or market. Supplies and inventories maintained at non-manufacturing
locations are valued at the lower of average cost or market.
DEPOSITS ON TIMBER CUTTING CONTRACTS
The Partnership purchases timber under cutting contracts with government
agencies and private landowners, where title to the timber does not pass until
the timber is harvested and measured. Timber remaining under contract is
considered to be a commitment and is not recorded as an asset or liability
until it is harvested and measured. Deposits are generally required to be made
on these contracts and are applied to the purchase of timber as it is
harvested.
F-6
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Buildings, machinery and equipment, including additions and improvements
that add to productive capacity or extend useful life, are recorded at cost,
including capitalized interest during construction of $1.0 million for the
year ended December 31, 1997. Maintenance and repairs are expensed currently.
Upon retirement or disposal of assets, the cost and related accumulated
depreciation are removed from their respective accounts and any gain or loss
is reflected in earnings.
Depreciation is calculated for financial reporting purposes using the
straight-line method that is based on estimated useful lives as follows:
Buildings and leasehold improvements 15 to 25 years
Machinery and equipment 3 to 10 years
TIMBER AND TIMBERLANDS
Timber and timberlands, including logging roads, are stated at cost less
depletion for timber previously harvested and accumulated amortization related
to roads. Amortization of the Partnership's logging roads and depletion of
timber harvested are determined based on the volume of timber harvested in
relation to the amount of estimated recoverable timber. The Partnership
estimates its timber inventory using statistical information and data obtained
from physical measurements, site maps, photo-types and other information-
gathering techniques. These estimates are updated annually and may result in
adjustments of timber volumes and depletion rates, which are recognized
prospectively (see Note 4). Changes in these estimates have no impact on the
Partnership's cash flow. Timber purchased through cutting contracts is
recorded separately as cutting rights and depleted throughout the harvest.
DEBT ISSUANCE COSTS
Debt issuance costs including $1.6 million and $3.1 million of costs in 1997
and 1996, respectively, are a component of other assets and include all costs
and fees incurred that are directly related to obtaining credit facilities.
These costs are amortized over the term of the related credit agreement.
Unamortized debt issuance costs were $8.0 million and $7.1 million at December
31, 1997 and 1996, respectively.
INCOME TAXES
The Partnership is not subject to federal income tax as its income or loss
is included in the tax returns of the individual Unitholders.
ACCRUED EXPENSES
Included in accrued expenses are accrued payroll and profit sharing expenses
of $5.1 million and $4.8 million for the years ended December 31, 1997 and
1996, respectively (see Note 7).
PER UNIT INFORMATION
Net income per Unit is calculated using the weighted average number of
Common and Subordinated Units outstanding, divided into net income (loss),
after adjusting for the 1% General Partner interest.
The Partnership adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128), for the year ended December 31, 1997. The
adoption of SFAS 128 had no effect on earnings per Unit for any years
presented. For the Partnership, under SFAS 128 there is no significant
difference between basic and diluted earnings per Unit as net income is
allocated proportionately to both subordinated and common Units.
F-7
<PAGE>
SALES TO EXPORTERS
The Partnership sells logs to domestic customers engaged in exporting
activities. Total sales to those customers were $16.3 million, $20.3 million
and $11.1 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123), allows companies to choose whether to account
for stock-based compensation on a fair value method, or to continue accounting
for such compensation under the method prescribed in Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25). The
Partnership has chosen to continue to account for unit-based compensation
using APB 25 (see Note 7). If the accounting provisions of SFAS 123 had been
adopted, as of the beginning of 1996, the effect on 1997 and 1996 net income
would have been immaterial.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates,
including those related to timber volumes and related depletion and
amortization of costs, and assumptions that affect the amounts reported in the
consolidated financial statements and notes to financial statements. Actual
results could differ from these estimates and changes in such estimates may
affect amounts reported in future periods.
FINANCIAL INSTRUMENTS
All of the Partnership's significant financial instruments are recognized in
its consolidated balance sheet. Carrying values approximate fair market value,
unless otherwise noted (see Note 5).
CONCENTRATION OF RISK
The Partnership is subject to credit risk through short-term cash
investments and trade and notes receivable. The Partnership restricts
investment of short-term cash investments to high credit quality financial
institutions. At times, such investments may be in excess of the FDIC
insurance limit. Credit risk on trade receivables is mitigated by control
procedures to monitor the credit worthiness of customers. The Partnership may
mitigate credit risk related to notes receivable by obtaining asset lien
rights or other secured interests or performing credit worthiness procedures
or both.
ENVIRONMENTAL COSTS
The Partnership expenses environmental costs incurred related to its
operations and for which no current or future benefit is discernible.
Expenditures that extend the life of the timberlands and related properties
are capitalized and amortized over their estimated useful lives.
FINANCIAL STATEMENT RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform with
current year presentation and had no impact on net income or partners'
capital.
F-8
<PAGE>
SUPPLEMENTAL CASH FLOW INFORMATION
The Partnership made cash payments for interest (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest $39,316 $35,936 $28,932
</TABLE>
2. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
------- -------
<S> <C> <C>
Finished goods $13,054 $ 9,068
Work in process -- 6,417
Logs 29,720 16,123
Supplies 1,224 1,534
LIFO adjustment 916 2,604
------- -------
Total inventories $44,914 $35,746
------- -------
------- -------
</TABLE>
In 1996, the liquidation of LIFO inventories decreased cost of sales and,
therefore, increased net income by $1.0 million.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-------- --------
<S> <C> <C>
Land $ 3,880 $ 3,885
Buildings and leasehold improvements 5,229 6,102
Machinery and equipment 57,722 41,040
Construction in progress 3,410 12,579
-------- --------
70,241 63,606
Less: accumulated depreciation (22,916) (19,927)
-------- --------
Property, plant and equipment, net $ 47,325 $ 43,679
-------- --------
-------- --------
</TABLE>
In February 1997, the Partnership sold the assets of its remanufacturing
facility in Redmond, Oregon. The net gain recognized on the sale was
insignificant.
In September 1996, the Partnership acquired substantially all of the assets
of a company located in Eugene, Oregon, which operates as a trader of lumber
and other wood products for $3.0 million. In addition, in September 1996, the
Partnership acquired substantially all of the assets of a studmill in
Marysville, Washington for $2.7 million.
In 1996, the Partnership disposed of substantially all of the assets of the
Thompson Falls, Montana and Albeni Falls, Idaho sawmills. Additionally, in
1996, the Partnership disposed of substantially all of the assets of its
Redmond, Oregon plywood facility. The Partnership's aggregate net loss related
to these disposals was insignificant.
F-9
<PAGE>
4. TIMBER, TIMBERLANDS AND ROADS
Timber, timberlands and roads consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------- ----------
<S> <C> <C>
Timber, timberlands and logging roads, net $637,353 $497,491
Timber cutting rights 8,288 14,378
-------- --------
Total timber and timberlands, net $645,641 $511,869
-------- --------
-------- --------
</TABLE>
On October 15, 1997 the Partnership purchased 65,000 acres of timberlands in
Northwest Washington from Trillium Corporation for $152.5 million (the
"Trillium Acquisition"). The Trillium Acquisition was initially financed with
$45 million from an existing acquisition line of credit and the balance of
$107.5 million was financed by the seller (see Note 5).
On May 15, 1996, the Partnership purchased 207,000 acres of Northwest
timberland from Cavenham Forest Industries for $205 million (the "Cavenham
Acquisition"). The Cavenham Acquisition, along with existing acquisition line
borrowings, was financed with a $250 million bank credit facility (the
"Acquisition Facility"), which was subsequently repaid with the proceeds of a
new equity offering (see Note 6) and placement of senior notes on August 13,
1996 (see Note 5).
The Partnership's annual update of its timber inventory system (See Note 1)
resulted in an increase in timber volumes, which reduced estimated depletion
rates and decreased the depletion cost for the year ended December 31, 1995 by
$7.4 million, or $0.41 per Unit. The adjustments for 1997 and 1996 were not
significant.
5. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
-------- --------
<S> <C> <C>
9.78% Senior Notes due 2002 - 2009 $275,000 $275,000
9.60% Senior Notes due 2002 - 2009 25,000 25,000
8.17% Senior Notes due 2003 - 2013 91,000 91,000
7.80% Senior Notes due 2012 15,000 --
Term Note - $55.0 million due in 1998 and
$52.5 million due in 1999, variable rate:
6.94% at December 31, 1997 107,500 --
Term Note due 1997 - 1998, variable rate:
5.79% at December 31, 1997 1,000 2,000
Revolving Acquisition Line of Credit 61,000 --
-------- --------
575,500 393,000
Less: current portion (1,000) (1,000)
-------- --------
Long-term debt, excluding current portion $574,500 $392,000
-------- --------
-------- --------
</TABLE>
F-10
<PAGE>
The Partnership has a $40 million revolving credit facility with a group
of banks for working capital purposes and stand-by letters of credit that
expire on September 30, 2000. The credit facility bears a floating rate of
interest, 6.875% at December 31, 1997, and among other provisions, requires
the Partnership to repay all outstanding indebtedness under this facility for
at least 30 consecutive days during any twelve-month period. The
Partnership's inventories and receivables secure the line of credit. At
December 31, 1997 and 1996, the Partnership had $9 million and $15.0 million,
respectively, outstanding under this facility. On December 31, 1996 the
Partnership borrowed $15 million on this facility and repaid the loan in full
on January 6, 1997.
On October 10, 1997 the Partnership renegotiated the terms of its
Acquisition Facility with a group of banks to provide for a $150 million three-
year revolving line of credit for the acquisition of additional timber,
timberlands and related assets. The Acquisition Facility is unsecured and
bears a floating rate of interest, 7.49% at December 31, 1997. At the end of
the revolving period, the Partnership may elect to convert any outstanding
borrowings under this facility to a four-year term loan, requiring quarterly
principal payments equal to 6.25% of the outstanding principal balance on the
conversion date. At December 31, 1997 the Partnership had $61.0 million
outstanding under this facility.
On October 15, 1997 the Partnership used $107.5 million of seller provided
financing to fund the Trillium Acquisition. The notes to Trillium require
monthly interest payments with principal payments of $55 million in January
1998 and $52.5 million in 1999. The $55 million payment in January 1998 was
paid with the proceeds from a new senior note offering issued in January 1998
and, therefore, is classified as long-term debt in the accompanying balance
sheet.
In December 1997 the Partnership committed to issue $95 million of new
senior notes. The Partnership issued $15.0 million of these notes on December
30, 1997. The proceeds from these notes were used to fund, in part, the $29.5
million acquisition of Alliance Wholesale Lumber, Inc. on January 2, 1998 (see
Note 10). The balance of the notes was issued on January 13, 1998 to repay in
part the indebtedness incurred in connection with the Trillium Acquisition.
The new senior notes bear an average interest rate of 7.80% and require semi-
annual interest payments. The new senior note agreements require the
Partnership to make annual principal payments in varying amounts beginning in
2010 and continuing through 2018.
The Partnership's 9.78%, 9.60% and 8.17% senior notes are unsecured and
require semi-annual interest payments through 2013. The senior note agreements
require the Partnership to make an annual principal payment of $37.5 million
on December 1, 2002, and various principal amounts from December 1, 2003
through 2013.
All of the Partnership's senior note agreements and bank lines of credit
contain certain restrictive covenants, including limitations on harvest
levels, land sales, cash distributions and the amount of future indebtedness.
The Partnership was in compliance with such covenants at December 31, 1997.
The senior notes are redeemable prior to maturity, subject to a premium on
redemption based on interest rates of U.S. Treasury securities, having a
similar average maturity as the senior notes, plus 50 basis points.
On December 31, 1997, the estimated aggregate fair value of the
Partnership's senior notes was approximately $446 million and was carried at
$406 million. The fair value was calculated in accordance with the
requirements of SFAS No. 107, "Disclosures About the Fair Value of Financial
Instruments," and was estimated by discounting the future cash flows using
rates currently available to the Partnership for debt instruments with similar
terms and remaining maturities. All other long-term debt amounts approximate
market value.
F-11
<PAGE>
6. PARTNERS' EQUITY, INCOME AND DISTRIBUTIONS
PARTNERSHIP EQUITY
On December 22, 1994, the Partnership sold 9,850,000 Common Units in an
initial public offering (the "1994 Offering"). Simultaneous to the 1994
Offering, 2,510,439 Common Units, 5,773,088 Subordinated Limited Partnership
Units ("Subordinated Units") and 10,000 Special Allocation Units ("SAUs") were
issued to certain existing partners of the predecessor entity to the
Partnership.
During August 1996, the Partnership sold 8,970,750 additional Common Units
in a second public offering (the "1996 Offering"). Proceeds from the 1996
Offering were $165.2 million, including $3.3 million from the General Partner,
and were used to redeem the SAUs for $4.1 million and to retire a portion of
the debt incurred to fund the Cavenham Acquisition (see Notes 4 and 5). An
additional 2,647,470 Common Units were sold in the 1996 Offering by certain
selling Unitholders.
The Partnership had 21,331,189 Common Units outstanding at December 31, 1997
and 1996. The Partnership also had 5,773,088 Subordinated Units outstanding at
December 31, 1997 and 1996.
PARTNERSHIP INCOME
The Partnership's income and losses are allocated 99% to the holders of
Common and Subordinated Units and 1% to the General Partners.
CASH DISTRIBUTIONS
In accordance with the Partnership Agreement, the Managing General Partner
is required to make quarterly cash distributions from Available Cash.
Generally, cash distributions are paid in order of preference: first to Common
Unitholders and, second, to the extent cash remains available, to Subordinated
Unitholders.
The Partnership agreement also sets forth certain cash distribution hurdle
rates for the General Partner to meet in order to increase its share of the
available cash flow. To the extent that the annual distribution exceeds $2.26
per Unit, the General Partner receives 15% of the excess cash flow rather than
the base amount of 2%. The General Partner can receive a maximum of 50% of the
available cash flow if the annual distribution exceeds $3.62 per Unit.
The Subordinated Units are subordinated in right of distributions to the
holders of Common Units. Provided that certain increases in cash distributions
are paid to the holders of Common and Subordinated Units, 50% of the
Subordinated Units will convert to Common Units in 1999 and the remaining 50%
will convert to Common Units in 2000.
The Managing General Partner declared distributions of $2.15 per Unit, $2.10
per Unit and $2.04 per Unit for the years ended December 31, 1997, 1996 and
1995, respectively.
The Partnership's 1997, 1996 and 1995 consolidated distributions to partners
included $0.6 million, $0.4 million, and $0.3 million, respectively, paid to
the Managing General Partner for its 1% share of the Operating Partnership's
distributions for those years. The remaining 99% of the Operating
Partnership's distributions was eliminated in consolidation.
F-12
<PAGE>
7. UNIT OPTION AND PROFIT SHARING AND EMPLOYEE SAVINGS BENEFIT PLANS
Effective December 22, 1994, the Managing General Partner adopted the 1994
Unit Option Plan (the "1994 Option Plan"). The 1994 Option Plan allows the
Partnership to award or grant Unit options to certain key employees of the
Partnership and Managing General Partner. Under the terms of the 1994 Option
Plan, the Managing General Partner can grant annual options on or about
January 1, 1995 through January 1, 1999. Total options granted in any one year
cannot exceed 1% of the total outstanding Common and Subordinated Units. There
were 35,900 and 15,200 units exercisable at December 31, 1997 and 1996,
respectively.
The exercise price for each annual option grant is the market price of the
Common Units at the date of grant. Option grants vest over a four-year period
as follows: 10% in year one; an additional 20% in year two; an additional 30%
in year three; and the final 40% in year four. After the options are granted,
they are generally exercisable for a ten-year period. A summary of option
transactions during each of the three years in the period ended December 31,
1997 is shown below:
<TABLE>
<CAPTION>
UNITS OPTION PRICE
------- ------------
<S> <C> <C>
December 31, 1994 181,000 $21.50
Granted -- --
Exercised -- --
Canceled (8,000) $21.50
-------
December 31, 1995 173,000 $21.50
Granted 156,000 $18.13
Exercised -- --
Canceled (21,000) $21.50
-------
December 31, 1996 308,000 $18.13-$21.50
Granted 255,000 $22.00
Exercised (20,700) $18.13-$21.50
Canceled (22,000) --
-------
December 31, 1997 520,300 $18.13-$22.00
-------
-------
</TABLE>
In January 1998 the Board of Control of the Managing General Partner granted
an additional 271,000 Unit options.
F-13
<PAGE>
Effective December 22, 1994, the 1994 Option Plan provided for the granting
of front end options to two officers of the Managing General Partner. Under
the terms of the front end option grants, each officer received an option to
purchase 181,335 Units on December 31, 1999, with an exercise price of $21.50
per Unit (not included in the previous table). Front end options will vest on
December 31, 1999 and may be exercised for the period beginning on December
31, 1999 through December 31, 2004, provided all of the following conditions
are met:
1) The Subordinated Units must convert to Common Units;
2) The officer must continue his employment with the Managing General
Partner through at least December 31, 1999; and
3) The Partnership must make certain minimum levels of cash
distributions to Common and Subordinated Unitholders through December 31,
1999 in excess of those required for Subordinated Unit conversion.
During 1997, the Partnership recorded compensation expense of $1.0 million
relative to the front end options. No expense was recorded in 1996 or 1995.
In January 1997, the Board of Control of the Managing General Partner
approved an incentive compensation plan (the "Plan") to attract and retain
certain key employees, who also have unit options outstanding under the 1994
Option Plan, by awarding them Distribution Equivalent Rights ("DERs").
Participants under the Plan may be granted DERs with respect to one or more of
their options granted on or after January 1, 1997. Each year, an amount equal
to the cash distribution made by the Partnership per Unit will be allocated to
each participant's account for each DER granted.
Such amounts are subordinated to the payment of quarterly distributions on
all units. To the extent the option related to the DER is vested under the
1994 Option Plan, the DER amount corresponding to the vesting portion of such
option will be paid to the participant. In January 1997, the Board of Control
awarded 255,000 DERs. The Partnership recorded $0.4 million in expense related
to these DERs in 1997. An additional 271,000 DERs were awarded in January
1998.
The Partnership has a Profit Sharing and Employee Savings Benefit Plan
covering substantially all full-time, nonunion employees who have completed at
least one year of service. Contributions are determined annually at the
discretion of the Managing General Partner. The expense related to profit
sharing was $1.7 million for each of the years ended December 31, 1997, 1996
and 1995.
8. RELATED PARTIES
In accordance with the Partnership Agreement, the Partnership reimburses the
General Partners for the direct costs incurred to manage the Partnership.
These reimbursements were $5.3 million, $3.7 million, and $2.9 million in
1997, 1996 and 1995, respectively.
9. COMMITMENTS AND CONTINGENT LIABILITIES
As of December 31, 1997 and 1996, the Partnership was committed to purchase
timber or logs from government and private sources. These commitments mature
on various dates through 2001. The remaining commitments were approximately
$73.8 million at December 31, 1997.
The Partnership is engaged in the construction of conversion facilities in
Bonners Ferry, Idaho and Port Angeles, Washington. At December 1997, the
Partnership had commitments for expenditures of approximately $12.5 million
for completion of these projects.
The Partnership becomes involved in litigation and other proceedings arising
in the normal course of its business. In the opinion of management, the
Partnership's liability, if any, under any pending litigation would not
materially affect its financial condition or results of operations.
F-14
<PAGE>
10. SUBSEQUENT EVENTS
On January 2, 1998 the Partnership acquired the stock of Alliance Wholesale
Lumber, Inc. for $29.5 million. The purchase was financed with $15 million of
senior notes, $5 million of Partnership Units and $9.5 million of assumed
debt. Alliance operates three contractor service yards in the Phoenix,
Arizona, area, which provide a variety of wood products to residential and
commercial contractors.
On January 13, 1998 the Partnership issued $80 million of the second series
of new senior notes. The first series of $15 million was issued on December
30, 1997. The $95 million of combined notes have an average interest rate of
7.80%, with principal payments of varying amounts due 2010 to 2018. The
proceeds of the second series of notes were used to refinance indebtedness
associated with the Trillium Acquisition.
In January 1998, the Board of Control of the Managing General Partner
declared the fourth quarter 1997 distribution of $0.538 per Unit. The
distribution will equal $15.0 million, including $0.3 million to the General
Partners, and will be paid on February 13, 1998 to Unitholders of record on
February 6, 1998.
F-15
<PAGE>
EXHIBIT 2.3
STOCK ACQUISITION AGREEMENT
THIS STOCK ACQUISITION AGREEMENT is made and entered into as of
November 10, 1997 (the "EFFECTIVE DATE"), by and among CROWN PACIFIC PARTNERS,
L.P., a Delaware limited partnership ("CROWN PARTNERS"), CP ACQUISITION CO., an
Oregon corporation ("CP ACQUISITION"), TRUE H. CARR, as Trustee of CARR
REVOCABLE LIVING TRUST DATED FEBRUARY 12, 1988 (the "CARR TRUST"), MILAN J.
McMANNIS and VIRGINIA McMANNIS, as Trustees of McMANNIS REVOCABLE LIVING TRUST
DATED FEBRUARY 11, 1988 (the "MCMANNIS TRUST"), and ALLIANCE WHOLESALE LUMBER,
INC., an Arizona corporation (the "COMPANY").
RECITALS:
The Carr Trust and the McMannis Trust (collectively, "SELLERS" and
individually each a "SELLER") together own all of the issued and outstanding
capital stock of the Company. The Crown Parties wish to acquire, and Sellers
wish to transfer, all such stock on the terms and conditions set forth in this
Agreement (this term and all other capitalized terms used herein having the
respective meanings set forth in Section 10).
AGREEMENTS:
In consideration of the foregoing and the mutual covenants of the
parties set forth in this Agreement, the parties, intending to be legally bound,
agree as follows:
1. ACQUISITION AND TRANSFER OF COMMON STOCK.
1.1 AGREEMENT TO ACQUIRE AND TRANSFER. Sellers agree to transfer
the Shares to the Crown Parties, and the Crown Parties agree to acquire the
Shares from Sellers, in each case for the consideration and on the other terms
and conditions set forth in this Agreement. To the extent that the Crown Parties
elect pursuant to Section 1.4 to have Crown Partners issue Units in
consideration of the acquisition of Shares, Sellers shall contribute to Crown
Partners at Closing that percentage of the Shares which equals the value of the
Units issued to Sellers pursuant to Section 1.4.1 divided by the Base
Consideration. CP Acquisition shall purchase the remainder of the Shares.
1.2 CONSIDERATION FOR ACQUISITION. The consideration for the Crown
Parties' acquisition of the Shares shall consist of the Base Consideration,
which shall be paid or represented by Units issued at the Closing, and, in the
circumstances described in Section 1.2.3, the Contingent Payment, which shall be
paid, if at all, as provided in Section 1.2.3.
1.2.1 ADJUSTMENT TO BASE CONSIDERATION. The Base
Consideration shall be reduced by the amount, if any, by which the stockholders'
equity of the Company as of the Closing Date, determined in accordance with
GAAP, is less than $4,100,000.
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<PAGE>
1.2.2 DETERMINATION OF NOTES PAYABLE AND STOCKHOLDERS'
EQUITY. For purposes of calculating the Base Consideration, the aggregate amount
of principal and unpaid accrued interest due under the Notes Payable as of the
Closing Date and the stockholders' equity of the Company as of the Closing Date
shall be determined as follows:
(a) Not later than 10 Business Days prior to the
anticipated Closing Date, Sellers shall provide to the Crown Parties
Sellers' preliminary estimates of (i) the aggregate amount of principal and
unpaid accrued interest that will be due under the Notes Payable as of the
Closing Date and (ii) the stockholders' equity of the Company as of the
Closing Date, in each case accompanied by reasonably detailed supporting
calculations and information. Such preliminary estimates shall be used to
determine the Base Consideration payable at the Closing; PROVIDED that the
Base Consideration shall thereafter be adjusted in accordance with this
Section 1.2.2.
(b) Sellers shall prepare and shall cause Sellers'
Accountants to audit, at the Company's expense, financial statements for
the Company as of the Closing Date (the "CLOSING FINANCIAL STATEMENTS"),
including computations of the aggregate amount of principal and unpaid
accrued interest due under the Notes Payable as of the Closing Date and the
stockholders' equity of the Company as of the Closing Date. The Crown
Parties shall be entitled to have their independent certified public
accountants monitor the preparation and auditing of the Closing Financial
Statements, at the Crown Parties' expense. Sellers shall deliver the
Closing Financial Statements to the Crown Parties as soon as practicable,
and in all events within 45 days, after the Closing Date. If within 30 days
after delivery of the Closing Financial Statements, the Crown Parties have
not given Sellers a notice of objection to the Closing Financial Statements
(which notice shall state the basis for such objection in reasonable
detail), then the computations of the aggregate amount principal and unpaid
accrued interest due under the Notes Payable as of the Closing Date and the
stockholders' equity of the Company as of the Closing Date set forth in the
Closing Financial Statements shall be used for purposes of the adjustment
pursuant to Section 1.2.2(d).
(c) If the Crown Parties submit a timely notice of
objection to the Closing Financial Statements and if the parties are unable
to resolve the matters set forth therein within 10 Business Days after such
notice is given, then the issues in dispute shall be submitted to the
Accountants for resolution. If issues in dispute are submitted to the
Accountants for resolution, (i) each party shall furnish to the Accountants
such workpapers and other documents and information relating to the
disputed issues as are in the possession or control of such party and shall
be afforded an opportunity to present to the Accountants the basis for its
view with respect to the disputed issues and to discuss the determination
of the disputed issues with the Accountants, (ii) the determination by the
Accountants, as set forth in a notice delivered to the parties by the
Accountants within 30 days after the disputed issues are submitted to the
Accountants, shall be final and binding on the parties, and (iii) the Crown
Parties and Sellers shall each pay one-half of the fees and expenses of the
Accountants.
2
<PAGE>
(d) On the 10th Business Day following (i) the
expiration of the 30 day period referred to in Section 1.2.2(b), if no
notice of objection is given by the Crown Parties thereunder, or (ii) the
resolution of any disputed issues, whether by agreement of the parties or
by the Accountants pursuant to Section 1.2.2(c), if such a notice of
objection is given, the Base Consideration shall be recalculated taking
into account the aggregate amount of principal and unpaid accrued interest
due under the Notes Payable as of the Closing Date and the stockholders'
equity of the Company as of the Closing Date, in each case as set forth in
the Closing Financial Statements, as the same may have been adjusted based
on the agreement of the parties or by the Accountants pursuant to Section
1.2.2(c). If the Base Consideration as so recalculated is greater than the
Base Consideration calculated pursuant to Section 1.2.2(a) for purposes of
the Closing, CP Acquisition shall pay the difference to Sellers. If the
Base Consideration as so recalculated is less than the Base Consideration
calculated pursuant to Section 1.2.2(a) for purposes of the Closing,
Sellers shall pay the difference to CP Acquisition. Any such payment by CP
Acquisition or Sellers shall be made on the 10th Business Day described
above in this Section 1.2.2(d) and shall include interest on the amount
thereof at the rate of 7.0% per annum for the period from the Closing Date
to the date of payment.
1.2.3 CONTINGENT PAYMENT. In the event Cash Flow equals or
exceeds $7,900,000 for any of the years 2000, 2001, or 2002, CP Acquisition
shall pay the Contingent Payment to Sellers. Cash Flow shall be determined and
the Contingent Payment, if earned, shall be paid as follows:
(a) Within 60 days after the end of each of the
years 2000, 2001, and 2002, the Crown Parties shall prepare and submit to
Sellers a calculation of Cash Flow (and the components thereof) for such
year in reasonable detail; PROVIDED that in the event the Contingent
Payment is earned based upon Cash Flow for 2000 or 2001, no further
calculation of Cash Flow shall thereafter be required. If within 30 days
after delivery of any such calculation of Cash Flow, Sellers have not given
the Crown Parties a notice of objection to such calculation (which notice
shall state the basis for such objection in reasonable detail), such
calculation shall be final and shall be used to determine whether the
Contingent Payment has been earned based upon Cash Flow for the year in
question.
(b) If Sellers submit a timely notice of objection
to the calculation of Cash Flow for any year and if the parties are unable
to resolve the matters set forth therein within 10 Business Days, then the
issues in dispute shall be submitted to the Accountants for resolution. If
issues in dispute are submitted to the Accountants for resolution, (i) each
party shall furnish to the Accountants such workpapers and other documents
and information relating to the disputed issues as are in the possession or
control of such party and shall be afforded an opportunity to present to
the Accountants the basis for its view with respect to the disputed issues
and to discuss the determination of the disputed issues with the
Accountants, (ii) the determination by the Accountants, as set forth in a
notice delivered to the parties by the Accountants within 30 days after the
disputed issues are submitted to the Accountants, shall be final and
binding on the parties,
3
<PAGE>
and (iii) the Crown Parties and Sellers shall each pay one-half of the fees
and expenses of the Accountants.
(c) If the Contingent Payment has been earned based
upon Cash Flow for any of the years 2000, 2001, or 2002, whether as
calculated by the Crown Parties pursuant to Section 1.2.3(a) or as
determined by agreement of the parties or by the Accountants pursuant to
Section 1.2.3(b), then on the 10th Business Day following (i) the
expiration of the 30 day period referred to in Section 1.2.3(a), if no
notice of objection is given by Sellers thereunder, or (ii) the resolution
of any disputed issues, whether by agreement of the parties or by the
Accountants pursuant to Section 1.2.3(b), if such a notice of objection is
given, CP Acquisition shall pay the Contingent Payment to Sellers, together
with interest on the amount thereof at the rate of 7.0% per annum for the
period from the date on which the calculation of Cash Flow for the year in
question was originally delivered by the Crown Parties pursuant to Section
1.2.3(a) to the date of payment.
(d) In the event the Contingent Payment is not
earned based upon Cash Flow for any of the years 2000, 2001, or 2002,
Sellers right to the Contingent Payment shall automatically expire and be
of no further force and effect. In no event shall Sellers be entitled to
any payment based upon or as a result of Cash Flow for any year other than
2000, 2001, or 2002.
(e) Notwithstanding any other provision of this
Section 1.2.3, in the event that both Carr and McMannis voluntarily
terminate their employment under their respective Employment Agreements or
are terminated for Cause prior to the expiration of the respective initial
terms of the Employment Agreements, Sellers shall have no right to receive
the Contingent Payment based upon Cash Flow for the year in which the
second such voluntary termination or termination for Cause occurs or based
upon Cash Flow for any subsequent year. A termination of the Employment
Agreements for any reason other than as set forth in the immediately
preceding sentence shall have no effect on Sellers' entitlement to the
Contingent Payment, if earned in accordance with this Section 1.2.3.
(f) Each Seller's right to receive the Contingent
Payment in the circumstances set forth in this Section 1.2.3 is personal to
such Seller and may not be sold, transferred, assigned, conveyed, pledged,
or otherwise disposed of in whole or in part without the prior written
consent of Crown Partners, which may be withheld in Crown Partners' sole
and absolute discretion; PROVIDED that either Seller shall be entitled,
without obtaining the consent of Crown Partners to transfer, in whole or in
part, its right to receive the Contingent Payment to any trust established
for the benefit of some or all of the same beneficiaries as such Seller, so
long as such Seller gives notice to Crown Partners of such transfer.
1.3 PAYMENTS IN IMMEDIATELY AVAILABLE FUNDS. Except to the extent
represented by Units issued to Sellers pursuant to Section 1.4, any payment to a
party under this
4
<PAGE>
Section 1 shall be made by wire transfer of immediately available funds in
accordance with instructions provided by the payee.
1.4 CONTRIBUTION OF SHARES; ISSUANCE OF UNITS.
1.4.1 The Crown Parties may elect to acquire Shares
representing up to $5,000,000 of the Base Consideration by having Sellers
contribute such Shares to Crown Partners in consideration of the issuance of
Units by Crown Partners to Sellers at the Closing. The Crown Parties may
exercise such election by giving notice to Sellers at any time not later than
five Business Days prior to the anticipated Closing Date. If such election is
made, the Units so issued will be valued for purposes of this transaction at the
average of the daily closing prices for Units on the New York Stock Exchange for
the 20 consecutive trading days immediately preceding the Closing Date.
1.4.2 The Units to be issued under Section 1.4.1 will be
issued by Crown Partners under its effective shelf registration statement on
Form S-4, as filed with the Securities and Exchange Commission on October 7,
1997 (Registration No. 333-37365) under the Securities Act. Rule 145 of the
General Rules and Regulations under the Securities Act will be available to each
Seller to sell the Units acquired hereunder without further registration. Each
Seller agrees not to sell, transfer, assign, convey, pledge, or otherwise
dispose of any of the Units issued to such Seller except (i) in accordance with
Rule 145(d) of the General Rules and Regulations under the Securities Act, to
the extent such Rule will permit such Seller to transfer Units without
registration, and (ii) after full compliance with all applicable provisions of
the Securities Act.
1.4.3 Sellers agree that, in addition to the restrictions
set forth in Section 1.4.2, they shall not, at any time during the period from
the Closing through the third anniversary of the Closing Date, sell on a
combined basis through one or more public sales more than an aggregate of 10,000
Units during any calendar week without the prior written consent of Crown
Partners.
1.4.4 Each Seller acknowledges that the certificate(s)
representing the Units may bear the following legend referring to the foregoing
restrictions on disposition:
The units represented by this certificate were issued in a transaction
registered under the Securities Act of 1933 and may only be sold or
otherwise transferred if the holder hereof represents in writing to
the issuer that such holder agrees to comply with resale limitations
under applicable securities laws. Sale of the units represented by
this certificate may be restricted pursuant to the terms of that
certain Stock Acquisition Agreement dated as of November 10, 1997 by
and among Crown Pacific Partners, L.P., CP Acquisition Co., True H.
Carr, as Trustee of Carr Revocable Living Trust Dated February 12,
1988, Milan J. McMannis and Virginia McMannis, as Trustees of McMannis
5
<PAGE>
Revocable Living Trust Dated February 11, 1988, and Alliance Wholesale
Lumber, Inc.
Promptly following the first anniversary of the Closing Date, Crown Partners
shall issue replacement certificates with respect to any Units then held by
Sellers, which certificates shall eliminate the first sentence from the
foregoing legend. Promptly following the third anniversary of the Closing Date,
Crown Partners shall issue replacement certificates with respect to any Units
then held by Sellers, which certificates shall eliminate the foregoing legend in
its entirety.
1.5 ALLOCATION BETWEEN SELLERS. Each payment or issuance of Units
to Sellers pursuant to this Section 1 shall be allocated between them in
proportion to the number of Shares owned by each of them as of the Closing Date.
1.6 CROWN PARTNERS GUARANTEE. Crown Partners unconditionally
guarantees all independent obligations of CP Acquisition under this Agreement.
2. PRE-CLOSING COVENANTS.
2.1 ACCESS AND INVESTIGATION. Between the Effective Date and the
Closing Date, Sellers shall, and shall cause their respective Representatives,
the Company, and the Company's Representatives to, (i) afford the Crown Parties
and their Representatives full and free access to the Company's personnel,
properties, contracts, books and records, and other documents and data, (ii)
furnish the Crown Parties and their Representatives with copies of all such
contracts, books and records, and other documents and data as the Crown Parties
may reasonably request, and (iii) furnish the Crown Parties and their
Representatives with such additional financial, operating, and other data and
information relating to the Company as the Crown Parties may reasonably request;
PROVIDED, HOWEVER, that the Crown Parties and their Representatives shall
coordinate their access to the Company's personnel and properties with Sellers
and their Representatives so as to minimize, to the extent practicable
consistent with the Crown Parties' investigation of the Company, the likelihood
of unintended disclosure of this transaction.
2.2 OPERATION OF THE COMPANY'S BUSINESS. Between the Effective
Date and the Closing Date, Sellers shall, and shall cause the Company to:
2.2.1 Conduct the business of the Company only in the
Ordinary Course of Business;
2.2.2 Use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of the current
employees and agents of the Company, and maintain the relations and good will
with suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with the Company;
2.2.3 Confer with the Crown Parties regarding operational
matters of a material nature; and
6
<PAGE>
2.2.4 Otherwise report periodically to the Crown Parties
regarding the status of the business, operations, and finances of the Company.
2.3 LIMITATION ON CERTAIN ACTIONS. Except as expressly permitted
by this Agreement or with the prior written consent of the Crown Parties,
between the Effective Date and the Closing Date, Sellers shall not, and shall
cause the Company not to, take any affirmative action or fail to take any
reasonable action that is within their or its control, as a result of which any
of the events described in Section 5.17 is likely to occur.
2.4 REQUIRED CONSENTS AND APPROVALS.
2.4.1 ACTION BY SELLERS. As promptly as practicable after
the Effective Date, Sellers shall, and shall cause the Company to, (i) make all
filings required by Legal Requirements to be made by them in order to consummate
this transaction, and (ii) cooperate with the Crown Parties, to the extent
reasonably requested by them, with respect to all filings that they are required
by Legal Requirements to make in connection with this transaction.
2.4.2 ACTION BY CROWN PARTIES. As promptly as practicable
after the Effective Date, the Crown Parties shall (i) make all filings required
by Legal Requirements to be made by them in order to consummate this
transaction, (ii) cooperate with Sellers, to the extent reasonably requested by
them, with respect to all filings that they are required by Legal Requirements
to make in connection with this transaction, and (iii) cooperate with Sellers,
to the extent reasonably requested by them, in obtaining all consents identified
in SCHEDULE 5.2.3.
2.5 SATISFACTION OF CONDITIONS. Each party shall use its Best
Efforts to cause the conditions set forth in Section 3 to be satisfied prior to
the Closing Date, or any earlier date set forth therein with respect to one or
more of such conditions.
2.6 NOTIFICATION OF CERTAIN EVENTS.
2.6.1 BY SELLERS. Between the Effective Date and the
Closing Date, each Seller shall promptly notify the Crown Parties in writing if
such Seller or the Company becomes aware of (i) any fact or condition that
causes or constitutes a Breach of any representation or warranty of Sellers or
the Company as of the Effective Date, (ii) any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition, (iii) the occurrence of any Breach of any covenant of Sellers in this
Section 2, or (iv) the occurrence of any event that may make the satisfaction of
any of the conditions set forth in Section 3 impossible or unlikely. In the
event that any fact or condition of the type described in the foregoing clause
(i) or (ii) requires any change in any of the Schedules to this Agreement if
such fact or condition had occurred or been known as of the Effective Date,
Sellers shall promptly deliver to the Crown Parties a Supplement to such
Schedule specifying the necessary change.
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<PAGE>
2.6.2 BY CROWN PARTIES. Between the Effective Date and the
Closing Date, each Crown Party shall promptly notify Sellers in writing if such
Crown Party becomes aware of (i) any fact or condition that causes or
constitutes a Breach of any representation or warranty of Sellers or of the
Crown Parties as of the Effective Date, (ii) any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition, (iii) the occurrence of any Breach of any covenant of the Crown
Parties in this Section 2, or (iv) the occurrence of any event that may make the
satisfaction of any of the conditions set forth in Section 3 impossible or
unlikely.
2.7 PAYMENT OF CERTAIN INDEBTEDNESS. Prior to the Closing Date,
Sellers shall cause any and all indebtedness owed to the Company by either
Seller or by any Related Person of either Seller to be paid in full.
2.8 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 8.1, Sellers shall not, and shall cause the
Company not to, directly or indirectly, through any Representative or otherwise,
solicit or entertain offers from, negotiate with, or in any manner encourage,
discuss, accept, or consider any proposal of any other person or entity relating
to an acquisition of the stock, assets, or business of the Company, in whole or
in part, whether directly or indirectly, through purchase, merger,
consolidation, or otherwise, other than sales of inventory in the Ordinary
Course of Business.
3. CONDITIONS PRECEDENT TO CLOSING.
3.1 SELLERS' CONDITIONS. Sellers' obligation to sell or contribute
the Shares and otherwise to consummate this transaction shall be subject to the
satisfaction of each of the following conditions precedent (any one of which may
be waived by Sellers in whole or in part):
3.1.1 All representations and warranties of the Crown
Parties set forth in this Agreement (considered collectively) and each such
representation and warranty (considered individually) shall have been accurate
in all material respects as of the Effective Date and shall be accurate in all
material respects as of the Closing Date, as if made on the Closing Date.
3.1.2 (i) All of the covenants and obligations that the
Crown Parties are, or either of them is, obligated to perform or comply with
pursuant to this Agreement prior to or at the Closing (considered collectively)
and each such covenant and obligation (considered individually) shall have been
performed and complied with in all material respects; and (ii) the Crown Parties
shall have made the deliveries of documents and funds required to be made
pursuant to Section 4.2.2.
3.1.3 [Intentionally omitted.]
3.1.4 The following documents shall have been delivered to
Sellers (i) an opinion of Ball Janik LLP, dated the Closing Date, in
substantially the form attached as EXHIBIT A; and (ii) such other documents as
Sellers may reasonably request for the purpose of (a)
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enabling their counsel to provide the opinion described in Section 3.2.5, (b)
evidencing the accuracy of any representation or warranty of the Crown Parties
set forth in this Agreement, (c) evidencing the performance by the Crown Parties
of, or their compliance with, any covenant or obligation of the Crown Parties
under this Agreement, (d) evidencing the satisfaction of any of the conditions
described in this Section 3.1, or (e) otherwise facilitating the consummation of
this transaction.
3.1.5 As of the Closing Date, there shall not be in effect
any Legal Requirement or any injunction or other Order that (i) prohibits the
transfer of the Shares by Sellers to the Crown Parties, and (ii) has been
adopted, entered, issued, made, or rendered, or has otherwise become effective,
since the Effective Date.
3.1.6 Since the Effective Date, there shall not have been
commenced or Threatened against either Seller, the Company, or any Related
Person of either Seller (i) involving any challenge to, or seeking damages or
other relief in connection with, any aspect of this transaction, or (ii) that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with any aspect of this transaction.
3.1.7 The waiting period with respect to this transaction
under the HSR Act shall have expired.
3.2 CROWN PARTIES' CONDITIONS. The Crown Parties' obligation to
acquire the Shares and otherwise to consummate this transaction shall be subject
to the satisfaction of each of the following conditions precedent (any one of
which may be waived by the Crown Parties in whole or in part):
3.2.1 All representations and warranties of Sellers and the
Company set forth in this Agreement (considered collectively) and each such
representation and warranty (considered individually) shall have been accurate
in all material respects as of the Effective Date and shall be accurate in all
material respects as of the Closing Date, as if made on the Closing Date,
without giving effect to any Supplement; PROVIDED that each of the
representations and warranties of Sellers and the Company set forth in Sections
5.3, 5.4, and 5.13, and in the last sentence of Section 5.25, shall have been
accurate in all respects as of the Effective Date and shall be accurate in all
respects as of the Closing Date, as if made on the Closing Date, without giving
effect to any Supplement.
3.2.2 (i) All of the covenants and obligations that Sellers
are, or either of them is, obligated to perform or comply with pursuant to this
Agreement prior to or at the Closing (considered collectively) and each such
covenant and obligation (considered individually) shall have been performed and
complied with in all material respects; and (ii) Sellers shall have made the
deliveries of documents required to be made pursuant to Section 4.2.1.
3.2.3 [Intentionally omitted.]
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3.2.4 The Crown Parties shall be satisfied in all respects,
in their sole and absolute discretion, with the results of their due diligence
investigation of the Company and its properties. The condition set forth in this
Section 3.2.4 shall be deemed satisfied or waived by the Crown Parties unless
they give notice of the failure of such condition to Sellers by not later than
(i) November 14, 1997 with respect to all aspects of the Crown Parties' due
diligence investigation other than its investigation of the environmental
condition of the Facilities, or (ii) December 1, 1997 with respect to the Crown
Parties' due diligence investigation regarding the environmental condition of
the Facilities.
3.2.5 The following documents shall have been delivered to
the Crown Parties (i) an opinion of Tiffany & Bosco, dated the Closing Date, in
substantially the form attached as EXHIBIT B; (ii) resignations, dated as of the
Closing Date, from all officers and directors of the Company; (iii) the
Leasehold Title Policies, the premiums for which shall be paid by the Crown
Parties; and (iv) such other documents as the Crown Parties may reasonably
request for the purpose of (a) enabling their counsel to provide the opinion
described in Section 3.1.4, (b) evidencing the accuracy of any representation or
warranty of Sellers set forth in this Agreement, (c) evidencing the performance
by Sellers of, or their compliance with, any covenant or obligation of Sellers
under this Agreement, (d) evidencing the satisfaction of any of the conditions
described in this Section 3.2, or (e) otherwise facilitating the consummation of
this transaction.
3.2.6 Since the Effective Date, there shall not have been
commenced or Threatened against either Crown Party, any of either Crown Party's
properties, or any Person affiliated with either Crown Party any Proceeding (i)
involving any challenge to, or seeking damages or other relief in connection
with, any aspect of this transaction, or (ii) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any aspect
of this transaction.
3.2.7 No Person shall have made or Threatened any claim
asserting that such Person (i) is the holder or the beneficial owner of, or has
the right to acquire or to obtain the beneficial ownership of, any stock of or
any voting, equity, or ownership interest in the Company, or (ii) is entitled to
all or any portion of the Base Consideration or the Contingent Payment.
3.2.8 Neither the consummation of this transaction nor the
performance of any of the Crown Parties' obligations hereunder shall, directly
or indirectly, with or without notice, lapse of time, or both, materially
contravene, conflict with, result in a violation of, or cause either of the
Crown Parties or any Person affiliated with either of them to suffer any
material adverse consequence under any applicable Legal Requirement or Order or
any Legal Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Authority.
3.2.9 The Crown Parties shall have obtained such Consents
from lenders to CPLP as may be necessary to permit the Post-Closing Company
Operations to be conducted in CPLP. The condition set forth in this Section
3.2.9 shall be deemed satisfied or waived by the
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Crown Parties unless they give notice of the failure of such condition to
Sellers by not later than November 14, 1997.
3.2.10 The waiting period with respect to this transaction
under the HSR Act shall have expired.
4. CLOSING.
4.1 TIME AND PLACE OF CLOSING. The Closing shall take place at the
offices of the Crown Parties' Arizona counsel, Osborn Maledon, P.A., at 2929
North Central Avenue, Suite 2100, Phoenix, Arizona, at 10:00 a.m. local time on
the later of (i) January 2, 1998, or (ii) the date that is two Business Days
after satisfaction (or waiver by the benefited party) of the conditions set
forth in Sections 3.1.3, 3.1.7, 3.2.3, and 3.2.10 or at such other time and
place as the parties may mutually agree, subject to the rights of the parties
with respect to termination of this Agreement, as set forth in Section 8.1.
4.2 CLOSING DELIVERIES.
4.2.1 At the Closing, Sellers shall deliver or cause to be
delivered to the Crown Parties:
(a) The Certificates, duly endorsed (or accompanied
by duly executed stock powers) for transfer to Crown Partners or CP
Acquisition, as appropriate;
(b) A Release in the form attached as EXHIBIT C,
executed by Sellers (the "SELLERS' RELEASE");
(c) Employment Agreements in the form attached as
EXHIBIT D, executed by Carr and McMannis (the "EMPLOYMENT AGREEMENTS");
(d) A Certificate executed by Sellers representing
and warranting to the Crown Parties that each of Sellers' representations
and warranties set forth in this Agreement was accurate in all respects as
of the Effective Date and is accurate in all respects as of the Closing
Date as if made on the Closing Date (giving full effect to any Supplements
that are delivered by Sellers to the Crown Parties prior to the Closing
Date in accordance with Section 2.6.1);
(e) A Lease with respect to each of the Facilities,
each in the form attached as EXHIBIT E, executed by Sellers, as landlords,
and by the Company, as Tenant (the "LEASES"); and
(f) Evidence of the termination of that certain
Amended and Restated Share Purchase and Redemption Agreement among Sellers
and the Company dated as of July 17, 1995, as amended.
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4.2.2 At the Closing, the Crown Parties shall deliver or
cause to be delivered to Sellers:
(a) Immediately available funds, by wire transfer in
accordance with Sellers' instructions, in an amount equal to the Base
Consideration, less the value of any Units issued pursuant to Section 1.4.1
(b) Certificates issued in the name of Sellers
representing any Units to be issued pursuant to Section 1.4.1;
(c) The Employment Agreements, executed by the
Company;
(d) A Lease Guaranty of the tenant's performance of
its obligations under the Leases, in the form attached as EXHIBIT F,
executed by Crown Partners;
(e) A Release in the form attached as EXHIBIT G,
executed by the Crown Parties (the "CROWN PARTIES' RELEASE"); and
(f) A Certificate executed by the Crown Parties
representing and warranting to Sellers that each of the Crown Parties'
representations and warranties set forth in this Agreement was accurate in
all respects as of the Effective Date and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE COMPANY. Sellers and
the Company jointly and severally represent and warrant to the Crown Parties as
follows:
5.1 ORGANIZATION AND GOOD STANDING; NO SUBSIDIARIES. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Arizona, with full corporate power and authority to
conduct its business as it is now being conducted, to own and use the properties
that it purports to own or use, and to perform all of its obligations under all
Company Contracts. The Company is not qualified to do business as a foreign
corporation in any jurisdiction and neither the ownership or use of the
properties owned or used by it or the nature of its activities requires any such
qualification. Sellers have delivered to the Crown Parties complete and accurate
copies of the Organizational Documents of the Company, as currently in effect.
The Company has no Subsidiaries.
5.2 AUTHORITY; NO CONFLICT.
5.2.1 This Agreement constitutes the legal, valid, and
binding obligation of Sellers and the Company, enforceable against each of them
in accordance with its terms. Upon the execution and delivery of Sellers'
Closing Documents, Sellers' Closing Documents will constitute the legal, valid,
and binding obligations of Sellers (to the extent each is a party thereto) (and,
in the case of the Leases, of the Company), enforceable against each of them in
accordance with their respective terms. Sellers and the Company have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver this Agreement and Sellers' Closing
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Documents (to the extent each is a party thereto) and to perform their
respective obligations hereunder and thereunder.
5.2.2 Except as set forth on the attached SCHEDULE 5.2.2,
neither the execution and delivery of this Agreement, nor the performance of any
of Sellers' or the Company's obligations hereunder, nor the consummation of this
transaction will, directly or indirectly, with or without notice, lapse of time,
or both, (i) contravene, conflict with, or result in a violation of any
provision of the Organizational Documents of either Seller, the Company's
Organizational Documents, or any resolution adopted by the board of directors or
the shareholders of the Company; (ii) contravene, conflict with, or result in a
violation of, or give any Governmental Authority or other Person the right to
challenge this transaction or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which the Company or either Seller, or any
of the properties owned or used by the Company, may be subject; (iii)
contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Authority the right to revoke,
withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the business of, or to
any of the properties owned or used by, the Company; (iv) cause either of the
Crown Parties or the Company to become subject to, or to become liable for the
payment of, any Tax; (v) cause any of the properties owned by the Company to be
reassessed or revalued by any taxing authority or other Governmental Authority;
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Company Contract or any Contract to which either
Seller is a party or by which either Seller is bound; or (vii) result in the
imposition or creation of any Lien upon or with respect to any of the properties
owned or used by the Company.
5.2.3 Except as set forth on the attached SCHEDULE 5.2.3,
neither Seller nor the Company is or will be required to give any notice to,
make any filing with, or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement, the performance of their
respective obligations hereunder, or the consummation of this transaction.
5.3 CAPITALIZATION. The authorized equity securities of the
Company consist of 1,000,000 shares of common stock, par value $1.00 per share,
750 of which are issued and outstanding and constitute the Shares. Sellers are
and on the Closing Date will be the record and beneficial owners and holders of
the Shares, free and clear of all Liens. The Carr Trust owns 375 of the Shares
and the McMannis Trust owns 375 of the Shares. No legend or other reference to
any purported Lien appears upon any certificate representing any of the Shares.
All of the Shares have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any of the Shares. None of the Shares was issued in violation of
the Securities Act or any other Legal Requirement. The Company does not own, or
have any Contract to acquire, any equity securities or other securities of any
Person or any direct or indirect equity or ownership interest in any other
business.
5.4 FINANCIAL STATEMENTS. Sellers have delivered to the Crown
Parties (i) a balance sheet of the Company as at December 31 in each of the
years 1991 through 1996, and the
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related statements of income, changes in stockholders' equity, and cash flow for
each of the fiscal years then ended, together with the report thereon of
Sellers' Accountants, and (ii) an unaudited balance sheet of the Company as at
September 30, 1997 (the "INTERIM BALANCE SHEET") and the related unaudited
consolidated statement of income for the nine months then ended, including in
each case the notes thereto. Such financial statements and notes fairly present
the financial condition and the results of operations, changes in stockholders'
equity, and cash flow of the Company as at the respective dates of and for the
periods referred to in such financial statements, all in accordance with GAAP,
subject, in the case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the most recent financial
statements referred to in the foregoing clause (i)). The financial statements
referred to in this Section 5.4 reflect the consistent application of such
accounting principles throughout the periods involved, except as may be
disclosed in the notes to such financial statements.
5.5 BOOKS AND RECORDS. The books of account, minute books, stock
record books, and other records of the Company, all of which have been made
available to the Crown Parties, are complete and correct and have been
maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls. The minute books of the
Company contain complete and accurate records of all meetings held of, and all
corporate action taken by, the stockholders, the board of directors, and
committees of the board of directors, if any, of the Company, and no meeting of
such stockholders, board of directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books. At
the Closing, all of the foregoing books and records will be in the possession of
the Company.
5.6 REAL PROPERTY.
5.6.1 The Company does not own any real property, in whole
or in part, or any fee interest in real property.
5.6.2 The attached SCHEDULE 5.6.2 contains a complete and
accurate list of all leases of real property by the Company (the "LEASED REAL
PROPERTY"), setting forth the address, landlord, and tenant for each parcel of
Leased Real Property. All of the Leased Real Property is held by the Company
pursuant to valid and binding leases that are in full force and effect and
enforceable by the Company in accordance with their respective terms. The
Company has provided to the Crown Parties complete and accurate copies of all
leases of Leased Real Property. Except as set forth on SCHEDULE 5.6.2. the
Company is not in material default under and has not received or given any
notice of default under any lease of Leased Real Property.
5.6.3 The Leased Real Property constitutes all of the real
property used in connection with and material to the business or operations of
the Company.
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5.7 PERSONAL PROPERTY.
5.7.1 The attached SCHEDULE 5.7.1 contains a complete and
accurate list of all machinery, equipment, and other tangible personal property
(other than inventory) owned by the Company that has an original cost in excess
of $5,000. The Company has good title to all such personal property, free and
clear of all Liens other than (i) Liens for taxes not yet due and payable, (ii)
statutory Liens for carriers, warehousemen, mechanics, workmen, materialmen, and
similar Persons for liabilities and obligations incurred by the Company in the
Ordinary Course of Business that are not yet delinquent or are being contested
in good faith, (iii) such defects, irregularities, encumbrances, and other
imperfections of title as normally exist with respect to property similar in
character, none of which are substantial in character, amount, or extent,
materially detract from the value or impair the use of the property subject
thereto, or impair the operations of the Company, and (iv) Liens disclosed on
SCHEDULE 5.7.1.
5.7.2 The attached SCHEDULE 5.7.2 contains a complete and
accurate list of all machinery, equipment, and other tangible personal property
leased by the Company and sets forth the lessor with respect to each such item
of personal property.
5.8 CONDITION AND SUFFICIENCY OF ASSETS. Except as disclosed on
the attached SCHEDULE 5.8, (i) the buildings, structures, machinery, and
equipment of the Company, including buildings and structures located on Leased
Real Property, are structurally sound, in good operating condition and repair,
and adequate for the respective uses to which they are being put by the Company;
and (ii) none of such buildings, structures, machinery, or equipment is in need
of maintenance or repair, except for ordinary, routine maintenance and repairs
that are not material in nature or cost. The Company's buildings, structures,
machinery, and equipment are sufficient for the conduct of the business of the
Company after the Closing in substantially the same manner as conducted prior to
the Closing.
5.9 ACCOUNTS RECEIVABLE. All of the Company's accounts receivable
that are reflected on the Interim Balance Sheet or on the Company's accounting
records (collectively, the "ACCOUNTS RECEIVABLE") represent or will represent
valid obligations arising from sales actually made or services actually
performed in the Ordinary Course of Business. There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. The attached SCHEDULE 5.9 contains a
complete and accurate list of all Accounts Receivable as of the date of the
Interim Balance Sheet and sets forth the aging of such Accounts Receivable. To
the Knowledge of each Seller and the Company, except as set forth on SCHEDULE
5.9, unless paid prior to the Closing Date, the Accounts Receivable are or will
be as of the Closing Date current and collectible net of the respective reserves
shown on the Interim Balance Sheet or on the Company's accounting records.
5.10 INVENTORY. All of the Company's inventory, whether or not
reflected on the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, all of which have been written off or
written down to net realizable value on the Interim Balance Sheet or on
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the Company's accounting records as of the Closing Date, as the case may be. For
purposes of the Closing Financial Statements, inventories will be valued on the
same basis as on the audited year-end financial statements of the Company. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the Company's present
circumstances.
5.11 NO UNDISCLOSED LIABILITIES, Except as set forth on the
attached SCHEDULE 5.11, the Company has no liabilities or obligations of any
kind or nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations reflected or
reserved against on the Interim Balance Sheet and current liabilities incurred
in the Ordinary Course of Business since the date of the Interim Balance Sheet.
5.12 TAXES.
5.12.1 The Company has filed or caused to be filed on a
timely basis all Tax Returns that are or were required to be filed by or with
respect to it pursuant to applicable Legal Requirements. Sellers have delivered
to the Crown Parties complete and accurate copies of, and the attached SCHEDULE
5.12 contains a complete and accurate list of, all such Tax Returns relating to
income or franchise taxes filed since January 1, 1992. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to such Tax Returns or otherwise, or pursuant to any assessment
received by Sellers or the Company, except such Taxes, if any, as are listed on
SCHEDULE 5.12 and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided on the Interim
Balance Sheet.
5.12.2 The Company's federal and state income Tax Returns
have been audited by the IRS or relevant state tax authorities or are closed by
the applicable statute of limitations for all taxable years through 1993.
SCHEDULE 5.12 contains a complete and accurate list of all audits of all such
Tax Returns, including a reasonably detailed description of the nature and
outcome of each audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described on SCHEDULE 5.12, are
being contested in good faith by appropriate proceedings. SCHEDULE 5.12
describes all adjustments to the United States federal income Tax Returns filed
by the Company for all taxable years since January 1, 1992, and the resulting
deficiencies proposed by the IRS. Except as described on SCHEDULE 5.12, neither
Seller nor the Company has given or been requested to give waivers or extensions
(or is or would be subject to a waiver or extension given by any other Person)
of any statute of limitations relating to the payment of Taxes of the Company or
for which the Company may be liable.
5.12.3 To the Knowledge of each Seller and the Company, the
charges, accruals, and reserves with respect to Taxes on the Company's books are
adequate (determined in accordance with GAAP) and are at least equal to the
Company's liability for Taxes. To the Knowledge of each Seller and the Company,
there exists no proposed tax assessment against the Company except as disclosed
on the Interim Balance Sheet or on SCHEDULE 5.12. No consent to the application
of Section 341(f)(2) of the Code has been filed with respect to any property
held, acquired, or to be acquired by the Company. All Taxes that the Company is
or was required by
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Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Authority
or other Person.
5.12.4 All Tax Returns filed by the Company are true,
correct, and complete. There is no tax-sharing agreement that will require any
payment by the Company after the date of this Agreement.
5.13 NO MATERIAL ADVERSE CHANGE. Since the date of the Interim
Balance Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, or condition (financial or otherwise) of the
Company, and no event has occurred or circumstance exists that will or could
reasonably be expected to result in such a material adverse change.
5.14 EMPLOYEE BENEFIT PLANS.
5.14.1 The attached SCHEDULE 5.14 contains a complete and
accurate list of all Employee Benefit Plans of the Company. Except as set forth
on SCHEDULE 5.14, no such Employee Benefit Plan is a Multiemployer Plan or a
plan that is subject to Title IV of ERISA and no such Employee Benefit Plan
provides health or other welfare benefits to former employees of the Company
other than (i) as necessary to comply with Section 4980B of the Code or any
similar state Legal Requirement ("COBRA"), or (ii) death benefits under such an
Employee Benefit Plan.
5.14.2 Except as set forth on SCHEDULE 5.14, each Employee
Benefit Plan of the Company is maintained and administered in compliance with
all applicable Legal Requirements. Each Employee Benefit Plan of the Company
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter to the effect that it is so qualified and the
Company has no Knowledge of any facts or circumstances that will or could
reasonably be expected to affect any such favorable determination letter
adversely.
5.14.3 With respect to each Employee Benefit Plan of the
Company that is an Employee Pension Benefit Plan, (i) all required contributions
that are due for all periods ending prior to or on the Closing Date have been
made, (ii) all such contributions that are not due as of the Closing Date have
been properly accrued to the extent required by GAAP, and (iii) the Company has
not incurred any accumulated funding deficiency (as defined in Section 412 of
the Code). With respect to each other Employee Benefit Plan of the Company, all
contributions, premiums, and other payments that are due under the terms thereof
have been made or, if not due as of the Closing Date, have been properly accrued
to the extent required by GAAP.
5.14.4 The Company has complied and is in compliance with
all Legal Requirements relating to Employee Benefit Plans of the Company. No
liability under Title IV of ERISA has been or is reasonably expected to be
incurred by the Company with respect to any Employee Benefit Plan.
5.14.5 The Company has not announced any plan or made any
legally binding commitment to create additional benefits that are intended to
cover employees or former
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employees of the Company or to make any amendment or modification to any
Employee Benefit Plan of the Company, except as required by applicable Legal
Requirements and disclosed on SCHEDULE 5.14.
5.14.6 Neither the execution and delivery of this Agreement,
the performance of Sellers' obligations hereunder, nor the consummation of this
transaction will (i) except as disclosed on SCHEDULE 5.14, result in any payment
(including any severance, unemployment compensation, golden parachute, or other
payment) becoming due to any employee or former employee of the Company, (ii)
increase any benefits otherwise payable to any employee or former employee of
the Company, or (iii) result in the acceleration of the time of payment or
vesting of any benefits under any Employee Benefit Plan of the Company.
5.15 COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS.
5.15.1 Except as set forth on the attached SCHEDULE 5.15,
(i) the Company is, and at all times since January 1, 1992 has been, in full
compliance with each Legal Requirement that is or was applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
properties; (ii) no event has occurred or circumstance exists that (with or
without notice, lapse of time, or both) (a) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, or (b) may give rise to any obligation on the part
of the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and (iii) the Company has not received, at any
time since January 1, 1992, any notice or other communication (oral or written)
from any Governmental Authority or other Person regarding (a) any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement, or (b) any actual, alleged, possible, or potential obligation
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature.
5.15.2 SCHEDULE 5.15 contains a complete and accurate list
of each Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the properties owned or used by, the
Company. Each Governmental Authorization listed or required to be listed on
SCHEDULE 5.15 is valid and in full force and effect. Except as set forth on
SCHEDULE 5.15, (i) the Company is, and at all times since January 1, 1992 has
been, in full compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be identified on SCHEDULE
5.15; (ii) no event has occurred or circumstance exists that may (with or
without notice, lapse of time, or both) (a) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed on SCHEDULE
5.15, or (b) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed on SCHEDULE 5.15;
(iii) the Company has not received, at any time since January 1, 1992, any
notice or other communication (oral or written) from any Governmental Authority
or other Person regarding (a) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any
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Governmental Authorization; and (iv) all applications required to have been
filed for the renewal of the Governmental Authorizations listed or required to
be listed on SCHEDULE 5.15 have been duly filed on a timely basis with the
appropriate Governmental Authorities, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Authorities.
5.15.3 The Governmental Authorizations listed on SCHEDULE
5.15 collectively constitute all of the Governmental Authorizations necessary to
permit the Company lawfully to conduct and operate its business in the manner it
currently conducts and operates such business and to permit the Company to own
and use its properties in the manner in which it currently owns and uses such
properties.
5.16 LEGAL PROCEEDINGS; ORDERS.
5.16.1 Except as set forth on the attached SCHEDULE 5.16,
(i) there is no pending Proceeding (a) that has been commenced by or against the
Company or that otherwise relates to or may affect the business of, or any of
the properties owned or used by, the Company; or (b) that challenges, or that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, this transaction; and (ii) to the Knowledge of each Seller and
the Company, (a) no such Proceeding has been Threatened, and (b) no event has
occurred or circumstance exists that may give rise to or serve as a basis for
the commencement of any such Proceeding. Sellers have delivered or made
available to the Crown Parties copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed on SCHEDULE 5.16. Such
Proceedings will not have a material adverse effect on the business, operations,
properties, prospects, or condition (financial or otherwise) of the Company.
5.16.2 Except as set forth on SCHEDULE 5.16, (i) there is no
Order to which the Company, or any of the properties owned or used by it, is
subject; (ii) neither Seller is subject to any Order that relates to the
business of, or any of the properties owned or used by, the Company; and (iii)
to the Knowledge of each Seller and the Company, no officer, director, agent, or
employee of the Company is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
5.16.3 Except as set forth on SCHEDULE 5.16, (i) the Company
is, and at all times since January 1, 1992 has been, in full compliance with all
of the terms and requirements of each Order to which it, or any of the
properties owned or used by it, is or has been subject; (ii) no event has
occurred or circumstance exists that may constitute or result in (with or
without notice, lapse of time, or both) a violation of or failure to comply with
any term or requirement of any Order to which the Company, or any of the
properties owned or used by it, is subject; and (iii) the Company has not
received, at any time since January 1, 1992, any notice or other communication
(oral or written) from any Governmental Authority or other Person regarding any
actual, alleged, possible, or potential violation of, or failure to comply with,
any term or requirement of any Order to which the Company, or any of the
properties owned or used by it, is or has been subject.
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5.17 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth on
the attached SCHEDULE 5.17, since the date of the Interim Balance Sheet, the
Company has conducted its businesses only in the Ordinary Course of Business and
there has not been any:
5.17.1 Change in the Company's authorized or issued capital
stock, grant of any stock option or right to purchase shares of capital stock of
the Company, issuance of any security convertible into such capital stock, grant
of any registration rights, purchase, redemption, retirement, or other
acquisition by the Company of any shares of any such capital stock; (ii)
amendment to the Organizational Documents of the Company;
5.17.2 Payment or increase by the Company of any bonuses,
salaries, or other compensation to any director, officer, or (except in the
Ordinary Course of Business) employee, other than Sellers, or entry into any
employment, severance, or similar Contract with any director, officer, or
employee;
5.17.3 Adoption of, or increase in the payments to or
benefits under, any Employee Benefit Plan of the Company;
5.17.4 Damage to or destruction or loss of any property of
the Company, whether or not covered by insurance, materially and adversely
affecting the business, operations, properties, condition (financial or
otherwise), or prospects of the Company;
5.17.5 Termination of, or receipt of notice of termination
of, (i) any material license, distributorship, dealer, sales representative,
joint venture, credit, or similar Contract, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least $50,000;
5.17.6 Sale (other than sales of inventory in the Ordinary
Course of Business and the replacement of obsolete or worn-out equipment),
lease, or other disposition of any property of the Company or mortgage, pledge,
or imposition of any Lien on any material property of the Company;
5.17.7 Cancellation or waiver of any claims or rights with a
value to the Company in excess of $50,000;
5.17.8 Material change in the accounting methods used by the
Company; or
5.17.9 Contract by the Company to do any of the foregoing.
5.18 CONTRACTS; NO DEFAULTS.
5.18.1 The attached SCHEDULE 5.18 contains a complete and
accurate list, and Sellers have delivered or made available to the Crown Parties
complete and accurate copies of:
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(a) Each Company Contract that relates to (i) any
indebtedness of the Company for borrowed money, including indebtedness owed
to either Seller or to any Related Party of either Seller, or (ii) any Lien
on any Leased Real Property leased to the Company by either Seller or by
any Related Party of either Seller;
(b) Each Company Contract that is a joint venture
agreement, a partnership agreement, and any other Company Contract (however
named) that involves a sharing of profits, losses, costs, or liabilities by
the Company with any other Person;
(c) Each Company Contract that is a real property
lease or sublease or a rental or occupancy agreement, whether the Company
is the lessor or the lessee thereunder;
(d) Each Company Contract providing for the
acquisition or sale of real property by the Company, including any Company
Contract containing an option or right of first refusal with respect to
real property;
(e) Each Company Contract that is a personal
property lease (whether or not a capital lease), rental agreement, or
installment financing Contract, except for any such Company Contract that
involves property with a value or aggregate payments of less than $50,000
and has a term of less than one year;
(f) Each Company Contract that is a collective
bargaining agreement or other Contract with any labor union or other
employee representative;
(g) Each Company Contract that is an employment or
similar contract, and a written summary of each oral employment obligation
with any officer or senior management employee of the Company;
(h) Each Company Contract that provides for any
payment or other benefit to any Person upon a sale of capital stock or
equity securities of the Company;
(i) Each Company Contract that grants to any Person
a power of attorney on behalf of the Company;
(j) Each Company Contract entered into other than in
the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be liable or responsible for consequential
damages;
(k) Each Company Contract that contains any
provision or covenant that purports to restrict or limit the business
activities of the Company or the Company's freedom to engage in any line of
business or to compete with any Person;
(l) Each Company Contract that provides for capital
expenditures by the Company in excess of $50,000;
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(m) Each Company Contract that provides for the
license or use by the Company of any technology, proprietary information,
or Intellectual Property of another Person or for the license or use by any
other Person of any technology, proprietary information, or Intellectual
Property of the Company;
(n) Each Company Contract that contains a commitment
of suretyship, guarantee, or indemnification by the Company, other than
endorsements of instruments for deposit or collection;
(o) Each Company Contract that contains restrictions
with respect to dividends or other distributions in respect of the capital
stock or equity securities of the Company;
(p) Each Company Contract that was not entered into
in the Ordinary Course of Business and that involves receipts or
expenditures of the Company in excess of $50,000; and
(q) Each Company Contract, not within any of the
foregoing categories, that involves the performance of services or the
delivery of goods or materials to or by the Company of an amount or value
in excess of $50,000, other than price sheets issued by the Company in the
Ordinary Course of Business.
SCHEDULE 5.18 sets forth with respect to each such Company Contract the name and
date of and parties to the Contract, including the date(s) of any amendment(s),
modification(s), or supplement(s).
5.18.2 Except as set forth on SCHEDULE 5.18, (i) neither
Seller (and no Related Person of either Seller) has or may acquire any rights
under, and neither Seller (and no Related Person of either Seller) has or may
become subject to any obligation or liability under, any Contract that relates
to the business of, or any of the properties owned or used by, the Company; and
(ii) to the Knowledge of each Seller and the Company, no officer, director,
agent, employee, consultant, or contractor of the Company is bound by any
Contract that purports to limit the ability of such officer, director, agent,
employee, consultant, or contractor (a) to engage in or continue any conduct,
activity, or practice relating to the business of the Company, or (b) to assign
to the Company or to any other Person any rights to any invention, improvement,
or discovery.
5.18.3 Except as set forth on SCHEDULE 5.18, each Contract
identified or required to be identified on SCHEDULE 5.18 is in full force and
effect and is valid and enforceable in accordance with its terms.
5.18.4 Except as set forth on SCHEDULE 5.18, (i) the Company
is, and at all times since January 1, 1992 has been, in full compliance with all
applicable terms and requirements of each Contract under which the Company has
or had any obligation or liability or by which the Company or any of the
properties owned or used by the Company is or was bound;
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(ii) to the Knowledge of each Seller and the Company, each other Person that has
or had any obligation or liability under any Contract under which the Company
has or had any rights is, and at all times since January 1, 1992 has been, in
full compliance with all applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or without notice,
lapse of time, or both) may contravene, conflict with, or result in a violation
or breach of, or give the Company or any other Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Company Contract; and
(iv) the Company has not given to or received from any other Person, at any time
since January 1, 1992, any notice or other communication (oral or written)
regarding any actual, alleged, possible, or potential violation or breach of, or
default under, any Contract.
5.18.5 There are no renegotiations of, attempts to
renegotiate, or outstanding rights to renegotiate any material amounts paid or
payable to the Company under any current or completed Contract with any Person
and no such Person has made written demand for such renegotiation.
5.18.6 All Contracts relating to the sale, design,
manufacture, or provision of products or services by the Company have been
entered into in (i) the Ordinary Course of Business and (ii) without the
commission of any act, either alone or in concert with any other Person, or the
payment or promise of any consideration, that is or would be in violation of any
Legal Requirement.
5.19 INSURANCE.
5.19.1 Sellers have delivered or made available to the Crown
Parties (i) complete and accurate copies of all policies of insurance to which
the Company is a party or under which the Company, or any director of the
Company, is or has been covered at any time since January 1, 1992; (ii) complete
and accurate copies of all pending applications for policies of insurance; and
(iii) a complete and accurate copy of any statement by the auditor of the
Company's financial statements with regard to the adequacy of the Company's
insurance coverage or of its reserves for claims.
5.19.2 The attached SCHEDULE 5.19 accurately describes (i)
any self-insurance arrangement by or affecting the Company, including any
reserves established thereunder; (ii) any Contract or other arrangement, other
than a policy of insurance, for the transfer or sharing of any risk by the
Company; and (iii) all obligations of the Company to other Persons with respect
to insurance (including such obligations under leases and service agreements)
and identifies the policy under which such coverage is provided.
5.19.3 SCHEDULE 5.19 accurately describes, by year, for the
current policy year and each of the three preceding policy years, (i) a summary
of the loss experience under each policy of insurance of the Company; (ii) a
statement describing each claim under any such policy for an amount in excess of
$50,000, which sets forth (a) the name of the claimant, (b) a description of the
policy by insurer, type of insurance, and period of coverage, and (c) the
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amount and a brief description of the claim; and (iii) a statement describing
the loss experience for all claims that were self-insured, including the number
and aggregate cost of such claims.
5.19.4 Except as set forth on SCHEDULE 5.19, (i) all
policies to which the Company is a party or that provide coverage to either
Seller, the Company, or any director or officer of the Company (a) are valid,
outstanding, and enforceable, (b) are issued by an insurer that is reputable
and, to the Knowledge of each Seller and the Company, financially sound, (c)
taken together, provide adequate insurance coverage for the properties and
operations of the Company for all risks to which the Company is normally
exposed, (d) are sufficient for compliance with all Company Contracts and all
Legal Requirements applicable to the Company, (e) will continue in full force
and effect following the consummation of this transaction, and (f) do not
provide for any retrospective premium adjustment or other experienced-based
liability on the part of the Company; (ii) neither Seller nor the Company has
received (a) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (b) any notice of cancellation or other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder; (iii) the Company has paid all premiums due,
and has otherwise performed all of its obligations, under each policy to which
the Company is a party or that provides coverage to the Company or any director
thereof; and (iv) the Company has given notice to the insurer of all claims that
may be insured by any policy to which the Company is a party or that provides
coverage to the Company or any director thereof.
5.20 ENVIRONMENTAL MATTERS. Except as set forth on the attached
SCHEDULE 5.20:
5.20.1 To the Knowledge of each Seller and the Company, the
Company is, and at all times has been, in full compliance with, and has not been
and is not in violation of or liable under, any Environmental Law. Neither
Seller nor, to the Knowledge of each Seller and the Company, the Company has any
basis to expect, nor has any of them or any other Person for whose conduct any
of them is or may be held responsible received, any actual or Threatened Order,
notice, or other communication from (i) any Governmental Authority or any
private citizen acting in the public interest, or (ii) the current or prior
owner or operator of any property in which either Seller or the Company has or
previously had any interest, of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or Threatened obligation to
undertake or bear the cost of any Environmental Liabilities with respect to any
property in either Seller or the Company has or previously had an interest, or
with respect to any property at, to, or from which Hazardous Materials were
generated, manufactured, refined, transferred, imported, used, or processed by
either Seller, the Company, or any other Person for whose conduct any of them is
or may be held responsible.
5.20.2 To the Knowledge of each Seller and the Company,
there are no pending or Threatened claims, Liens, or other restrictions of any
nature resulting from any Environmental Liabilities or arising under any
Environmental Law with respect to or affecting any property in which either
Seller or the Company has or previously had an interest.
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5.20.3 Neither Seller nor, to the Knowledge of each Seller
and the Company, the Company has any basis to expect, nor has any of them or any
other Person for whose conduct any of them is or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication that relates to (i) Hazardous Materials, (ii) any alleged,
actual, or potential violation of or failure to comply with any Environmental
Law, or (iii) any alleged, actual, or potential obligation to undertake or bear
the cost of any Environmental Liabilities with respect to any property in which
either Seller or the Company has or previously had an interest, or with respect
to any property at or to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by either Seller, the
Company, or any other Person for whose conduct any of them is or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
5.20.4 To the Knowledge of each Seller and the Company,
neither Seller nor the Company, nor any other Person for whose conduct any of
them is or may be held responsible, has any Environmental Liabilities with
respect to any property in which either Seller or the Company has or previously
had an interest, or any property geologically or hydrologically adjoining any
such property.
5.20.5 To the Knowledge of each Seller and the Company,
there are no Hazardous Materials present on, in, or under any property in which
the Company has an interest, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed), or other containers, either temporary or
permanent, or deposited or located in land, water, sumps, or any other part of
any such property, or incorporated into any structure therein or thereon, other
than such Hazardous Materials as may be used by the Company in the Ordinary
Course of Business and as are used, stored, and disposed of in full compliance
with all Environmental Laws.
5.20.6 Sellers have delivered or made available to the Crown
Parties complete and accurate copies of all reports, analyses, studies, tests,
and monitoring results possessed or initiated by either Seller or the Company
with respect to Hazardous Materials in, on, or under any property in which
either Seller or the Company has or previously had an interest or compliance
with Environmental Laws by either Seller, the Company, or any other Person for
whose conduct any of them is or may be held responsible.
5.21 EMPLOYEES.
5.21.1 The attached SCHEDULE 5.21 contains a complete and
accurate list of (i) the following information for each employee or director of
the Company, including each employee on leave of absence or layoff status: name;
job title; current compensation paid or payable; accrued vacation; and service
credited for purposes of vesting and eligibility to participate under any
Employee Benefit Plan of the Company; and (ii) the following information for
each retired employee or director of the Company, or their dependents, receiving
benefits or scheduled to receive benefits in the future: name, pension benefit,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
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5.21.2 No employee or director of the Company is a party to,
or is otherwise bound by, any Contract or other arrangement, including any
confidentiality, noncompetition, or proprietary rights agreement, with any other
Person, including either Seller or the Company, that in any way adversely
affects or will adversely affect (i) the performance of such individual's duties
as an employee or director of the Company, or (ii) the ability of the Company to
conduct its business. To the Knowledge of each Seller, no director, officer, or
other key employee of the Company intends to terminate his employment.
5.22 LABOR RELATIONS. The Company has not been and is not a party
to any collective bargaining or other labor Contract. Except as described on the
attached SCHEDULE 5.22, since January 1, 1992, there has not been, and there is
not presently pending, existing, or Threatened, (i) any strike, slowdown,
picketing, work stoppage, or employee grievance process by or involving any
employees of the Company, (ii) any Proceeding against or affecting the Company
relating to the alleged violation of any Legal Requirement pertaining to labor
relations or employment matters, or (iii) to the Knowledge of each Seller and
the Company, any application for certification of a collective bargaining agent.
To the Knowledge of each Seller and the Company, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute by or involving any employees of the Company. There is no lockout
of any employees by the Company, and no such action is contemplated by the
Company. The Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and plant
closing. The Company is not liable for the payment of any compensation, damages,
taxes, fines, penalties, or other amounts, however designated, for failure to
comply with any of the foregoing Legal Requirements.
5.23 INTELLECTUAL PROPERTY. The attached SCHEDULE 5.23 contains a
complete and accurate description of (i) all Intellectual Property (other than
computer software used by the Company in the Ordinary Course of Business) in
which the Company has an interest, (ii) each pending application of any nature
made by the Company with respect to Intellectual Property, and (iii) each
license granted to or by the Company with respect to the use of Intellectual
Property (other than licenses of computer software used by the Company in the
Ordinary Course of Business). Except as set forth on SCHEDULE 5.23, no claim or
Proceeding is pending or Threatened with respect to the validity,
enforceability, use, or ownership of any Intellectual Property by the Company.
5.24 CERTAIN PAYMENTS. Since January 1, 1992, neither the Company
nor, to the Knowledge of either Seller or the Company, any director, officer,
agent, or employee of the Company or any other Person associated with or acting
for or on behalf of the Company, has directly or indirectly (i) made or promised
any contribution, gift (other than gifts not exceeding $1,500 in cost or value
in any single instance), bribe, rebate, payoff, influence payment, kickback, or
other payment to any Person, private or public, regardless of form, whether in
money, property, or services (a) to obtain favorable treatment in securing
business, (b) to pay for favorable treatment for business secured, (c) to obtain
special concessions, or for special concessions already obtained, for or in
respect of the Company or any Related Person of the
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Company, or (d) in violation of any Legal Requirement; or (ii) established or
maintained any fund or property that has not been recorded in the books and
records of the Company.
5.25 DISCLOSURE. No representation or warranty of Sellers or the
Company in this Agreement and no statement in any Schedule to this Agreement
relating to any such representation or warranty omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not materially misleading. No notice
given pursuant to Section 2.6.1 will contain any untrue statement or omit to
state a material fact necessary to make the statements therein or in this
Agreement, in light of the circumstances in which they were made, not materially
misleading. There is no fact known to either Seller or the Company that has
specific application to either Seller or to the Company (other than general
economic or industry conditions) and that materially adversely affects or, as
far as either Seller can reasonably foresee, materially threatens, the business,
operations, properties, condition (financial or otherwise), or prospects of the
Company that has not been set forth in this Agreement or the Schedules hereto.
5.26 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth on the
attached SCHEDULE 5.26 and except for Sellers' ownership of the Facilities,
neither Seller nor any Related Person of either Seller or of the Company (i)
has, or since January 1, 1996 has had, any interest in any property used in or
pertaining to the Company's businesses; (ii) has, or since January 1, 1996 has
had, any equity or other financial or profits interest in any Person that has
(a) had business dealings or a material financial interest in any transaction
with the Company, other than business dealings or transactions conducted in the
Ordinary Course of Business with the Company at substantially prevailing market
prices and on substantially prevailing market terms, or (b) engaged in
competition with the Company with respect to any line of the products or
services of the Company in any market presently served by the Company; or (iii)
is a party to any Contract with, or has any claim or right against, the Company.
5.27 BROKERS AND FINDERS. Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement or this transaction.
5.28 MATTERS RELATING TO UNITS. Each Seller (i) has been provided
with a copy of Crown Partners' Shelf Offering Prospectus dated October 27, 1997,
and with copies of the various reports incorporated therein by reference, and
has been provided as much time and opportunity as such Seller deemed appropriate
to review and study such Prospectus and such reports and to consult with
Representatives of Crown Partners regarding the merits and risks of an
investment in Crown Partners; (ii) has had adequate opportunity to ask questions
of and receive answers from the officers of Crown Partners regarding any and all
matters relating to the business of Crown Partners that such Seller deemed
appropriate to ask, including the background and experience of such officers and
the members of the board of control of Crown Partners, the plans of such
officers for the operation of Crown Partners, and the current conduct and status
of and prospects for Crown Partners' business; (iii) has in fact asked of the
officers of Crown Partners any and all questions of the nature described in the
foregoing clause (ii) that such Seller has wished to ask, and all such questions
have been answered to the satisfaction of such Seller;
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(iv) is the true party in interest and will not be acquiring any Units for the
benefit of any other Person; (v) has such knowledge and experience in financial
and business matters and investments in general that such Seller is capable of
evaluating the merits and risks of the ownership of Units; (vi) understands that
the Units will not be capable of being sold readily without compliance with
applicable federal and state securities laws; and (vii) has liquid assets and
income sufficient to assure that such Seller's current and future personal needs
will be provided for notwithstanding the complete loss of such Seller's
investment in Units.
6. REPRESENTATIONS AND WARRANTIES OF THE CROWN PARTIES. The Crown Parties
jointly and severally represent and warrant to Sellers as follows:
6.1 ORGANIZATION AND GOOD STANDING. Crown Partners is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware. CP Acquisition is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Oregon.
6.2 AUTHORITY; NO CONFLICT.
6.2.1 This Agreement constitutes the legal, valid, and
binding obligation of the Crown Parties, enforceable against each of them in
accordance with its terms. Upon the execution and delivery of the Employment
Agreements and the Crown Parties' Release, the Employment Agreements and the
Crown Parties' Release will constitute the legal, valid, and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms. The Crown Parties have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Crown Parties' Release, the Company will, as of the Closing Date, have the
absolute and unrestricted right, power, authority, and capacity to execute and
deliver the Employment Agreement, and the Crown Parties have and, as of the
Closing Date, the Company will have the absolute and unrestricted right, power,
authority, and capacity to perform their respective obligations hereunder and
thereunder.
6.2.2 Neither the execution and delivery of this Agreement,
nor the performance of any of the Crown Parties' obligations hereunder, nor the
consummation of this transaction will, directly or indirectly (with or without
notice, lapse of time, or both), (i) contravene, conflict with, or result in a
violation of any provision of the Crown Parties' Organizational Documents or any
resolution adopted by the board of control, managing general partner, or limited
partners of Crown Partners or by the board of directors or the shareholders of
CP Acquisition; (ii) give any Person the right to prevent, delay, or otherwise
interfere with this transaction pursuant to any Legal Requirement or Order to
which either Crown Party may be subject or any Contract to which either Crown
Party is a party or by which it is bound.
6.2.3 Other than filings under the HSR Act, neither Crown
Party is or will be required to give any notice to, make any filing with, or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement, the performance of their respective obligations hereunder, or
the consummation of this transaction.
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6.3 INVESTMENT INTENT. CP Acquisition is acquiring the Shares for
its own account and not with a view to their distribution within the meaning of
Section 2(11) of the Securities Act.
6.4 CERTAIN PROCEEDINGS. No Proceeding is pending or has been
Threatened against either Crown Party that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, this
transaction.
6.5 DISCLOSURE. No representation or warranty of the Crown Parties
in this Agreement omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were
made, not materially misleading.
6.6 BROKERS AND FINDERS. The Crown Parties and their agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or this transaction.
7. POST-CLOSING COVENANTS.
7.1 REPAYMENT OF CERTAIN NOTES PAYABLE. The Crown Parties shall
cause the Company to repay in full the Notes Payable identified on the attached
SCHEDULE 7.1. Such repayment shall occur (i) on the Closing Date and immediately
after the Closing in the case of all such Notes Payable that do not relate to
financing for specific vehicles or equipment acquired by the Company, or (ii)
within 30 days after the Closing Date in the case of all such Notes Payable that
relate to financing for specific vehicles or equipment acquired by the Company.
The Crown Parties shall provide Sellers with evidence of the repayment of all
such Notes Payable.
7.2 RESPONSIBILITY FOR CERTAIN TAX RETURNS AND AUDITS. Sellers
shall be solely responsible for, shall be entitled to amend in such manner as
they deem appropriate, and shall pay all costs and expenses relating to and all
Taxes due pursuant to, all federal and state income Tax Returns previously or
hereafter filed or required to have been filed by the Company that relate to the
period to and including the Closing Date and any and all audits of such Tax
Returns by Governmental Authorities. The Crown Parties agree to cause the
Company to make available to Sellers and their Representatives such access to
the books and records of the Company as they may reasonably request for the
purpose of preparing such Tax Returns and responding to such audits.
7.3 MANAGEMENT OF POST-CLOSING COMPANY OPERATIONS.
7.3.1 The Crown Parties acknowledge that (i) the existence
of the Contingent Payment requires them to make reasonable, good faith efforts
to cause the Post-Closing Company Operations to achieve the Cash Flow necessary
to enable the Contingent Payment to be made, and (ii) they have no present
strategy regarding the Post-Closing Company Operations that would make
achievement of such Cash Flow unlikely. Notwithstanding the foregoing, the
parties acknowledge and agree that the Crown Parties cannot reasonably be
required to conduct the Post-Closing Company Operations on the basis of
short-term strategies
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and objectives that are established only for the purpose of attaining the Cash
Flow necessary to enable the Contingent Payment to be made and that do not
reflect careful long-term planning. The Crown Parties agree not to take or fail
to take any action for the purpose of causing the Contingent Payment not to be
payable pursuant to Section 1.2.3. To the extent necessary to permit an accurate
calculation of Cash Flow and its components, all financial matters with respect
to the Post-Closing Company Operations will be accounted for separately from
financial matters relating to other businesses and operations of Crown Partners
and its Subsidiaries.
7.3.2 Ultimate control with respect to the management
Post-Closing Company Operations will be vested in Crown Partners' board of
control and chief executive officer. For so long as they are employed pursuant
to their respective Employment Agreements, the authority to manage the
day-to-day business and affairs of the Company will be delegated to Carr and
McMannis, subject to operating and capital budgets to be proposed by Carr and
McMannis and approved by the board of control of Crown Partners.
7.4 POST-CLOSING INSURANCE. Throughout the period from the Closing
Date through the fifth anniversary of the Closing Date, the Crown Parties shall
cause the Company to maintain in full force and effect, with one or more
reputable insurance companies licensed to issue insurance in the State of
Arizona, insurance coverages of the types and in the minimum amounts set forth
in Section 6 of the Leases. All such insurance shall name Sellers, Carr, and
McMannis as insureds and shall contain a clause or endorsement pursuant to which
the insurer waives any right of subrogation to any claim that the Crown Parties
may have against Sellers under this Agreement. The Crown Parties shall deliver a
certificate evidencing such insurance to Sellers at the Closing and shall
deliver evidence of the renewal of such insurance to Sellers at least 30 days
prior to its expiration. Each insurance policy maintained pursuant to this
Section 7.4 shall contain a provision pursuant to which it cannot be canceled
without at least 30 days prior written notice to Sellers.
7.5 CREDIT FOR COMPANY SENIORITY. For purposes of determining
their entitlement to employee benefits after the Closing, all employees of the
Company, including Carr and McMannis, shall be credited for their seniority with
the Company as of the Closing Date.
8. TERMINATION.
8.1 TERMINATION EVENTS. This Agreement may, by notice given prior
to or at the Closing, be terminated:
8.1.1 By either Sellers or the Crown Parties if a material
Breach of any provision of this Agreement has been committed by the other party
and such Breach has not previously been waived; PROVIDED that except with
respect to a Breach of the parties' obligations under Section 4.2, a Breach
shall not give either party the right to terminate this Agreement unless (i) the
non-Breaching party has given the Breaching party notice specifying the nature
of the Breach in reasonable detail, and (ii) the Breaching party either (a) has
failed to cure such Breach within ten Business Days after such notice is given,
or (b) if such Breach cannot be cured solely by the payment of money and cannot
reasonably be cured within ten Business Days
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despite the exercise of due diligence, has failed to commence curative action
within ten Business Days after such notice is given or thereafter fails to
complete the cure of such Breach as soon as practicable;
8.1.2 (i) By Sellers, if any of the conditions in Section
3.1 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Sellers to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date; or (ii) by the Crown Parties, if
any of the conditions in Section 3.2 has not been satisfied as of the Closing
Date or if satisfaction of such a condition is or becomes impossible (other than
through the failure of the Crown Parties to comply with their obligations under
this Agreement) and the Crown Parties have not waived such condition on or
before the Closing Date;
8.1.3 By mutual consent of the Crown Parties and Sellers;
or
8.1.4 By either Sellers or the Crown Parties if the Closing
has not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before February 1, 1998, or such later date as the parties may
agree upon.
8.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination shall not constitute an
election of remedies. If this Agreement is terminated pursuant to Section 8.1,
all further obligations of the parties under this Agreement shall thereupon
terminate, except that the obligations set forth in Sections 11.6 through 11.8
shall survive; PROVIDED, HOWEVER, that if this Agreement is terminated by a
party because of a Breach of this Agreement by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its obligations under this Agreement, the terminating party's right to
pursue all legal remedies shall survive such termination unimpaired, subject to
any limitations thereon expressly set forth in this Agreement.
9. INDEMNIFICATION; REMEDIES.
9.1 SURVIVAL; EFFECT OF KNOWLEDGE OR WAIVER. All representations,
warranties, covenants, and obligations set forth in this Agreement, any
Supplements, and any certificate or document delivered pursuant to this
Agreement shall survive the Closing; PROVIDED, HOWEVER, that the representations
and warranties made by the Company in this Agreement shall not survive the
Closing. The right to indemnification, payment of Damages, or any other remedy
based on such representations, warranties, covenants, and obligations shall not
be affected by any investigation conducted with respect to, or any Knowledge
capable of being acquired at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with any such representation, warranty, covenant, or
obligation; PROVIDED that a party shall not be entitled to indemnification or
payment
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of Damages based on any breach of a representation or warranty of another party
of which such first party had Actual Knowledge prior to the Closing Date.
9.2 INDEMNIFICATION BY SELLERS.
9.2.1 Sellers, jointly and severally, shall indemnify and
hold harmless the Crown Parties, the Company, and their respective
Representatives, partners, stockholders, controlling persons, and affiliates
(collectively, the "INDEMNIFIED PERSONS") for, and shall pay to the Indemnified
Persons the amount of, any and all Damages arising, directly or indirectly, from
or in connection with any of the following:
(a) Any Breach of any representation or warranty
made by Sellers or the Company in this Agreement (giving effect to any
Supplements), any Supplement (giving effect to any subsequent Supplement),
or any other certificate or document delivered by Sellers pursuant to this
Agreement;
(b) Any Breach by either Seller of any covenant or
obligation of such Seller in this Agreement;
(c) Any product shipped or manufactured by, or any
services provided by, the Company prior to the Closing Date;
(d) Any matter disclosed in the attached SCHEDULE
9.2; or
(e) Any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any Contract
alleged to have been made by any such Person with either Seller or the
Company (or any Person acting on their behalf) in connection with this
transaction.
9.2.2 Without limiting the generality of the provisions of
Section 9.2.1, Sellers, jointly and severally, shall indemnify and hold harmless
the Indemnified Persons for, and shall pay to the Indemnified Persons the amount
of, any Damages (including costs of cleanup, containment, or other remediation)
arising, directly or indirectly, from or in connection with:
(a) Any Environmental Liabilities arising out of or
relating to (i) the operation at any time on or prior to the Closing Date
of any property in which either Seller or the Company has or previously had
an interest; (ii) any Hazardous Materials that, to the Knowledge of either
Seller or the Company, were present on, in, or under any such property at
any time on or prior to the Closing Date; (iii) any Hazardous Materials
that, to the Knowledge of either Seller or the Company, were, or were
allegedly, generated, transported, stored, treated, released, or otherwise
handled by either Seller, the Company, or any other Person for whose
conduct any of them is or may be held responsible at any time on or prior
to the Closing Date; or (iv) any actual or alleged violation of
Environmental Laws on or prior to the Closing Date by either Seller, the
Company, or any other Person for whose conduct any of them is or may be
held responsible; or
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(b) Any bodily injury (including illness, disability, and
death, and regardless of when any such bodily injury occurred, was
incurred, or manifested itself or occurs, is incurred, or manifests
itself), personal injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real property), or other
damage of or to any Person, including any employee or former employee of
either Sellers, the Company, or any other Person for whose conduct any of
them is or may be held responsible, in any way arising from or allegedly
arising from any activity conducted or allegedly conducted in violation of
Environmental Laws with respect to the operation on or prior to the Closing
Date of the Company or of any property in which either Seller or the
Company has or previously had an interest or from any Hazardous Material
that was (i) to the Knowledge of either Seller or the Company, present or
suspected to be present on or before the Closing Date on or at any property
in which either Seller or the Company has or previously had an interest (or
present or suspected to be present on any other property, if such Hazardous
Material emanated or allegedly emanated from any of such property on or
prior to the Closing Date) or (ii) to the Knowledge of either Seller or the
Company, released or allegedly released by either Seller, the Company, or
any other Person for whose conduct any of them is or may be held
responsible at any time on or prior to the Closing Date.
The Crown Parties shall be entitled to control any cleanup, any related
Proceeding, and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this Section
9.2.2. The procedure described in Section 9.7 shall apply to any claim solely
for monetary damages relating to a matter covered by this Section 9.2.2.
9.2.3 The remedies provided in Section 9.2.1 and 9.2.2
shall be exclusive remedies available to the Crown Parties or the other
Indemnified Persons with respect to matters covered thereby; PROVIDED, HOWEVER,
that the limitation set forth in this Section 9.2.3 shall not apply to any claim
of fraud asserted by the Crown Parties or any other Indemnified Person, to any
Breach of any of Sellers' representations and warranties of which either Seller
had Knowledge at any time prior to the date on which such representation and
warranty is made, or to any intentional Breach by either Seller of any covenant
or obligation of Sellers under this Agreement.
9.2.4 Sellers shall have no right of contribution against
the Company with respect to any liability of Sellers under this Section 9.
9.3 INDEMNIFICATION BY THE CROWN PARTIES. The Crown Parties,
jointly and severally, shall indemnify and hold harmless Sellers, and shall pay
to Sellers the amount of any Damages arising, directly or indirectly, from or in
connection with (i) any Breach of any representation or warranty made by the
Crown Parties in this Agreement or in any certificate delivered by the Crown
Parties pursuant to this Agreement, (ii) any Breach by either Crown Party of any
covenant or obligation of such Crown Party in this Agreement, or (iii) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any Contract alleged to have been made by such Person with a Crown
Party (or any Person acting on its behalf) in connection with this transaction.
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9.4 TIME LIMITATIONS.
9.4.1 If the Closing occurs, Sellers' liability (for
indemnification or otherwise) with respect to representations or warranties and
with respect to covenants or obligations to be performed and complied with prior
to the Closing Date shall be subject to the following limitations:
(a) Sellers shall have no liability with respect to
any of the representations and warranties set forth in Sections 5.1, 5.4
through 5.10, 5.13, 5.17, 5.18, 5.19, 5.21 through 5.24, 5.26, and 5.27, or
with respect to any such covenant or obligations to be performed or
complied with prior to the Closing Date, except with respect to any such
matter as to which, on or before the first anniversary of the Closing Date,
the Crown Parties notify Sellers of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by the Crown
Parties.
(b) Sellers shall have no liability with respect to
any of the representations and warranties set forth in Sections 5.2, 5.3,
5.11, 5.14, 5.15, 5.16, 5.25, and 5.28, except with respect to any such
matter as to which, on or before the third anniversary of the Closing Date,
the Crown Parties notify Sellers of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by the Crown
Parties.
(c) Sellers shall have no liability with respect to
any of the representations and warranties set forth in Sections 5.12 and
5.20, or under Section 9.2.2, except with respect to any such matter as to
which, on or before the fifth anniversary of the Closing Date, the Crown
Parties notify Sellers of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by the Crown Parties.
9.4.2 If the Closing occurs, the Crown Parties will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, except with respect to any matter as to which, on or before
the third anniversary of the Closing Date, Sellers notify the Crown Parties of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Sellers. A claim not based upon any representation or
warranty or any covenant or obligation to be performed and complied with prior
to the Closing Date, may be made at any time.
9.5 LIMITATIONS ON AMOUNT.
9.5.1 Sellers shall have no liability (for indemnification
or otherwise) with respect to the matters described in Section 9.2.1(a), 9.2.2,
or, to the extent relating to any failure to perform or comply prior to the
Closing Date, 9.2.1(b), (i) until the total of all Damages with respect to such
matters exceeds $500,000, and then only for the amount by which such Damages
exceed $500,000, or (ii) for an aggregate amount in excess of the Base
Consideration; PROVIDED, HOWEVER, that the limitations set forth in this Section
9.5.1 shall not apply to any
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Breach of any of Sellers' representations and warranties of which either Seller
had Actual Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional Breach by either Seller of any covenant
or obligation, and Sellers shall be jointly and severally liable for all Damages
with respect to such Breaches.
9.5.2 The Crown Parties shall have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(i) or (ii) of Section 9.3 until the total of all Damages with respect to such
matters exceeds $500,000, and then only for the amount by which such Damages
exceed $500,000; PROVIDED, HOWEVER, that the limitation set forth in this
Section 9.5.2 shall not apply to any Breach of any of the Crown Parties'
representations and warranties of which either of the Crown Parties had Actual
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional Breach by either Crown Party of any covenant
or obligation, and the Crown Parties shall be jointly and severally liable for
all Damages with respect to such Breaches.
9.6 RIGHT OF SET-OFF. Upon notice to Sellers specifying in
reasonable detail the basis for such set-off, the Crown Parties may set off any
amount to which a court of competent jurisdiction has determined they are
entitled under this Section 9 against the Contingent Payment and against amounts
otherwise payable to Sellers under any Lease (for so long as Sellers own the
real property subject to such Lease) or otherwise. Neither the exercise of nor
the failure to exercise such right of set-off shall constitute an election of
remedies or limit the Crown Parties in any manner in the enforcement of any
other remedies that may be available to them.
9.7 PROCEDURE FOR INDEMNIFICATION.
9.7.1 Promptly after receipt by an indemnified party under
Section 9.2.1, 9.3, or (to the extent provided in the last sentence of Section
9.2.2) 9.2.2 of notice of the commencement of any Proceeding against it, such
indemnified party shall, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim; PROVIDED that the failure to notify the indemnifying party shall not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such Proceeding is prejudiced by the indemnifying party's
failure to give such notice.
9.7.2 If any Proceeding referred to in Section 9.7.1 is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party shall,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and to provide indemnification with respect
to such Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party shall not, as long as it
diligently conducts such defense, be
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liable to the indemnified party under this Section 9 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it shall be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (a) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (b) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party shall
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within 10
days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party shall be bound by any determination made in such Proceeding
or any compromise or settlement effected by the indemnified party.
9.7.3 Notwithstanding the foregoing provisions of this
Section 9.7, if an indemnified party determines in good faith that there is a
reasonable probability that a Proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party shall not be
bound by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which shall not be unreasonably
withheld).
9.7.4 Sellers and the Crown Parties each hereby consent to
the non-exclusive jurisdiction of any court in which a Proceeding is brought
against any Indemnified Person for purposes of any claim that an Indemnified
Person may have under this Agreement with respect to such Proceeding or the
matters alleged therein, and agree that process may be served on Sellers or the
Crown Parties with respect to such a claim anywhere in the world.
9.7.5 A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought.
10. DEFINITIONS AND INTERPRETATION.
10.1 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the respective meanings set forth below:
"ACCOUNTANTS" means Arthur Andersen LLP.
"ACCOUNTS RECEIVABLE" has the meaning set forth in Section 5.9.
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"ACTUAL KNOWLEDGE" means (i) with respect to the Crown Parties, that
Peter W. Stott, Roger L. Krage, Richard D. Snyder, Mark Conan or any attorney
representing the Crown Parties in connection with this transaction is actually
aware of a particular fact or other matter, or (ii) with respect to Sellers,
that Carr, McMannis, or any attorney representing either Seller or the Company
in connection with this transaction is actually aware of a particular fact or
other matter.
"AGREEMENT" means this Stock Acquisition Agreement.
"BASE CONSIDERATION" means, subject to adjustment as provided in
Section 1.2.1, an amount equal to the excess of (i) $29,500,000, over (ii) the
aggregate amount of principal and unpaid accrued interest due under the Notes
Payable as of the Closing Date.
"BEST EFFORTS" means the efforts that a prudent Person who wishes to
achieve a result would use in similar circumstances to achieve such result as
expeditiously as possible.
"BREACH" means, with respect to any representation, warranty,
covenant, obligation, or other provision of this Agreement or any document
delivered pursuant to this Agreement, (i) any inaccuracy in or breach of, or any
failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision, or (ii) any claim by any Person or any other
occurrence or circumstance that is or was inconsistent with such representation,
warranty, covenant, obligation, or other provision.
"BUSINESS DAY" means any day other than a Saturday, Sunday, or other
day on which commercial banks in Portland, Oregon, Phoenix, Arizona, New York
City, New York, or San Francisco, California are authorized or required by law
to be closed.
"CARR" means True H. Carr, an individual.
"CARR TRUST" has the meaning set forth in the preamble to this
Agreement.
"CASH FLOW" means, with respect to any calendar year, an amount equal
to (i) the net income attributable to the Post-Closing Company Operations for
such year (using the first in-first out method of accounting for inventory),
excluding gains and losses from sales of properties outside the Ordinary Course
of Business, PLUS (ii) any federal or state income taxes, interest expense,
depreciation, depletion, and amortization taken into account in determining such
net income, MINUS (iii) all capital expenditures (other than Expansive Capital
Expenditures) incurred during such year in connection with the Post-Closing
Company Operations, to the extent such capital expenditures do not exceed the
depreciation taken into account in determining such net income, MINUS (iv) an
amount equal to the product of (a) the CPLP Borrowing Cost for such year,
multiplied by (b) the Excess Working Capital, if any, for such year, MINUS (v)
an amount equal to 10% of the aggregate Expansive Capital Expenditures incurred
during the period from the Closing Date to the end of such year; PROVIDED that
in no event shall any general overhead allocation from Crown Partners or its
Subsidiaries be taken into account in the calculation of Cash Flow.
"CAUSE" has the meaning given that term in the Employment Agreements.
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"CERTIFICATES" means the outstanding certificates that, on the Closing
Date, represent shares of Common Stock.
"CLOSING" means the closing of the acquisition and transfer of the
Shares pursuant to this Agreement.
"CLOSING DATE" means the date on which the Closing occurs.
"CLOSING FINANCIAL STATEMENTS" has the meaning set forth in Section
1.2.2(b).
"COBRA" has the meaning set forth in Section 5.14.1.
"CODE" means the Internal Revenue Code of 1986 or any successor law,
and the regulations and rules issued thereunder, as amended through the Closing
Date.
"COMMON STOCK" means the common stock of the Company, $1.00 par value
per share.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPANY CONTRACT" means any Contract (i) under which the Company has
or may acquire any rights, (ii) under which the Company has or may become
subject to any obligation or liability, or (iii) by which the Company or any of
the properties owned or used by the Company is or may become bound.
"CONSENT" means any approval, consent, ratification, waiver, or other
authorization, including any Governmental Authorization.
"CONTINGENT PAYMENT" means the sum of $3,000,000, to be paid to
Sellers in the circumstances and manner set forth in Section 1.2.3.
"CONTRACT" means any agreement, contract, obligation, promise, or
understanding, whether written or oral and whether express or implied, that is
legally binding.
"CP ACQUISITION" has the meaning set forth in the preamble to this
Agreement.
"CPLP" means Crown Pacific Limited Partnership, a Delaware limited
partnership and a Subsidiary of Crown Partners.
"CPLP BORROWING COST" means the average interest rate payable by CPLP
during any calendar year under the terms of its then-current working capital
credit facility.
"CROWN PARTIES" means Crown Partners and CP Acquisition.
"CROWN PARTIES' RELEASE" has the meaning set forth in Section
4.2.2(e).
"CROWN PARTNERS" has the meaning set forth in the preamble to this
Agreement.
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"DAMAGES" means all losses, liabilities, claims, damages (including
incidental and consequential damages), expenses (including costs of
investigation and defense and reasonable attorneys' fees), and diminution of
value, whether or not involving a third party claim, except to the extent, if
any, that any such losses, liabilities, claims, damages, expenses, or diminution
in value are recovered through insurance proceeds actually received (net of any
costs incurred in connection therewith, whether through retrospective premium
adjustments, experience-based premium adjustments, or otherwise).
"EFFECTIVE DATE" has the meaning set forth in the preamble to this
Agreement.
"ERISA" means the Employee Retirement Security Income Security Act of
1974 or any successor law, and the regulations and rules issued thereunder, as
amended through the Closing Date.
"EMPLOYEE BENEFIT PLAN" means any (i) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or arrangement
that is an Employee Pension Benefit Plan, (iii) qualified defined benefit
retirement plan or arrangement (including any Multiemployer Plan) that is an
Employee Pension Benefit Plan, (iv) Employee Welfare Benefit Plan, or (v) other
material fringe benefit plan, program, or arrangement, that, in the case of any
of the foregoing, is sponsored or contributed to by the Company for the benefit
of any current or former employee of the Company.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in Section
3(2) of ERISA.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in Section
3(1) of ERISA.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 4.2.1(c).
"ENVIRONMENTAL LAW" means any federal, state, or local Legal
Requirement relating or pertaining to environmental, health, safety, natural
resource, or land use matters, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Air Act, the Water Pollution
Control Act, the Solid Waste Disposal Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Emergency Planning and
Community Right-to-Know Act, the Safe Drinking Water Act, the Occupational
Safety and Health Act, and any substantively similar state or local statutes, in
each case as amended through the Closing Date.
"ENVIRONMENTAL LIABILITIES" means any cost, damages, expense, fine,
penalty, liability, obligation, or other responsibility arising from or under
any Environmental Law, including response, investigative, remedial, or
inspection costs and expenses.
"EXCESS WORKING CAPITAL" means, with respect to any calendar year, the
amount, if any, by which (i) average Working Capital for such year (based upon
Working Capital as of
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the last day of each month during such year) exceeds (ii) 15.0% of the gross
sales generated by the Post-Closing Company Operations during such year.
"EXPANSIVE CAPITAL EXPENDITURES" means capital expenditures incurred
in connection with the Post-Closing Company Operations for the acquisition of
existing or the construction of new capital assets intended to increase the
operating capacity of such operations.
"FACILITIES" means the facilities at which the Company operates,
located at 7400 East Adobe Drive, Scottsdale, Arizona; 24610 and 24602 South
Rittenhouse Road, Queen Creek, Arizona; and 6770 West Northern Avenue, Glendale,
Arizona.
"GAAP" means generally accepted accounting principles as in effect in
the United States as of the date of this Agreement, applied on a consistent
basis.
"GOVERNMENTAL AUTHORITY" means any national, federal, state,
provincial, county, municipal, or local government, foreign or domestic, or the
government of any political subdivision of the any of the foregoing, or any
entity, authority, agency, ministry, or other similar body exercising executive,
legislative, judicial, regulatory, or administrative authority or functions of
or pertaining to the government, including any quasi-governmental entity
established to perform any such functions.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any Legal Requirement.
"HAZARDOUS MATERIAL" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law, including any admixture or solution thereof,
and specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFIED PERSONS" has the meaning set forth in Section 9.2.1.
"INTELLECTUAL PROPERTY" means any patent, trademark, service mark, or
copyright registration.
"INTERIM BALANCE SHEET" has the meaning set forth in Section 5.4.
"IRS" means the United States Internal Revenue Service or any
successor agency and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE" means (i) with respect to an individual, (a) that such
individual is actually aware of a particular fact or other matter, or (b) that a
prudent individual could be
40
<PAGE>
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonably diligent investigation concerning the
existence of such fact or other matter; or (ii) with respect to a Person other
than an individual, that any individual who is serving as a director, officer,
senior management employee, partner, executor, trustee of such Person (or in any
similar capacity) has Knowledge of a particular fact or other matter.
"LEASED REAL PROPERTY" has the meaning set forth in Section 5.6.2.
"LEASEHOLD TITLE POLICY" means a standard coverage policy of leasehold
title insurance with respect to each Lease, in the coverage amount of
$1,000,000, insuring that fee title to the applicable Facility is held by
Sellers and the Company's interest thereto as lessee under such Lease, subject
only to the standard exceptions to such policies and such Liens as may be
approved by the Crown Parties.
"LEASES" has the meaning set forth in Section 4.2.1(e).
"LEGAL REQUIREMENTS" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, rule,
statute, or treaty.
"LIEN" means any mortgage, deed of trust, pledge, assignment, security
interest, encumbrance, lien, charge, or claim of any kind or nature whatsoever
in respect of any property, including any of the foregoing created by, arising
under, or evidenced by any conditional sale or other title retention agreement,
the interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
a financing statement naming the owner of the property as to which such lien
relates as the debtor under the Uniform Commercial Code or any comparable law.
"MCMANNIS" means Milan J. McMannis, an individual.
"MCMANNIS TRUST" has the meaning set forth in the preamble to this
Agreement.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section 3(37) of
ERISA.
"NOTES PAYABLE" means all promissory notes and other documents
evidencing indebtedness of the Company, including capital leases (determined in
accordance with GAAP), but excluding accounts payable incurred in the Ordinary
Course of Business.
"ORDER" means any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means any action taken by a Person if,
and only if (i) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person, (ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
41
<PAGE>
exercising similar authority over such Person), and (iii) such action is similar
in nature and magnitude to actions customarily taken, without any authorization
by the board of directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means (i) the articles or certificate of
incorporation and the bylaws of a corporation, (ii) the partnership agreement
and any statement of partnership of a general partnership, (iii) the limited
partnership agreement and certificate of limited partnership of a limited
partnership, (iv) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person, and (v) any amendment
to any of the foregoing.
"PERSON" means an individual, partnership, corporation, limited
liability company, joint stock company, trust, unincorporated organization or
association, joint venture, or other organization, whether or not a legal
entity, or a Governmental Authority.
"POST-CLOSING COMPANY OPERATIONS" means the operations of the business
of the Company after the Closing Date, whether such operations are undertaken
directly by the Company or through one or more other Subsidiaries of Crown
Partners or through one or more divisions of one or more other Subsidiaries of
Crown Partners.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Authority or arbitrator.
"RELATED PERSON" means (i) with respect to an individual (a) each
member of such individual's Family, (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family, (c) any Person in which such individual or one or more
members of such individual's Family hold (individually or in the aggregate) a
Material Interest, and (d) any Person with respect to which such individual or
one or more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in any similar capacity); or (ii) with respect
to any Person other than an individual (a) any Person that directly or
indirectly controls, is directly or indirectly controlled by, or is directly or
indirectly under common control with such Person, (b) any Person that holds a
Material Interest in such Person or in which such Person holds a Material
Interest, (c) each Person that serves as a director, officer, partner, executor,
or trustee of such Person (or in any similar capacity), (d) any Person with
respect to which such Person serves as general partner or trustee (or in any
similar capacity), and (e) any Related Person of any individual described in the
foregoing clauses (ii)(b) or (ii)(c). For purposes of this definition, (x) the
"FAMILY" of an individual includes the individual, the individual's spouse, any
other natural person who is related to the individual or the individual's spouse
within the second degree, and any other natural person who resides with the
individual; and (y) "MATERIAL INTEREST" means direct or indirect beneficial
ownership of voting securities or interests representing at least 20% of the
outstanding voting power of a Person or
42
<PAGE>
equity securities or interests representing at least 20% of the outstanding
equity securities or interests in a Person.
"REPRESENTATIVE" means, with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of or to such Person, including such Person's attorneys, accountants, and
financial advisors.
"SECURITIES ACT" means the Securities Act of 1933 or any successor
law, and the regulations and rules issued thereunder, as amended through the
Closing Date.
"SELLERS" has the meaning set forth in the Recitals.
"SELLERS' ACCOUNTANTS" means Mukai, Greenlee & Co., P.C., or another
independent certified public accounting firm (other than Arthur Andersen LLP)
selected by Sellers.
"SELLERS' CLOSING DOCUMENTS" means the Sellers' Release, the
Employment Agreements, and the Leases.
"SELLERS' RELEASE" has the meaning set forth in Section 4.2.1(b).
"SHARES" means all of the issued and outstanding shares of the Common
Stock on a fully diluted basis as of the Closing Date, assuming the exercise of
all securities of the Company that are convertible into or exchangeable for
share of Common Stock.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled to
vote in the election of directors, managers, or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership,
association, or other business entity, a majority of the partnership or other
ownership interests thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more other Subsidiaries of that Person or a
combination thereof. For purposes of the foregoing, a Person shall be deemed to
have a majority ownership interest of a partnership, association, or other
business entity if such Person is or would be allocated a majority of
partnership, association, or other business entity gains or losses or is or
controls the managing director, managing member, general partner, or other
managing Person of such partnership, association, or other business entity.
Unless the context otherwise requires, each reference herein to a Subsidiary
shall be deemed a reference to a Subsidiary of the Company.
"SUPPLEMENT" means any supplement to any Schedule to this Agreement
delivered by Sellers to the Crown Parties pursuant to Section 2.6.1.
"TAX" means any tax (including any income tax, capital gains tax,
value-added tax, sales tax, excise tax, property tax, gift tax, or estate tax),
levy, assessment, tariff, duty (including any customs duty), deficiency, or
other fee, and any related charge or amount
43
<PAGE>
(including any fine, penalty, interest, or addition to tax), imposed, assessed,
or collected by or under the authority of any Governmental Authority or payable
pursuant to any tax-sharing agreement or other Contract relating to the sharing
or payment of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" means any return (including any informational return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Authority in connection with the determination, assessment,
collection, or payment of any Tax or in connection with the administration,
implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREATENED" means, with respect to a claim, Proceeding, dispute,
action, or other matter, the making of any demand or statement (orally or in
writing), the giving of any notice (orally or in writing), the occurrence of any
event, or the existence of any circumstance that would lead a prudent Person to
conclude that such claim, Proceeding, dispute, action, or other matter is likely
to be asserted, commenced, taken, or otherwise pursued in the future.
"UNIT" means a common unit representing a limited partner interest in
Crown Partners.
"WORKING CAPITAL" means, as of any date, an amount equal to (i)
current assets of the Post-Closing Company Operations as of such date, minus
(ii) current liabilities of the Post-Closing Company Operations as of that date
(other than funded debt).
10.2 CONSTRUCTION AND INTERPRETATION.
10.2.1 The headings or titles of the sections of this
Agreement are intended for ease of reference only and shall have no effect
whatsoever on the construction or interpretation of any provision of this
Agreement. References herein to sections are to sections of this Agreement
unless otherwise specified.
10.2.2 Meanings of defined terms used in this Agreement are
equally applicable to singular and plural forms of the defined terms. The
masculine gender shall also include the feminine and neutral genders and vice
versa.
10.2.3 As used herein, (i) the term "party" refers to a
party to this Agreement, unless otherwise specified, (ii) the terms "hereof,"
"herein," "hereunder," and similar terms refer to this Agreement as a whole and
not to any particular provision of this Agreement, (iii) the term "this
transaction" refers to the transaction(s) contemplated by this Agreement, (iv)
the term "including" is not limiting and means "including without limitation,"
(v) the term "documents" includes all instruments, documents, agreements,
certificates, indentures, notices, and other writings, however evidenced, and
(vi) the term "property" includes any kind of property or asset, real, personal,
or mixed, tangible or intangible.
44
<PAGE>
10.2.4 In the event any period of time specified in this
Agreement ends on a day other than a Business Day, such period shall be extended
to the next following Business Day. In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding," and the
word "through" means "to and including."
10.2.5 This Agreement is the product of arm's length
negotiations among, and has been reviewed by counsel to, the parties and is the
product of all the parties. Accordingly, this Agreement shall not be construed
for or against any party by reason of the authorship or alleged authorship of
any provision hereof.
11. MISCELLANEOUS PROVISIONS.
11.1 BINDING EFFECT. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties and, subject to the
restrictions on assignment set forth herein, their respective successors and
assigns.
11.2 ASSIGNMENT. No party shall assign any of its rights or
interests under this Agreement without the prior written consent of the other
parties, except that Crown Partners shall be entitled to cause CP Acquisition to
assign any of its rights hereunder to any other Subsidiary of Crown Partners.
11.3 NOTICES. All notices under this Agreement shall be in writing.
Notices may be (i) delivered personally, (ii) delivered by a recognized national
overnight delivery service, or (iii) mailed by certified United States mail,
postage prepaid and return receipt requested. Notices to any party shall be
directed to the address set forth below, or to such other or additional address
as any party may specify by notice to the other party. Any notice delivered in
accordance with this Section 11.3 shall be deemed given when actually received
or, if earlier, (a) in the case of any notice delivered by a recognized national
overnight delivery service, on the next business day after delivery to the
service or, if different, on the day designated for delivery, or (b) in the case
of any notice mailed by certified U.S. mail, four business days after deposit
therein.
If to the Carr Trust: True H. Carr
2929 E. Acoma
Phoenix, AZ 85032
With a copy to: Tiffany & Bosco, P.A.
500 Viad Tower
1850 North Central Avenue
Phoenix, AZ 85004
Attn: William J. Simon
If to the McMannis Trust: Milan J. McMannis
6416 N. 30th Place
Phoenix, AZ 85016
45
<PAGE>
With a copy to: Tiffany & Bosco, P.A.
500 Viad Tower
1850 North Central Avenue
Phoenix, AZ 85004
Attn: William J. Simon
If to the Crown Parties: Crown Pacific Partners, L.P.
121 S.W. Morrison Street, Suite 1500
Portland, Oregon 97204
Attn: Roger L. Krage
With a copy to: Ball Janik LLP
101 S.W. Main Street, Suite 1100
Portland, OR 97204
Attn: William H. Perkins
Notices to the Company shall be sent in any of the manners set forth above to
both the Carr Trust and the McMannis Trust, with a copy to Tiffany & Bosco,
P.A., in each case at the applicable address set forth above.
11.4 WAIVER. Any party's failure to exercise any right or remedy
under this Agreement, delay in exercising any such right or remedy, or partial
exercise of any such right or remedy, shall not constitute a waiver of that or
any other right or remedy hereunder. A waiver of any breach of any provision of
this Agreement shall not constitute a waiver of any succeeding breach of such
provision or a waiver of such provision itself. No waiver of any provision of
this Agreement shall be binding on a party unless it is set forth in writing and
signed by such party.
11.5 AMENDMENT. This Agreement may not be modified or amended
except by the written agreement of the parties.
11.6 EXPENSES.
11.6.1 Subject to the provisions of Section 11.6.2 and
except as expressly provided elsewhere in this Agreement, each party shall bear
its respective expenses incurred in connection with the preparation, execution,
and performance of this Agreement and this transaction, including all fees and
expenses of its Representatives.
11.6.2 If a suit, action, or other proceeding of any nature
whatsoever (including any proceeding under the U.S. Bankruptcy Code) is
instituted in connection with this transaction, this Agreement, or any document
delivered by either party at Closing, or to interpret or enforce any rights or
remedies hereunder or under any such document, the prevailing party shall be
entitled to recover its attorneys' fees and all other fees, costs, and expenses
actually incurred and reasonably necessary in connection therewith, as
determined by the court at trial or on any appeal or review, in addition to all
other amounts provided by law.
46
<PAGE>
11.7 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Sellers and the Crown Parties shall maintain in confidence, and
shall cause their respective Representatives to maintain in confidence, any
written, oral, or other information obtained in confidence from another party or
the Company in connection with this Agreement or this transaction, unless (i)
such information is already known to such party or to others not bound by a duty
of confidentiality or such information becomes publicly available through no
fault of such party, (ii) the use of such information (a) is necessary or
appropriate in giving any notice, making any filing, or obtaining any Consent
required for the consummation of this transaction or in seeking any IRS ruling
necessary or appropriate, in the judgment of the Crown Parties, in connection
with the Post-Closing Company Operations, and (b) has been approved by Sellers
and the Crown Parties, which approval shall not be unreasonably withheld, or
(iii) the furnishing or use of such information is required by or necessary or
appropriate in connection with legal proceedings. If this transaction is not
consummated, each party shall return or destroy as much of the written
information referred to in this Section 11.7 as the other party may reasonably
request.
11.8 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or this transactions shall be issued,
if at all, with such contents, at such time, and in such manner as the parties
mutually agree; PROVIDED that Sellers and the Company acknowledge and agree that
Crown Partners shall be entitled to make a public announcement regarding this
transaction as such time as it is advised by its legal counsel that such
announcement is required under the Securities Act, so long as the content of
such announcement is approved in advance by Sellers, which approval shall not be
unreasonably withheld. Sellers and the Crown Parties shall consult with each
other concerning the means by which the Company's' employees, customers, and
suppliers and others having dealings with the Company will be informed of this
transaction, and the Crown Parties shall have the right to have a Representative
present during any such communication.
11.9 SEVERABILITY. If any provision of this Agreement is held
invalid, illegal, or unenforceable, then (i) such provision shall be enforceable
to the fullest extent permitted by applicable law, and (ii) the validity and
enforceability of the other provisions of this Agreement shall not be affected
and all such provisions shall remain in full force and effect.
11.10 INTEGRATION. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements with respect thereto,
including that certain letter or intent dated as of October 1, 1997. The parties
acknowledge and agree that there are no agreements or representations relating
to the subject matter of this Agreement, either written or oral, express or
implied, that are not set forth in this Agreement or in the Exhibits or
Schedules (or Supplements thereto) to this Agreement.
11.11 EXECUTION. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one and the same agreement.
Each party may rely upon the signature of each other party on this Agreement
that is transmitted by facsimile as constituting a duly authorized, irrevocable,
actual, current delivery of this Agreement with the original ink signature of
the transmitting party.
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<PAGE>
11.12 INCORPORATION OF RECITALS, EXHIBITS, AND SCHEDULES. The
Recitals to this Agreement and the Exhibits and Schedules attached to this
Agreement and any Supplements hereafter delivered pursuant to Section 2.6.1 are
incorporated herein by this reference. In the event of any conflict between this
Agreement and anything set forth in such Exhibits, Schedules, or Supplements,
the provisions of this Agreement shall control.
11.13 FURTHER ASSURANCES. Each party agrees to execute and deliver
such additional documents as may reasonably be required to effect this
transaction fully, so long as the terms thereof are consistent with the terms of
this Agreement.
11.14 NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and legal benefit of the parties and,
subject to the restrictions on assignment set forth herein, their respective
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement.
11.15 TIME OF ESSENCE. Time is of the essence with respect to all
dates and time periods set forth or referred to in this Agreement.
11.16 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona, without regard to
the principles thereof relating to conflicts of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
Crown Partners: CROWN PACIFIC PARTNERS, L.P.,
a Delaware limited partnership
By:
-------------------------------------
Title:
-----------------------------------
CP Acquisition: CP ACQUISITION CO.,
an Oregon corporation
By:
--------------------------------------
Title:
-----------------------------------
Carr Trust:
-----------------------------------------
True H. Carr, Trustee
Carr Revocable Living Trust
dated February 12, 1988
McMannis Trust:
-----------------------------------------
Milan J. McMannis, Trustee
McMannis Revocable Living Trust
dated February 11, 1988
-----------------------------------------
Virginia McMannis, Trustee
McMannis Revocable Living Trust
dated February 11, 1988
Company: ALLIANCE WHOLESALE LUMBER,
INC., an Arizona corporation
By:
--------------------------------------
Title:
-----------------------------------
49
<PAGE>
EXHIBIT A
FORM OF BALL JANIK LLP LEGAL OPINION
Attached.
<PAGE>
EXHIBIT B
FORM OF TIFFANY & BOSCO, P.A., LEGAL OPINION
Attached.
<PAGE>
EXHIBIT C
FORM OF SELLERS' RELEASES
Attached.
<PAGE>
EXHIBIT D
FORM OF EMPLOYMENT AGREEMENTS
Attached.
<PAGE>
EXHIBIT E
FORM OF LEASES
Attached.
<PAGE>
EXHIBIT F
FORM OF LEASE GUARANTY
Attached.
<PAGE>
EXHIBIT G
FORM OF CROWN PARTIES' RELEASE
Attached.
<PAGE>
SCHEDULE 5.2.2
EXCEPTIONS TO NO CONFLICT REPRESENTATIONS
[SELLERS TO PROVIDE ANY EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES IN SECTION 5.2.2; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.2.3
REQUIRED CONSENTS
[SELLERS TO IDENTIFY ANY REQUIRED CONSENTS; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.6.2
LEASED REAL PROPERTY
PART I
[SELLERS TO IDENTIFY ALL LEASED REAL PROPERTY; IF NONE, SO STATE.]
PART II
[SELLERS TO IDENTIFY ANY DEFAULTS UNDER LEASES OF
LEASED REAL PROPERTY; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.7.1
OWNED PERSONAL PROPERTY
PART I
Owned machinery, equipment, and other tangible personal property (other than
inventory) is identified on ATTACHMENT 1 to this SCHEDULE 5.7.1.
PART II
[SELLERS TO IDENTIFY ANY LIENS ON OWNED PERSONAL PROPERTY; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.7.2
LEASED PERSONAL PROPERTY
Leased machinery, equipment, and other tangible personal property is identified
by the designation L, A, F, or P in the column labeled "AWL#" on ATTACHMENT 1 to
this SCHEDULE 5.7.2.
<PAGE>
SCHEDULE 5.8
CONDITION OF ASSETS
[SELLERS TO IDENTIFY ANY EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES SET FORTH IN SECTION 5.8; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.9
ACCOUNTS RECEIVABLE
PART I
Accounts Receivable as of the date of the Interim Balance Sheet and related
aging information is set forth on ATTACHMENT 1 to this SCHEDULE 5.9.
PART II
[SELLERS TO IDENTIFY ANY EXCEPTIONS TO COLLECTIBILITY
REPRESENTATION; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.11
OTHER LIABILITIES
[SELLERS TO IDENTIFY ANY LIABILITIES OTHER THAN THOSE REFLECTED
ON INTERIM BALANCE SHEET OR INCURRED IN ORDINARY COURSE OF BUSINESS;
IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.12
TAXES
PART I
[SELLERS TO IDENTIFY ALL TAX RETURNS SINCE JANUARY 1, 1992.]
PART II
[SELLERS TO DESCRIBE ANY AUDITS AND ADJUSTMENTS IN ACCORDANCE
WITH SECTION 5.12.2; IF NONE, SO STATE.]
PART III
[SELLERS TO IDENTIFY ANY PROPOSED TAX ASSESSMENTS; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.14
ERISA
PART I
[SELLERS TO IDENTIFY ALL EMPLOYEE BENEFIT PLANS AND ANY THAT
ARE MULTIEMPLOYER PLANS OR SUBJECT TO TITLE IV OF ERISA.]
PART II
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATION AND WARRANTY
REGARDING COMPLIANCE WITH LEGAL REQUIREMENTS; IF NONE, SO STATE.]
PART III
[SELLERS TO MAKE ANY DISCLOSURE REQUIRED BY SECTION 5.14.5; IF NONE, SO STATE.]
PART IV
[SELLERS TO MAKE ANY DISCLOSURE REQUIRED BY SECTION 5.14.6; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.15
COMPLIANCE WITH LAW; GOVERNMENTAL AUTHORIZATIONS
PART I
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECTION 5.15.1; IF NONE, SO STATE.]
PART II
[SELLERS TO IDENTIFY ALL GOVERNMENTAL AUTHORIZATIONS.]
PART III
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECTION 5.15.2; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.16
LEGAL PROCEEDINGS; ORDERS
PART I
[SELLERS TO IDENTIFY ANY PROCEEDINGS AND RELATED EVENTS
REQUIRED TO BE DISCLOSED UNDER SECTION 5.16.1; IF NONE, SO STATE.]
PART II
[SELLERS TO IDENTIFY ANY ORDERS REQUIRED TO BE DISCLOSED
UNDER SECTION 5.16.2; IF NONE, SO STATE.]
PART III
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECTION 5.15.3; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.17
CERTAIN CHANGES AND EVENTS
[SELLERS TO IDENTIFY ANY CHANGES OR EVENTS REQUIRED TO BE DISCLOSED
UNDER SECTION 5.17; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.18
CONTRACTS
PART I
[SELLERS TO IDENTIFY ANY COMPANY CONTRACTS REQUIRED
TO BE DISCLOSED UNDER SECTION 5.18.1; IF NONE, SO STATE.]
PART II
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECTIONS 5.18.2, 5.18.3, AND 5.18.4; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.19
INSURANCE
PART I
[SELLERS TO IDENTIFY ANY SELF-INSURANCE ARRANGEMENTS REQUIRED
TO BE DISCLOSED UNDER SECTION 5.19.2; IF NONE, SO STATE.]
PART II
[SELLERS TO DESCRIBE INSURANCE CLAIMS AND RELATED MATTERS REQUIRED
TO BE DISCLOSED UNDER SECTION 5.19.3; IF NONE, SO STATE.]
PART III
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECTION 5.19.4; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.20
ENVIRONMENTAL MATTERS
[SELLERS TO IDENTIFY ANY EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES SET FORTH IN SECTION 5.20; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.21
EMPLOYEES
[SELLERS TO PROVIDE EMPLOYEE INFORMATION REQUIRED BY SECTION 5.8]
<PAGE>
SCHEDULE 5.22
LABOR RELATIONS
[SELLERS TO IDENTIFY ANY EXCEPTIONS TO REPRESENTATIONS
AND WARRANTIES SET FORTH IN SECTION 5.22; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.23
INTELLECTUAL PROPERTY
PART I
[SELLERS TO PROVIDE INTELLECTUAL PROPERTY INFORMATION REQUIRED
TO BE DISCLOSED UNDER FIRST SENTENCE OF SECTION 5.23.]
PART II
[SELLERS TO DESCRIBE ANY EXCEPTIONS TO REPRESENTATIONS AND
WARRANTIES IN SECOND SENTENCE OF SECTION 5.23; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 5.26
RELATIONSHIPS WITH RELATED PERSONS
[SELLERS TO PROVIDE INFORMATION REQUIRED TO BE
DISCLOSED UNDER SECTION 5.26; IF NONE, SO STATE.]
<PAGE>
SCHEDULE 7.1
NOTES PAYABLE TO BE REPAID AT CLOSING
All indebtedness of the Company pursuant to:
Promissory Notes of the Company payable to the Carr Trust.
Promissory Notes of the Company payable to the McMannis Trust.
The Company's working capital and equipment acquisition lines of credit
with Pacific Century Bank, N.A., and First National Bank of Arizona.
<PAGE>
SCHEDULE 9.2
CERTAIN INDEMNIFIED MATTERS
Any claim asserted against the Company or the Crown Parties with respect to or
any Damages incurred by the Company or the Crown Parties in connection with the
Company's prior involvement in any of the following Persons or projects:
Avondale Gateway Associates Limited Partnership
Phoenix Western Gateway Associates Limited Partnership
T-Bar-H Land & Cattle Co.
Joint Venture between the Company and Carlson Systems Corporation
Alliance Court
Architectural Construction Supplies, Inc.
Vogel Property Partnership I
Vogel Property Partnership II
U.S. Carpentry
Any claim asserted against the Company or the Crown Parties by any former
shareholder of the Company, including Michael Nicholas or Rock Schaffer.
<PAGE>
STOCK ACQUISITION AGREEMENT
NOVEMBER 10, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
1. Acquisition and Transfer of Common Stock. 1
1.1 Agreement to Acquire and Transfer. 1
1.2 Consideration for Acquisition. 1
1.2.1 Adjustment to Base Consideration. 1
1.2.2 Determination of Notes Payable and Stockholders' Equity. 2
1.2.3 Contingent Payment 3
1.3 Payments in Immediately Available Funds. 4
1.4 Contribution of Shares; Issuance of Units. 5
1.5 Allocation Between Sellers. 6
1.6 Crown Partners Guarantee. 6
2. Pre-Closing Covenants. 6
2.1 Access and Investigation. 6
2.2 Operation of the Company's Business. 6
2.3 Limitation on Certain Actions. 7
2.4 Required Consents and Approvals. 7
2.4.1 Action by Sellers. 7
2.4.2 Action by Crown Parties. 7
2.5 Satisfaction of Conditions. 7
2.6 Notification of Certain Events. 7
2.6.1 By Sellers. 7
2.6.2 By Crown Parties. 8
2.7 Payment of Certain Indebtedness. 8
2.8 No Negotiation. 8
3. Conditions Precedent to Closing. 8
3.1 Sellers' Conditions. 8
3.2 Crown Parties' Conditions. 9
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
4. Closing. 11
4.1 Time and Place of Closing. 11
4.2 Closing Deliveries. 11
5. Representations and Warranties of Sellers and the Company. 12
5.1 Organization and Good Standing; No Subsidiaries. 12
5.2 Authority; No Conflict. 12
5.3 Capitalization. 13
5.4 Financial Statements. 13
5.5 Books and Records. 14
5.6 Real Property. 14
5.7 Personal Property. 15
5.8 Condition and Sufficiency of Assets 15
5.9 Accounts Receivable. 15
5.10 Inventory. 15
5.11 No Undisclosed Liabilities, 16
5.12 Taxes. 16
5.13 No Material Adverse Change. 17
5.14 Employee Benefit Plans. 17
5.15 Compliance with Law; Governmental Authorizations. 18
5.16 Legal Proceedings; Orders. 19
5.17 Absence of Certain Changes and Events. 20
5.18 Contracts; No Defaults. 20
5.19 Insurance. 23
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
5.20 Environmental Matters. 24
5.21 Employees. 25
5.22 Labor Relations. 26
5.23 Intellectual Property. 26
5.24 Certain Payments. 26
5.25 Disclosure. 27
5.26 Relationships with Related Persons. 27
5.27 Brokers and Finders. 27
5.28 Matters Relating to Units. 27
6. Representations and Warranties of the Crown Parties. 28
6.1 Organization and Good Standing. 28
6.2 Authority; No Conflict. 28
6.3 Investment Intent. 29
6.4 Certain Proceedings. 29
6.5 Brokers and Finders. 29
7. Post-Closing Covenants. 29
7.1 Repayment of Certain Notes Payable. 29
7.2 Responsibility for Certain Tax Returns and Audits. 29
7.3 Management of Post-Closing Company Operations. 29
7.4 Post-Closing Insurance. 30
7.5 Credit for Company Seniority. 30
8. Termination. 30
8.1 Termination Events. 30
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
8.2 Effect of Termination. 31
9. Indemnification; Remedies. 31
9.1 Survival; Effect of Knowledge or Waiver. 31
9.2 Indemnification by Sellers. 32
9.3 Indemnification by the Crown Parties. 33
9.4 Time Limitations. 34
9.5 Limitations on Amount. 34
9.6 Right of Set-Off. 35
9.7 Procedure for Indemnification. 35
10. Definitions and Interpretation. 36
10.1 Certain Defined Terms. 36
10.2 Construction and Interpretation. 44
11. Miscellaneous Provisions. 45
11.1 Binding Effect. 45
11.2 Assignment. 45
11.3 Notices. 45
11.4 Waiver. 46
11.5 Amendment. 46
11.6 Expenses. 46
11.7 Confidentiality. 47
11.8 Public Announcements. 47
11.9 Severability. 47
11.10 Integration. 47
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
11.11 Execution. 47
11.12 Incorporation of Recitals, Exhibits, and Schedules. 48
11.13 Further Assurances. 48
11.14 No Third Party Beneficiaries. 48
11.15 Time of Essence. 48
11.16 Governing Law. 48
</TABLE>
v
<PAGE>
EXHIBIT 3.4
AMENDMENT TO
AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
CROWN PACIFIC LIMITED PARTNERSHIP
THIS AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP (the "AMENDMENT") is made and entered into as of January 2, 1998, by
and between CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP, a Delaware limited
partnership, as General Partner (the "GENERAL PARTNER"), and CROWN PACIFIC
PARTNERS, L.P., a Delaware limited partnership, as Limited Partner (the "LIMITED
PARTNER").
RECITALS:
The General Partner and the Limited Partner are parties to that certain
Amended and Restated Agreement of Limited Partnership of Crown Pacific Limited
Partnership dated as of December 22, 1994 (the "PARTNERSHIP AGREEMENT"). The
General Partner and the Limited Partner wish to amend the Partnership Agreement
on the terms and conditions set forth in this Amendment.
AGREEMENTS:
In consideration of the foregoing and the mutual covenants of the
parties set forth herein, the parties, intending to be legally bound, agree as
follows:
1. The following defined terms set forth in Article I of the Partnership
Agreement are hereby deleted and replaced in their entirety with the following:
"LIMITED PARTNER" means the MLP and, upon its admission to the
Partnership pursuant to Section 11.3, CP Acquisition; PROVIDED that CP
Acquisition shall have no voting or other rights except as provided in Section
7.4.
"PARTNERS" means the General Partner and the Limited Partners.
"PERCENTAGE INTEREST" means (a) prior to the admission of CP
Acquisition to the Partnership pursuant to Section 11.3, (i) as to the General
Partner (in its capacity as General Partner and without reference to any limited
partner interests held by it), 1.0101%, and (ii) as to the MLP, 98.9899%; and
(b) from and after the admission of CP Acquisition to the Partnership pursuant
to Section 11.3, (i) as to the General Partner (in its capacity as General
Partner and without reference to any limited partner interests held by it),
1.0101%, (ii) as to the MLP, 98.1219%, and (iii) as to CP Acquisition, 0.868%.
2. The following definition is hereby added to Article I of the
Partnership Agreement:
1
<PAGE>
"CP ACQUISITION" means CP Acquisition Co., an Oregon corporation.
3. Section 11.3 is hereby added to Article XI of the Partnership
Agreement, reading as follows:
11.3 Without the need for any additional action by any Partner,
the Partnership shall issue a Partnership Interest to CP Acquisition
and CP Acquisition shall be admitted to the Partnership as a Limited
Partner simultaneously with the contribution by CP Acquisition to the
Partnership of substantially all of its assets, including the assets
acquired by CP Acquisition by merger with Alliance Wholesale Lumber,
Inc., but excluding any promissory note of CP Air, Inc., held by CP
Acquisition.
4. Except as expressly provided herein, the Partnership Agreement shall
remain unamended and in full force and effect. All references in the
Partnership Agreement to "this Agreement" shall be deemed to refer to the
Partnership Agreement as amended by this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment to be
effective as of the date first written above.
CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, a Delaware limited partnership
By:
--------------------------------------
Roger L. Krage, Secretary
CROWN PACIFIC PARTNERS, L.P.,
a Delaware limited partnership
By: Crown Pacific Management Limited
Partnership, its General Partner
By:
--------------------------------------
Roger L. Krage, Secretary
2
<PAGE>
EXHIBIT 10.4
FOURTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"AMENDMENT"), dated as of December 23, 1997, is entered into among Crown Pacific
Limited Partnership, a Delaware limited partnership (the "COMPANY"), the several
financial institutions from time to time party to the Credit Agreement referred
to below (collectively, the "BANKS"; individually, a "BANK"), Bank of America
National Trust and Savings Association, as agent for the Banks (in such
capacity, the "AGENT"), and ABN AMRO Bank, N.V. and Societe Generale, as
co-agents for the Banks (in such capacity, the "CO-AGENTS").
RECITALS
WHEREAS, the Company, the Banks, the Co-Agents and the Agent are
parties to the Amended and Restated Credit Agreement dated as of July 31,
1996, as amended by the First Amendment to Amended and Restated Credit
Agreement dated as of October 15, 1996, and the Second Amendment to Amended
and Restated Credit Agreement dated as of March 31, 1997, and the Third
Amendment to Amended and Restated Credit Agreement dated as of October, 10,
1997 (as so amended, the "CREDIT AGREEMENT"), pursuant to which the Banks
have extended certain credit facilities to the Company;
WHEREAS, the Company, the Banks, the Co-Agents and the Agent now hereby
wish to amend the Credit Agreement in certain respects, all as set forth in
greater detail below;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. DEFINED TERMS. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Credit
Agreement.
2. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement is
hereby amended as follows:
(a) Section 1.1 shall be amended by deleting the definition of
"Senior Debt" and adding the following in its stead:
"SENIOR DEBT" means, as to the Company, as of any date
of determination, without duplication, all outstanding
unsecured Indebtedness of the Company of the type described
in clauses (a), (b), or (d) of the definition of
Indebtedness herein and all Indebtedness represented by the
Senior Notes, this Agreement and
1
<PAGE>
the Facility B Credit Agreement (including "L/C
Obligations" as defined therein), but not including any
Indebtedness subordinated to the Obligations upon terms and
conditions satisfactory to the Agent and the Banks.
(b) The definition of "Trillium Note" in Section 1.1 shall be amended
by deleting the word "note" and inserting the word "notes" in its stead.
(c) Subsection 2.7(a)(iii) shall be amended by deleting the first
sentence thereof and inserting the following in its stead: "Subject to payment
of any amounts owing under Section 3.4, if the Company shall incur any Senior
Debt for borrowed money pursuant to subsection 7.6(i) (other than (a) Loans,
(b) Senior Debt to the extent used within 10 Business Days after its incurrence
to repay in whole or in part the Trillium Note, and (c) Senior Debt to the
extent used within 10 Business Days after its incurrence to repay in whole or in
part Senior Debt assumed by the Company in connection with the acquisition of
the assets of Alliance Wholesale Lumber), the Company shall prepay, on the later
of the date the Company receives the net proceeds thereof and the date such debt
ceases to be excluded from this subsection pursuant to the 10 Business Day
limitation in clauses (b) or (c) of the preceding parenthetical, the outstanding
principal amount of the loans in an amount equal to the net proceeds of such
Senior Debt."
(d) Subsection 2.7(b) shall be amended by deleting that portion of
the first sentence thereof that ends at the first semicolon, and inserting the
following phrase in its stead: "The Aggregate Commitment shall be permanently
reduced from time to time by the amount of any mandatory prepayment of Loans
required by subsection 2.7(a)(i) and by the amount of any Senior Debt incurred
by the Company pursuant to subsection 7.6(i) (other than (a) Loans, (b) Senior
Debt evidenced by the Trillium Note, (c) Senior Debt to the extent used to repay
the Trillium Note in whole or in part within 10 Business Days after its
incurrence, (d) Senior Debt in an amount not to exceed $24,500,000 assumed by
the Company in connection with the acquisition of the assets of Alliance
Wholesale Lumber, (e) Senior Debt in an amount not to exceed $24,500,000 to the
extent used within 10 Business Days after its incurrence to repay in whole or in
part Senior Debt assumed by the Company in connection with the acquisition of
the assets of Alliance Wholesale Lumber, and (f) Senior Debt in an amount not to
exceed $15,500,000 to the extent used within 10 Business Days after its
incurrence to repay in whole or in part outstanding Loans);".
(d) Subsection 2.8(b) shall be amended by deleting the date
"December 31, 1999" and inserting "December 31, 2000" in its stead.
(e) A new Subsection 7.5(ee) shall be inserted between existing
subsections 7.5(e) and 7.5(f):
(ee) Acquisitions as long as (x) after giving
effect to such Acquisition, the Company remains engaged
solely in a Permitted Business on a consolidated basis,
and (y) in the case of an Acquisition of stock or other
equity interests, the Person
2
<PAGE>
acquired is domiciled in, and substantially all of its
assets are located in, the United States, Canada, Mexico or
New Zealand, or, in the case of an Acquisition of assets,
substantially all of such assets are located in the United
States, Canada, Mexico or New Zealand;
(f) Subsection 7.5(f) shall be amended by inserting the word "solely"
after the word "engaged" in clause (w) thereof.
(g) Section 7.11 shall be amended by adding the following new
clause (c) at the end thereof: "and (c) Subsidiaries of the Company may declare
and make dividends or distributions to the Company."
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Agent, the Co-Agents and the Banks as follows:
(a) No Default or Event of Default exists.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary partnership and corporate
and other action and do not and will not require any registration with, consent
or approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct as though made on and as of the date
hereof (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct as of such
earlier date).
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent, any
of the Co-Agents, any Banks or any other Person.
3
<PAGE>
4. AMENDMENT FEE. In consideration of the execution of this
Amendment by the Agent and the Banks, the Company agrees to pay on the Effective
Date to the Agent for the pro rata distribution to the Banks in accordance with
their Commitments an amendment fee equal to 0.04% of the Aggregate Commitment.
5. EFFECTIVE DATE. This Amendment will become effective on the
first Business Day (the "Effective Date") upon which the Agent has received
(a) this Amendment executed by the Company, the Agent, and each Bank, and in
sufficient copies for each Bank and (b) payment of the amendment referred to in
Section 4 of this Amendment in immediately available funds.
6. RESERVATION OF RIGHTS. The Company acknowledges and agrees that
the execution and delivery by the Agent and the Banks of this Amendment shall
not be deemed to create a course of dealing or otherwise obligate the Agent or
the Banks to forbear or execute similar amendments under the same or similar
circumstances in the future.
7. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein and in the other Loan Documents to the Credit
Agreement shall henceforth refer to the Credit Agreement as amended by this
Amendment. This Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. No third party
beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by, and construed in accordance
with, the law of the State of California; provided, however, that the Agent and
the Banks shall retain all rights arising under federal law.
(d) This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, and all such
counterparts taken together shall be deemed to constitute but one and the same
instrument.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment, or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Agent, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their duly authorized officers as of the date
first above written.
CROWN PACIFIC LIMITED PARTNERSHIP, a
Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, a Delaware limited
partnership, its general partner
By:
----------------------------
Title:
----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent and as a
Bank
By:
---------------------------------
Title:
---------------------------------
ABN AMRO BANK N.V., as Co-Agent and as a
Bank
By:
---------------------------------
Title:
---------------------------------
By:
---------------------------------
Title:
---------------------------------
5
<PAGE>
SOCIETE GENERALE, as Co-Agent and as a
Bank
By:
---------------------------------
Title:
---------------------------------
BANK OF MONTREAL
By:
---------------------------------
Title:
---------------------------------
THE BANK OF NOVA SCOTIA
By:
---------------------------------
Title:
---------------------------------
BANQUE PARIBAS
By:
---------------------------------
Title:
---------------------------------
By:
---------------------------------
Title:
---------------------------------
6
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
---------------------------------
Title:
---------------------------------
KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Title:
---------------------------------
WELLS FARGO BANK, N.A.
By:
---------------------------------
Title:
---------------------------------
7
<PAGE>
EXHIBIT 10.7
THIRD AMENDMENT TO AMENDED AND
RESTATED FACILITY B CREDIT AGREEMENT
THIS THIRD AMENDMENT TO AMENDED AND RESTATED FACILITY B CREDIT
AGREEMENT (this "AMENDMENT"), dated as of December 23, 1997, is entered into
among Crown Pacific Limited Partnership, a Delaware limited partnership (the
"COMPANY"), the several financial institutions from time to time party to the
Credit Agreement referred to below (collectively, the "BANKS"; individually, a
"BANK"), Bank of America National Trust and Savings Association, as agent for
the Banks (in such capacity, the "AGENT"), and ABN AMRO Bank, N.V. and Societe
Generale, as co-agents for the Banks (in such capacity, the "CO-AGENTS").
RECITALS
WHEREAS, the Company, the Banks, the Co-Agents and the Agent are
parties to the Amended and Restated Facility B Credit Agreement dated as of
July 31, 1996, as amended by the First Amendment to Amended and Restated
Facility B Credit Agreement dated as of March 31, 1997, and the Second Amendment
to Amended and Restated Facility B Credit Agreement dated as of October 10, 1997
(as so amended, the "CREDIT AGREEMENT"), pursuant to which the Banks, the
Swingline Bank and the Issuing Bank have extended certain credit facilities to
the Company;
WHEREAS, the Company, the Banks, the Co-Agents and the Agent now
hereby wish to amend the Credit Agreement in certain respects, all as set forth
in greater detail below;
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. DEFINED TERMS. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings assigned to them in the Credit
Agreement.
2. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement is
hereby amended as follows:
(a) Section 1.1 shall be amended by deleting the definition of
"Senior Debt" and adding the following in its stead:
"SENIOR DEBT" means, as to the Company, as of any date of
determination, without duplication, all outstanding
unsecured Indebtedness of the Company of the type described
in clauses (a), (b), or (d) of the definition of Indebtedness
herein and all Indebtedness represented by the Senior Notes,
this Agreement
1
<PAGE>
(including L/C Obligations), and the Facility A Credit
Agreement, but not including any Indebtedness
subordinated to the Obligations upon terms and conditions
satisfactory to the Agent and the Banks.
(b) A new Subsection 8.5(ee) shall be inserted between existing
subsections 8.5(e) and 8.5(f):
(ee) Acquisitions as long as (x) after giving effect to
such Acquisition, the Company remains engaged solely in a
Permitted Business on a consolidated basis, and (y) in the
case of an Acquisition of stock or other equity interests,
the Person acquired is domiciled in, and substantially all
of its assets are located in, the United States, Canada,
Mexico or New Zealand, or, in the case of an Acquisition of
assets, substantially all of such assets are located in the
United States, Canada, Mexico or New Zealand;
(c) Subsection 8.5(f) shall be amended by inserting the word "solely"
after the word "engaged" in clause (w) thereof.
(d) Section 8.11 shall be amended by adding the following new
clause (c) at the end thereof: "and (c) Subsidiaries of the Company may declare
and make dividends or distributions to the Company."
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Agent, the Co-Agents and the Banks as follows:
(a) No Default or Event of Default exists.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary partnership and corporate
and other action and do not and will not require any registration with, consent
or approval of, notice to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement as
amended by this Amendment constitutes the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct as though made on and as of the date
hereof (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true and correct as of such
earlier date).
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Agent, any
of the Co-Agents, any Banks or any other Person.
2
<PAGE>
4. AMENDMENT FEE. In consideration of the execution of this
Amendment by the Agent and the Banks, the Company agrees to pay on the Effective
Date to the Agent for the pro rata distribution to the Banks in accordance with
their Commitments an amendment fee equal to 0.04% of the Aggregate Commitment.
5. EFFECTIVE DATE. This Amendment will become effective on the
first Business Day (the "Effective Date") upon which the Agent has received
(a) from the Company and the Required Banks a duly executed original of this
Amendment with sufficient copies for each Bank and (b) from the Company payment
of the amendment fee referred to in Section 4 of this Amendment in immediately
available funds.
6. RESERVATION OF RIGHTS. The Company acknowledges and agrees that
the execution and delivery by the Agent and the Banks of this Amendment shall
not be deemed to create a course of dealing or otherwise obligate the Agent or
the Banks to forbear or execute similar amendments under the same or similar
circumstances in the future.
7. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein and in the other Loan Documents to the Credit
Agreement shall henceforth refer to the Credit Agreement as amended by this
Amendment. This Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. No third party
beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by, and construed in accordance
with, the law of the State of California; provided, however, that the Agent and
the Banks shall retain all rights arising under federal law.
(d) This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, and all such
counterparts taken together shall be deemed to constitute but one and the same
instrument.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment, or the
Credit Agreement, respectively.
3
<PAGE>
(g) The Company covenants to pay to or reimburse the Agent, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their duly authorized officers as of the date
first above written.
CROWN PACIFIC LIMITED PARTNERSHIP, a
Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, a Delaware limited
partnership,its general partner
By:
----------------------------
Title:
----------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent and as a
Bank
By:
---------------------------------
Title:
---------------------------------
ABN AMRO BANK N.V., as Co-Agent and as a
Bank
By:
---------------------------------
Title:
---------------------------------
By:
---------------------------------
Title:
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5
<PAGE>
SOCIETE GENERALE, as Co-Agent and as a
Bank
By:
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Title:
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BANK OF MONTREAL
By:
---------------------------------
Title:
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THE BANK OF NOVA SCOTIA
By:
---------------------------------
Title:
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BANQUE PARIBAS
By:
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Title:
---------------------------------
By:
---------------------------------
Title:
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<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By:
---------------------------------
Title:
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KEYBANK NATIONAL ASSOCIATION
By:
---------------------------------
Title:
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WELLS FARGO BANK, N.A.
By:
---------------------------------
Title:
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7
<PAGE>
EXHIBIT 10.10
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
1997 DISTRIBUTION EQUIVALENT RIGHTS PLAN
SECTION 1. ESTABLISHMENT, PURPOSE, AND EFFECTIVE DATE
1.1 ESTABLISHMENT OF PLAN. Crown Pacific Management Limited
Partnership, a Delaware limited partnership (the "Manager"), hereby
establishes the CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP 1997
DISTRIBUTION EQUIVALENT RIGHTS PLAN (the "Plan"), for the benefit of certain
key employees of the Manager. Subject to the terms and conditions provided
herein, the Plan provides for rewarding participating key employees with a
cash payment with respect to vested Distribution Equivalent Rights (as
defined herein) granted hereunder, which are in tandem with the Participant's
options ("Options") on Common Units in Crown Pacific Partners, L.P., a
Delaware limited partnership (the "Partnership"), pursuant to the Crown
Pacific Management Limited Partnership 1994 Unit Option Plan ("Option Plan").
1.2 PURPOSE. The purpose of the Plan is to help attract and retain
the services of participating key employees, and further to align their
interests with the interests of the partners of the Partnership, and to
encourage such employees to increase operating profitability, with the
ultimate goal of surpassing distribution objectives with respect to the
Partnership's Common Units and Subordinated Units.
1.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective as of
January 1, 1997.
SECTION 2 DEFINITIONS
2.1 DEFINITIONS. When used in the Plan, the following terms shall
have the meanings specified below:
<PAGE>
2.1.1 "Account" means a ledger account established for a
Participant which shall reflect, with respect to each year, the Distribution
Amounts for such year that have not become vested and paid to the
Participant. Distribution Amounts credited to an Account shall not be
credited with interest.
2.1.2 "Beneficiary" means the person or entity determined to be a
Participant's beneficiary pursuant to Section 9.
2.1.3 "Board" means the Board of Control of the Manager, as
constituted in accordance with the agreement of limited partnership of the
Manager.
2.1.4 "Common Unit" has the meaning assigned to such term in the
Partnership Agreement.
2.1.5 "Compensation Committee" means the Compensation Committee
of the Board.
2.1.6 "Disability" has the meaning assigned to such term in the
Manager's long-term disability plan covering the Participant at the applicable
time, or if no such plan exists, means a physical or mental disability that is
reasonably expected to render the Participant incapable of performing his
duties as an employee of the Manager for a period of six months within any
twelve-month period.
2.1.7 "Distribution Amount" means, with respect to any year, an
amount equal to the cash distributions made by the Partnership with respect to
a Common Unit for such year.
2.1.8 "Distribution Equivalent Right" or "DER" means a right, in
tandem with a specified Option, to receive a Distribution Amount.
-2-
<PAGE>
2.1.9 "Distribution Date" means the 45th day following the end of
each calendar year or such other date as may be established by the Compensation
Committee.
2.1.10 "Participant" means a key employee of the Manager
designated as a Participant pursuant to Section 4.
2.1.11 "Plan" means the Crown Pacific Management Limited
Partnership 1997 Distribution Equivalent Rights Plan, as set forth herein and
as amended from time to time.
2.1.12 "Related Companies" means the Partnership, Crown Pacific
Limited Partnership, a Delaware limited partnership, CP Air, Inc., an Oregon
corporation, Yellowstone Trucking Limited Partnership, a Delaware limited
partnership, and Klamath Northern Railway Co., an Oregon corporation, and any
other entity in which the Partnership owns, directly or indirectly, now or in
the future, 50% or more of the outstanding equity securities. The Manager
shall not be treated as a Related Company.
SECTION 3 ADMINISTRATION
3.1 ADMINISTRATION. The Compensation Committee shall be responsible
for the administration of the Plan. The Compensation Committee is authorized
(i) to designate the key employees of the Manager eligible to become
Participants in the Plan, (ii) to designate the Options with respect to which
Distribution Equivalent Rights are granted, so long as the Options were not
issued prior to January 1, 1997, (iii) to interpret and construe any
provision of the Plan, (iv) to determine eligibility and benefits under the
Plan, (v) to prescribe, amend, and rescind rules and regulations relating to
the Plan, (vi) to adopt such forms as it may deem appropriate for the
administration of the Plan, (vii) to provide for conditions and assurances
deemed necessary or advisable to protect the interests of the Manager, and
(viii) to make all other determinations
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<PAGE>
necessary or advisable for the administration of the Plan, but only to the
extent not contrary to the express provisions of the Plan. Determinations,
interpretations, or other actions made or taken by the Compensation Committee
under the Plan shall be final and binding for all purposes and upon all
persons. A majority of the Compensation Committee shall constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all members of the
Compensation Committee, shall be deemed acts of the Compensation Committee.
3.2 INDEMNIFICATION OF COMPENSATION COMMITTEE. The Manager and the
Partnership shall indemnify, protect, defend and hold harmless each member of
the Compensation Committee (which, for purposes of this Section 3.2, includes
any employee of the Manager or a Related Company to whom the Compensation
Committee has delegated any responsibility in the administration of the Plan)
against any and all claims, losses, damages, expenses, including, without
limitation, counsel fees incurred by the Compensation Committee, and
liability, including, without limitation, any amounts paid in settlement with
the Manager's approval, arising from the member's or the Compensation
Committee's determination, action or failure to act, except when the same is
judicially determined to be attributable to the gross negligence or willful
misconduct of such member. The right of indemnity described in the preceding
sentence shall be conditioned upon (i) the timely receipt of notice by the
Manager of any claim asserted against the Compensation Committee member,
which notice, in the event of a lawsuit, shall be given within 10 days after
receipt by the Compensation Committee member, and (ii) the timely receipt by
the Manager of an offer from the Compensation Committee member of an
opportunity for the Partnership to participate in the settlement or defense
of such claim.
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<PAGE>
3.3 RELIANCE BY COMPENSATION COMMITTEE. The Compensation Committee
may employ such legal counsel, consultants and agents as it may deem
desirable for the administration of the Plan and may rely upon any opinion
received from any such counsel or consultant. Expenses incurred by the
Compensation Committee in the engagement of such counsel, consultant, or
agent shall be paid by the Partnership. No member or former member of the
Compensation Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any rights granted herein.
3.4 COST. Although the Plan is maintained by the Manager for
administrative convenience, all expenses and costs associated with the Plan,
including, without limitation, the cost of administration and the cost of
funding the benefits to be provided by the Plan, shall be borne by the
Partnership. All economic benefits and burdens will accrue to and be
incurred by the Partnership, and the Manager shall have no opportunity to
profit from the operation of the Plan.
SECTION 4 ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Any employee of the Manager or a Related Company
who (i) is not a member of the Compensation Committee and (ii) has Options
outstanding under the Option Plan shall be eligible to be a Participant.
DERs may be granted to the same employee on more than one occasion.
4.2 GRANTS. Grants of DERs shall be made by the Compensation
Committee to such eligible employees as it may determine from time to time
and shall be evidenced by such form of agreement as the Compensation
Committee may approve. Each grant shall specify the Option with respect to
which the granted DER relates.
-5-
<PAGE>
SECTION 5 TERMS OF DERS
5.1 VESTING/TERMINATION OF DERS. Each DER will be or become vested, as
the case may be, to the same extent as the Option to which it relates is vested
or becomes vested under the Option Plan. Each DER shall automatically
terminate upon the earlier of the Distribution Date that coincides with or next
follows the sixth anniversary of the grant date of the DER, or the date the
tandem Option is exercised or terminates.
5.2 ANNUAL PAYMENT AND/OR CREDITING OF DER AMOUNTS. Subject to Section
5.4, on each Distribution Date each Participant who is an employee of the
Manager or a Related Company on such date:
(a) shall be immediately paid the vested portion of the
Participant's Distribution Amounts for such year in cash;
(b) shall have credited to the Participant's Account the nonvested
portion of the Distribution Amounts for such year; and
(c) shall be immediately paid in cash the portion of any
Distribution Amount credited to the Participant's Account as of a
previous Distribution Date that has become vested as of the current
Distribution Date.
5.3 TERMINATION OF EMPLOYMENT. All DERs and all amounts credited to a
Participant's Account shall be immediately canceled unpaid on the date the
Participant ceases to be an employee of the Manager and its Related Companies,
including as a result of death or Disability.
5.4 LIMITATIONS ON ANNUAL DISTRIBUTION AMOUNTS. Notwithstanding anything
in this Plan to the contrary, no Distribution Amounts shall be paid to a
Participant or credited to a Participant's Account on a Distribution Date
unless the Available Cash (as defined in the Partnership Agreement)
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<PAGE>
of the Partnership with respect to the applicable year is sufficient to pay
the sum of (1) all distributions with respect to the Common Units and
Subordinated Units for such year in an amount equal to the distribution goal
established by the Compensation Committee with respect to such year ("Unit
Distributions") and (2) all Distribution Amounts for such year. In the event
the Available Cash is sufficient to pay all Unit Distributions, but not all
Distribution Amounts, the Distribution Amounts shall be reduced prorata for
such year.
5.5 ELECTIVE DEFERRALS. A Participant may be given an election to defer
all or part of a Distribution Amount otherwise payable on such terms as the
Manager may from time to time determine.
SECTION 6 DURATION OF PLAN
Subject to Section 8, the Plan shall remain in effect until December 31,
2010.
SECTION 7 WITHHOLDING OF TAXES
The Manager and Related Companies shall withhold from any amounts
payable to a Participant hereunder an amount sufficient to satisfy all federal,
state, local and other withholding tax requirements.
SECTION 8 TERMINATION AND AMENDMENT
Except as specifically set forth herein, the Plan may be terminated at any
time or amended from time to time in any respect by the Board. Notwithstanding
anything to the contrary contained herein, no amendment or termination shall be
made that would materially and adversely affect or diminish the rights of any
Participant with respect to any DERs or amounts credited to his Account,
without such Participant's prior written consent; provided that the Manager may
amend the Plan from time to time in such a manner as may be necessary to avoid
having the Plan being subject to
-7-
<PAGE>
the Employment Retirement Income Security Act of 1974, as amended. A
Participant's incurring any income tax liability as a result of an amendment
or the termination of the Plan shall not be considered to materially and
adversely affect or diminish the rights of a Participant.
SECTION 9 BENEFICIARIES, PERMITTED TRANSFEREES, AND OTHER PAYEES
9.1 DESIGNATION OF BENEFICIARY. Each Participant shall have the right to
designate in writing from time to time a Beneficiary by filing a written notice
of such designation with the Compensation Committee. A Participant's
designation of a Beneficiary may be revoked by filing with the Compensation
Committee an instrument of revocation or a later designation. Any designation
or revocation shall be effective when received by the Compensation Committee.
In the event of the death of a Participant, any payment required to be made
hereunder to such Participant shall be made to such Participant's Beneficiary.
Unless the Participant's Beneficiary designation provides otherwise, no person
shall be entitled to benefits upon the death of the Participant unless such
person survives the Participant. If the Beneficiary designated by a
Participant does not survive the Participant or if the Participant has not made
a valid Beneficiary designation, the Participant's Beneficiary shall be the
Participant's estate.
9.2 NONTRANSFERABILITY. Except as provided in Section 9.1, no DER or
Account, any interest therein, or any other interest or right of a Participant
under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated (except by will or by the applicable laws of descent
and distribution), or in any matter be liable for or subject to the debts,
contracts, liabilities, engagements or torts of a Participant or Beneficiary
entitled thereto, or be subject to any lien, directly or indirectly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, and bankruptcy.
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<PAGE>
9.3 INCAPACITY OF PARTICIPANT OR BENEFICIARY. If the Compensation
Committee finds that any Participant or Beneficiary to whom a payment is
payable under the Plan is unable to care for his or her affairs because of
illness or accident or is under a legal disability, any payment due (unless a
prior claim therefor shall have been made by a duly appointed legal
representative) may, in the sole discretion of the Compensation Committee, be
paid to the spouse, child, parent or brother or sister of such Participant or
Beneficiary. Any such payment shall be a complete discharge of the obligations
of the Manager under the provisions of the Plan.
SECTION 10 RIGHTS OF EMPLOYMENT
Nothing in this Plan shall interfere with or limit in any way the right of
the Manager or any Related Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ
of the Manager or any Related Company.
SECTION 11 REQUIREMENTS OF LAW AND GOVERNING LAW
11.1 REQUIREMENTS OF LAW. The transfer of Common Units issued under the
Plan shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.
11.2 GOVERNING LAW. The Plan and all agreements under the Plan shall be
construed in accordance with and governed by the laws of the State of Oregon.
CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, a Delaware limited partnership
By: HS Corp. of Oregon, an Oregon corporation,
general partner
By:
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Roger L. Krage, Secretary
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<PAGE>
By: Fremont Timber, Inc., a Delaware corporation,
general partner
By:
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Title:
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<PAGE>
EXHIBIT 10.14
AFTER RECORDING MAIL TO:
Cindy Wenig, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
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GROUND LEASE AGREEMENT
Dated as of December 19, 1997
between
CROWN PACIFIC LIMITED PARTNERSHIP
as Ground Lessor,
and
SELCO SERVICE CORPORATION,
as Ground Lessee
Port Angeles, Washington
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<PAGE>
GROUND LEASE AGREEMENT (this "GROUND LEASE") dated as of December 19,
1997, between CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership,
as Ground Lessor, and SELCO SERVICE CORPORATION, an Ohio corporation, as Ground
Lessee.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Unless the context shall otherwise require, the capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned thereto
in the Lease Agreement dated as of December 19, 1997 between the Ground Lessor,
as lessee and construction agent, and the Ground Lessee, as lessor, with respect
to the Facility, as amended from time to time (the "LEASE AGREEMENT").
ARTICLE II
GRANT
Section 2.01. LEASE OF PARCEL. Ground Lessor is the owner of the fee
estate in and to a certain parcel of land located in Callam County, Washington,
as more particularly described on Schedule A attached hereto (the "PARCEL").
Ground Lessor hereby leases the Parcel to Ground Lessee, and Ground Lessee
hereby leases the Parcel from Ground Lessor, for the Ground Lease Term
(hereinafter defined), subject to all the terms and conditions hereof, together
with all rights of way or uses, licenses, easements, tenements, hereditaments
and appurtenances now or hereafter belonging or pertaining to the Parcel.
Effective from and after the date hereof, Ground Lessor waives and relinquishes
any Lien or other right in the nature of a landlord's lien or privilege which it
might now or hereafter otherwise have in or with respect to the Parcel or any
part thereof.
Section 2.02. PERSONAL PROPERTY. The parties hereto acknowledge that
the title to the Facility and all Components now or hereafter constructed or
installed on the Parcel by any party (including, without limitation, Ground
Lessor or the Lessee under the Lease Agreement) during the Ground Lease Term
(hereinafter defined) are and will be owned by the Ground Lessee. It is the
intention of the parties that the separation of the title to the Parcel from the
title to the Facility is to remain so separated throughout the Ground Lease
Term. The Facility, to the greatest extent possible, shall for all purposes
<PAGE>
and at all times be and remain personal property under the laws of the state in
which the Parcel and the Facility are located.
ARTICLE III
TERM
Section 3.01. GROUND LEASE TERM. This Ground Lease shall be
effective and the Parcel shall be subject to the terms and conditions of this
Ground Lease from and after the date hereof and shall terminate with respect to
the Parcel on the earlier to occur of (a) the date of Lessee's purchase of the
Facility pursuant to SECTION 19(b) of the Lease Agreement or (b) December 19,
2047, unless sooner terminated as provided or permitted herein (the "GROUND
LEASE TERM").
Section 3.02. ELECTION TO TERMINATE. Ground Lessee may elect to
terminate this Ground Lease at any time upon the payment of $1 to Ground Lessor.
Upon such termination, Ground Lessee's obligations hereunder shall terminate.
ARTICLE IV
PAYMENTS
Ground Lessee shall pay to Ground Lessor One Hundred Dollars ($100) as
rental payment for the Ground Lease Term, receipt of which is hereby
acknowledged by Ground Lessor.
ARTICLE V
QUIET ENJOYMENT
Ground Lessor represents and warrants that it has full right and
authority to lease the Parcel pursuant to the terms of this Ground Lease and
that it has good and marketable fee title to the Parcel free and clear of all
Liens, except for those exceptions to title set forth on Title Commitment dated
December 19, 1997 #NBG. No. 97-0719 of Chicago Title Insurance Company (the
"PERMITTED ENCUMBRANCES"), and Ground Lessor represents and warrants that, at
all times during the Ground Lease Term, it will defend and hold harmless Ground
Lessee and its successors and assigns in their peaceable, quiet, exclusive and
undisputed enjoyment of the Parcel against the claims of all Persons.
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ARTICLE VI
USE OF THE PARCEL
Ground Lessee may use the Parcel for any legal business purpose,
including, without limitation, the same purpose and business as Lessee may use
the Parcel for under the Lease Agreement.
ARTICLE VII
ALTERATIONS
During the Ground Lease Term, Ground Lessee, in its discretion, may
from time to time alter or improve, or cause to be altered or improved, the
Parcel or any part thereof, in any manner it deems necessary or desirable, to
carry on any activity permitted hereunder, including the construction, addition,
alteration, demolition and removal of any buildings, equipment, roads or other
structures, items of personal property or fixtures and any grading or
landscaping of the Parcel; PROVIDED, HOWEVER, that so long as the Lease
Agreement is in effect, Ground Lessee shall refrain from any action permitted
under this Article VII, except to the extent such action is undertaken by Ground
Lessee in its capacity as Lessor under, and in accordance with, the Lease
Agreement.
ARTICLE VIII
LIENS
Ground Lessor shall not directly or indirectly create, incur, assume
or suffer to exist any Lien on or with respect to the Parcel, the Facility,
title thereto or any interest therein, except Permitted Liens, and Ground Lessor
shall promptly, at its own expense, take such action as may be necessary to duly
discharge any such Lien. If Ground Lessor shall fail to promptly discharge any
such Lien, Ground Lessee, at its option, may cause the same to be so discharged,
and sums expended by Ground Lessee in connection therewith shall be repaid by
Ground Lessor to Ground Lessee on demand.
ARTICLE IX
TAXES AND CHARGES
So long as the Lease Agreement is in effect, Ground Lessor
acknowledges that the Lessee under the Lease Agreement shall be responsible for
the payment of all Taxes due with respect to the Parcel and the Facility. If
the Lease Agreement shall expire
3
<PAGE>
or be terminated and this Ground Lease shall remain in effect, Ground Lessor
shall pay or cause to be paid all Taxes due with respect to the Parcel and the
Facility; PROVIDED, HOWEVER, that Ground Lessor shall not be required to make
any such payments if Ground Lessor shall in good faith be contesting any such
Taxes, so long as such contest does not involve any material danger of the sale,
forfeiture or loss of any part of the Parcel, the Facility, title thereto or any
interest of Ground Lessee therein. If Ground Lessor fails to make any payment
required to be made by Ground Lessor, Ground Lessee at its option may pay the
same and any moneys so paid by Ground Lessee shall be repaid on an After-Tax
Basis by Ground Lessor to Ground Lessee on demand.
ARTICLE X
INSURANCE
So long as the Lease Agreement is in effect, Ground Lessor
acknowledges that the Lessee under the Lease Agreement shall be responsible for
maintaining insurance coverage with respect to the Parcel and the Facility in
accordance with SECTION 14 of the Lease Agreement. If the Lease Agreement shall
expire or be terminated and this Ground Lease shall thereafter remain in effect,
Ground Lessor shall, without cost to Ground Lessee, maintain or cause to be
maintained in effect throughout the remaining Ground Lease Term, with insurers
of recognized responsibility, insurance policies with respect to the Parcel and
the Facility insuring against loss or damage to the person and property of
Ground Lessee and others, all from such risks and in such amounts as owners of
similar properties maintain with respect to such property, including liability
insurance in an amount reasonably satisfactory to Ground Lessee; PROVIDED,
HOWEVER, that Ground Lessor shall in no event be required to maintain any such
insurance in amounts greater than is generally maintained by responsible owners
of similar property. If the Ground Lessor shall fail to maintain such insurance
during the remaining Ground Lease Term, the Ground Lessee may (but shall be
under no obligation to) maintain or cause such insurance to be maintained at the
sole cost and expense of the Ground Lessor.
ARTICLE XI
CASUALTY OR CONDEMNATION
Any payment, including condemnation awards, received at any time by
Ground Lessor or Ground Lessee from any Governmental Authority or other Person
as a result of the occurrence of an Event of Loss or a Requisition of Use when
the Lease Agreement is in effect shall be distributed in accordance with SECTION
13 of the Lease Agreement. Any such payment received by Ground Lessor or Ground
Lessee after the Lease Agreement has expired or has been terminated shall be
applied as follows: so much
4
<PAGE>
of such payments as shall be necessary to pay in full all sums owing to Ground
Lessee, as lessor under the Lease Agreement or under any other Operative
Document shall be retained by, or paid over to, Ground Lessee, and the balance
(if any) of such payments shall be retained by, or paid over to Ground Lessor.
ARTICLE XII
DEFAULT
Notwithstanding anything to the contrary contained in this Ground
Lease, no event, occurrence or failure to perform by (or on behalf of) Ground
Lessee shall constitute a default or an event of default hereunder, and Ground
Lessor shall have no right (whether conferred by statute or otherwise) to
terminate this Ground Lease or to take possession of the Parcel, so long as any
sums remain to be paid at any time by Lessee under the Lease Agreement or any
other Operative Document. After the expiration or termination of the Lease
Agreement, the following events shall constitute an event of default hereunder:
(a) The Ground Lessee shall consent to the appointment of a receiver,
trustee, liquidator, assignee, trustee, custodian, sequestrator (or similar
official) of itself or for any substantial part of its property, or the Ground
Lessee shall not pay or generally be unable to pay, or admit in writing its
inability to pay, its debts generally as they come due, or shall make a general
assignment for the benefit of creditors;
(b) The Ground Lessee shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law (as now or hereafter in
effect), or the Ground Lessee shall consent to the entry of an order for relief
in an involuntary case under any such law;
(c) An order, judgment or decree shall be entered by any court having
jurisdiction in the premises for relief in respect of the Ground Lessee in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law (as now or hereafter in effect), or appointing a receiver, liquidator,
assignee, or for any substantial part of its property, or sequestering any
substantial part of the property of the Ground Lessee, or, ordering the winding
up or liquidating of the Ground Lessee's affairs, and any such order, judgment
or decree shall remain in force undismissed, unstayed or unvacated for a period
of sixty (60) days after the date of entry thereof; or
(d) A petition against the Ground Lessee in a proceeding under
applicable bankruptcy laws or other insolvency laws, as now or hereafter in
effect, shall be filed and shall not be withdrawn or dismissed within ninety
(90) days thereafter, or if, under the
5
<PAGE>
provisions of any law providing for reorganization or liquidation of
corporations which may apply to the Ground Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Ground Lessee
or of any substantial part of its property and such jurisdiction, custody or
control shall remain in force unrelinquished, unstayed or unterminated for a
period of sixty (60) days.
Ground Lessor shall have the right, after the occurrence and during the
continuance of an event of default hereunder (provided that the Lease Agreement
has terminated or expired), to take possession of the Parcel or to terminate
this Ground Lease by giving thirty (30) days written notice to Ground Lessee of
Ground Lessor's election to terminate same. The remedies set forth above are
exclusive of any other rights or remedies of Ground Lessor which exist at law or
in equity.
ARTICLE XIII
SUBLEASE; ASSIGNMENT; SALE
Section 13.01. BY GROUND LESSEE. Ground Lessee will not assign this
Ground Lease or any of its rights or interests hereunder and will not sublease
all or any portion of the Parcel, except that Ground Lessee may from time to
time:
(a) sublease all or any part of the Parcel and/or the Facility
pursuant to the Lease Agreement;
(b) sublease all or any part of the Parcel and/or the Facility or
assign this Ground Lease or any interests of Ground Lessee hereunder to any
Person after the termination or expiration of the Lease Agreement; and
(c) assign Ground Lessee's interests hereunder in connection with an
assignment of its interests as Lessor under the Lease Agreement.
In addition, in the event the Ground Lessor enters into a new leasing
arrangement pursuant to Section 19(a) of the Lease Agreement, the Ground Lessee
shall assign its interests hereunder to the lessor under such new leasing
arrangement. Any subletting or assignment permitted hereunder shall relieve
Ground Lessee of its obligations hereunder.
Section 13.02. BY GROUND LESSOR. So long as the Ground Lessee
(including its successors and assigns) is also the Lessor under the Lease
Agreement, Ground Lessor will not sell, transfer or convey the Parcel or any of
its rights or interests in the Parcel or assign this Ground Lease or any rights
or interests of Ground Lessor hereunder.
6
<PAGE>
ARTICLE XIV
NOTICES
Unless otherwise specifically provided herein, all notices and other
communications required or permitted hereunder shall be in writing and shall be
addressed and become effective as provided in the Lease Agreement.
ARTICLE XV
BINDING EFFECT; SUCCESSORS AND ASSIGNS
The terms and provisions of this Ground Lease and the respective
rights and obligations of Ground Lessee and Ground Lessor hereunder shall be
binding upon, and inure to the benefit of, their respective permitted successors
and assigns.
ARTICLE XVI
POSSESSION UPON TERMINATION
Upon termination of the Ground Lease Term, whether by lapse of time or
because of any of the conditions or provisions contained herein, Ground Lessee
will peaceably and quietly yield up and surrender possession of the Parcel to
Ground Lessor without representation or warranty.
ARTICLE XVII
GROUND LESSOR'S BANKRUPTCY
It is expressly understood and agreed that for purposes of Section
365(h) of the Bankruptcy Code, 11 U.S.C. Section 365(h), (a) Ground Lessee
shall be deemed to be in possession of the Parcel by virtue of the possessory
interest therein granted to Ground Lessee under this Ground Lease whether or not
all or any part of the Parcel has been subleased by Ground Lessee and (b) in the
event of any rejection or disaffirmance of this Ground Lease in any bankruptcy
or similar proceeding relating to Ground Lessor, Ground Lessee may elect to
remain in possession of the Parcel for the balance of the Ground Lease Term,
including all extensions exercisable hereunder, at the option of Ground Lessee.
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<PAGE>
ARTICLE XVIII
INDEMNIFICATION
The Ground Lessor hereby agrees to indemnify, protect and keep
harmless each Indemnified Person pursuant to the provisions of SECTION 23 of the
Lease Agreement, which provisions are hereby incorporated herein by reference as
if fully set forth herein.
ARTICLE XIX
THE LEASE AGREEMENT
So long as the Lease Agreement remains in effect or the Lessee under
the Lease Agreement is otherwise liable for amounts in respect thereof or under
the other Operative Documents, Ground Lessor shall look solely to the Lessee
under the Lease Agreement for the performance and discharge of Ground Lessee's
obligations and liabilities under this Ground Lease (other than with respect to
Lessor's Liens and the restrictions on Ground Lessee's rights of assignment and
subleasing under Section 13.01) with the same force and effect as though Ground
Lessee had performed the same, and Ground Lessee shall have no liability
hereunder, no default or event of default shall arise hereunder and the rights
of Ground Lessee hereunder shall not be affected, as a result of any failure of
Ground Lessee to perform or discharge such liabilities or obligations
notwithstanding (a) any continuation of any such failure after the end of the
term of the Lease Agreement or (b) that such failure first became known or
apparent after the end of the term of the Lease Agreement. No such performance
or discharge by or on behalf of the Lessee under the Lease Agreement shall be
deemed an acknowledgment by Ground Lessor of the Lessee under the Lease
Agreement as Ground Lessee hereunder, or a merger of the Lease Agreement with
this Ground Lease or a merger of the estate of Lessor under the Lease Agreement
with the estate of the Lessee thereunder.
ARTICLE XX
PERSONAL LIABILITY/LIMITED RECOURSE
Section 10.01. PERSONAL LIABILITY. No officer, director, stockholder
or employee of the Ground Lessee shall become personally liable for the
performance or observance of any agreements, obligations, covenants or
conditions to be performed or observed by Ground Lessee under this Ground Lease,
or any liabilities with respect thereto.
8
<PAGE>
Section 10.02. LIMITED RECOURSE. Except as otherwise provided in the
proviso to this SECTION 10.02, nothing contained in this Ground Lease or in the
other Operative Documents shall be construed as creating any liability on the
part of any past or present shareholder, limited partner or general partner of
the Ground Lessor, the General Partner, or the MGP General Partners to pay any
amount on account of the Ground Lessor's obligations hereunder or under any
other Operative Document to which it is a party or to perform any covenant of
the Ground Lessor contained herein or therein; provided, however, that nothing
in this SECTION 10.02 shall be construed (i) to relieve any Person from
liability for fraud, concealment, or other intentional wrongdoing for which such
Person would otherwise be liable under any Applicable Law, either directly or on
behalf of the Ground Lessor, (ii) to restrict the joinder in any action of any
necessary party in order to seek enforcement of rights against the Ground Lessor
or any other party to any Operative Document or to restrict injunctive relief
against any Person to the extent necessary to obtain performance by the Ground
Lessor of any of its obligations under any Operative Document, or (iii) to
relieve any Person from liability for distributions, payments, or other
transfers made to such Person in violation of the Operative Documents or in
violation of or otherwise recoverable under any Applicable Law.
ARTICLE XXI
MISCELLANEOUS
Section 21.01. SEVERABILITY. Any provision of this Ground Lease that
shall be prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 21.02. AMENDMENT. Neither this Ground Lease nor any of the
terms hereof may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against which
the enforcement of the termination, amendment, supplement, waiver or
modification shall be sought.
Section 21.03. HEADINGS. The Table of Contents and headings of the
various Articles and Sections of this Ground Lease are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
Section 21.04. COUNTERPARTS. This Ground Lease may be executed by
the parties hereto in separate counterparts. All such counterparts shall
together constitute but one and the same instrument.
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<PAGE>
Section 21.05. GOVERNING LAW. THIS GROUND LEASE SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF WASHINGTON
APPLICABLE TO AGREEMENTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 21.06. RECORDING. This Ground Lease or a memorandum hereof
may be recorded by either party hereto in the appropriate real estate records
and Ground Lessor shall pay all costs of recording and all applicable recording
or transfer taxes or related charges.
Section 21.07. ESTOPPEL CERTIFICATES. Ground Lessor will execute,
acknowledge and deliver to Ground Lessee, promptly upon request an estoppel
certificate certifying (a) that this Ground Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Ground Lease
is in full force and effect, as modified, and stating the date of each
instrument so modifying this Ground Lease), (b) the dates, if any, to which rent
has been paid and (c) whether any default exists hereunder known to it and, if
any such default exists, specifying the nature and period of existence thereof
and what action it is taking or proposes to take with respect thereto, and
whether notice thereof has been given to Ground Lessee. Any such certificate
may be relied upon by the Lessor, Ground Lessee and any prospective purchaser or
transferee of Ground Lessee's interest under this Ground Lease or any part
thereof.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Ground Lease
to be duly executed and delivered and their corporate seals to be hereunto
affixed and attested as of the day and year first above written.
Ground Lessor:
-------------
CROWN PACIFIC LIMITED PARTNERSHIP
BY CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its general partner
By:
--------------------------------
Name:
Title:
Ground Lessee:
-------------
SELCO SERVICE CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
(the Parcel)
<PAGE>
EXHIBIT 10.15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE AGREEMENT
Dated as of December 19, 1997
between
SELCO SERVICE CORPORATION,
as Lessor
and
CROWN PACIFIC LIMITED PARTNERSHIP,
as Lessee and Construction Agent
-----------------------
Port Angeles Sawmill Complex
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS; CONSTRUCTION OF REFERENCES. . . . . . . . . . 1
SECTION 2. LEASE OF THE LEASED PROPERTY . . . . . . . . . . . . . . . 14
SECTION 3. TERM AND RENT. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 4. CONSTRUCTION AGENT . . . . . . . . . . . . . . . . . . . . 15
SECTION 5. ACQUISITION OF COMPONENTS; FINANCING . . . . . . . . . . . 19
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 19
SECTION 7. NET LEASE; NON-TERMINABILITY . . . . . . . . . . . . . . . 27
SECTION 8. RETURN OF THE LEASED PROPERTY. . . . . . . . . . . . . . . 28
SECTION 9. WARRANTY OF THE LESSOR . . . . . . . . . . . . . . . . . . 29
SECTION 10. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE AND USE;
REPLACEMENT PARTS; MODIFICATIONS. . . . . . . . . . . . 31
SECTION 12. INSPECTION REPORTS . . . . . . . . . . . . . . . . . . . . 34
SECTION 13. LOSS OR DESTRUCTION; REQUISITION OF USE. . . . . . . . . . 36
SECTION 14. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 15. SUBLETTING; ASSIGNABILITY; AMENDMENT OF CONTRACTS. . . . . 41
SECTION 16. REPRESENTATIONS AND WARRANTIES OF LESSOR . . . . . . . . . 42
SECTION 17. REPRESENTATIONS AND WARRANTIES OF LESSEE . . . . . . . . . 43
SECTION 18. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . 51
SECTION 19. OPTIONS UPON LEASE TERMINATION . . . . . . . . . . . . . . 55
SECTION 20. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . 56
SECTION 21. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 59
<PAGE>
Page
----
SECTION 22. RIGHT TO PERFORM FOR LESSEE. . . . . . . . . . . . . . . . 61
SECTION 23. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 61
SECTION 24. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 25. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 65
SECTION 26. AMENDMENTS AND MISCELLANEOUS . . . . . . . . . . . . . . . 65
EXHIBITS
Exhibit A - Form of Lease Supplement
Exhibit B - Form of Requisition
Exhibit C - Approved Construction Budget
Exhibit D - Form of Officer's Certificate for Final Completion Date
Exhibit E - Terms of Single Investor Tax Lease
Exhibit F - Credit Agreement
SCHEDULES
Schedule 1 - Parcel
Schedule 6(a)(viii) - Permits
ii
<PAGE>
LEASE AGREEMENT
LEASE AGREEMENT dated as of December 19, 1997 between SELCO SERVICE
CORPORATION, an Ohio corporation ("Lessor"), and CROWN PACIFIC LIMITED
PARTNERSHIP, a Delaware limited partnership ("Lessee").
SECTION 1. DEFINITIONS; CONSTRUCTION OF REFERENCES.
In this Lease, unless the context otherwise requires:
(a) All references in this Lease to designated Sections and other
subdivisions are to designated Sections and other subdivisions of this Lease,
and the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Lease as a whole and not to any particular Section or other
subdivision.
(b) The terms defined in this Section or elsewhere in this Lease
shall, for purposes of this Lease and all Exhibits and Schedules hereto, have
the meanings assigned to them in this Section or elsewhere herein and include
the plural as well as the singular and the singular as well as the plural;
except as otherwise indicated, all the agreements or instruments herein defined
shall mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms hereof and thereof and of the
other Operative Documents.
(c) Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this Lease,
such determination or computation shall be done in accordance with GAAP at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Lease.
(d) The following terms shall have the following meanings for all
purposes of this Lease:
ACTUAL PROJECT COSTS shall mean, collectively, (i) all amounts paid or
payable to finance the acquisition of the Components, (ii) all amounts paid or
payable as costs for the construction, operation and maintenance of the Facility
and (iii) amounts constituting interest, fees and expenses paid or payable with
respect to the Facility as set forth in the Approved Construction Budget.
<PAGE>
AFFILIATE shall mean, as to a particular entity, a Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such entity, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of such
entity or (iii) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by such entity. As used herein, the term control
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, the terms
"controlling," "controlled by" and "under common control with" shall have
meanings correlative to the foregoing.
AFTER-TAX BASIS shall mean on a basis such that any payment received
or deemed to have been received by any Person shall, if necessary, be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction of all taxes, penalties, fines, interest,
additions to tax and other charges (taking into account any related credits or
deductions) resulting from the receipt (actual or constructive) of such payments
imposed by or under any Federal, state, local or foreign law or taxing or
governmental authority be equal to the payment received or deemed to have been
received.
APPLICABLE LAW shall mean all applicable laws, rules, codes,
ordinances, permits, certificates, Orders, regulations and treaties of the
United States of America and states, territories and political subdivisions
thereof and of any other Governmental Authority.
APPLICABLE PERMITS shall mean any Permit that is necessary to develop,
build, improve, own, operate or use all or any part of the Leased Property or
any part thereof in accordance with this Lease and the other Operative
Documents.
APPRAISAL shall have the meaning set forth in Section 6(a)(xiv)
hereof.
APPRAISER shall mean Independent Equipment Company.
APPROVED CONSTRUCTION BUDGET shall mean the budget prepared by the
Lessee, in form and substance satisfactory to the Lessor, attached as EXHIBIT C
hereto, which budget specifies the estimated Actual Project Costs including:
(a) all labor, materials and services necessary for the design, engineering and
construction of the Facility, in accordance with the Construction Contract and
the Construction Agreements, and (b) the expenses to be incurred in connection
with the design, engineering and construction of the Facility, as the same may
be amended from time to time in accordance with the provisions of Section 4
hereof and the other Operative Documents.
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<PAGE>
APPROVED CREDIT AGREEMENT ACTION shall mean any amendment or
modification to, or waiver under, the Credit Agreement at such times that Key
Bank National Association or any Affiliate of Key Bank National Association is
a "Bank" party to the Credit Agreement.
BASIC RENT shall have the meaning set forth in Section 3(b) hereof.
BASIC RENT PAYMENT DATE shall have the meaning set forth in Section
3(b) hereof.
BASIC RENT RATE shall mean, with respect to each Rental Period, an
interest rate per annum equal to the sum of (i) the rate or interest at which
deposits in U.S. dollars for a one month period are offered in the London
interbank market as quoted on the Reuters Screen page "LIBO" at or about 11:00
A.M. (London time) on the second Business Day prior to the commencement of such
Rental Period, or if such page on such screen ceases to display such
information, such other page as may replace it on that screen for the purpose of
displaying such information PLUS (ii) 125 basis points.
BUSINESS DAY shall mean (a) a day of the year (other than a Saturday
or a Sunday) on which banks are not required or authorized to close in New York
City, Boston, Massachusetts, and San Francisco, California, and (b) if the
applicable Business Day relates to the determination of the Basic Rent Rate, a
day of the year (other than a Saturday or a Sunday) that is also a day on which
dealings are carried on in the London interbank market and banks are open for
business in London.
CERCLIS shall mean the Comprehensive Environmental Response
Compensation and Liability Information System, which is a list maintained by the
United States Environmental Protection Agency of sites where there is a known or
suspected release or potential release of hazardous materials which may require
remediation.
CLAIM shall mean all liabilities (including, without limitation,
negligence, warranty, statutory, product, strict or absolute liability,
liability in tort or otherwise), obligations, responsibilities, losses, damages,
penalties, fines, sanctions, claims, Environmental Claims, actions, causes of
action, suits, investigations, judgments, Liens (including any Lien in favor of
any Governmental Authority for environmental liabilities and costs or violations
of any Environmental Laws), Taxes, costs, expenses and disbursements, of any
kind or nature, including, without limitation, reasonable legal fees and
expenses and costs of investigation.
CLOSING DATE shall mean December 19, 1997.
3
<PAGE>
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMPONENTS shall mean all furniture, fixtures, equipment and other
real or personal property to be constructed or installed on the Parcel on or
after the Closing Date as set forth in detail in the Lease Supplements, and
together shall constitute the Facility.
CONSTRUCTION AGENT shall have the meaning set forth in Section 4(a)
hereof.
CONSTRUCTION AGREEMENTS shall have the meaning set forth in Section
4(c)(iv) hereof.
CONSTRUCTION CONTRACT shall mean the Agreement dated as of July 22,
1997 between Lessee and HCMA relating to the construction of the Facility, as
assigned to the Lessor pursuant to the Construction Contract Assignment.
CONSTRUCTION CONTRACT ASSIGNMENT shall mean the Assignment Agreement
dated as of December 19, 1997 among the Lessee, as assignor, the Lessor, as
assignee, and HCMA.
CONSTRUCTION SCHEDULE shall mean the Construction Schedule for the
Facility, as the same may be amended or supplemented from time to time in
accordance with Section 4 hereof.
CONTRACTUAL OBLIGATION shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
CREDIT AGREEMENT shall mean the Amended and Restated Credit Agreement
dated as of July 31, 1996, as amended October 15, 1996, March 31, 1997, and
October 10, 1997, among the Lessee, Bank of America National Trust and Savings
Association, as Agent, ABN AMRO Bank, N.V. and Societ Generale, as Co-Agents,
and the other financial institutions party thereto, a copy of which is attached
as EXHIBIT F hereto, as it may hereafter be amended or modified or any of its
provisions may hereafter be waived pursuant to any Approved Credit Agreement
Action.
DEFAULT shall mean an event which, after the giving of notice or lapse
of time, or both, would constitute an Event of Default.
4
<PAGE>
ENVIRONMENTAL CLAIMS shall mean any Claim, action, cause of action,
investigation or notice (in written form) by any Person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, Remedial Action, Releases, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the presence,
release into the environment, of any Hazardous Material at any location, whether
or not owned or operated by the Lessee or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
ENVIRONMENTAL CONSULTANT shall mean Century West Engineering
Corporation.
ENVIRONMENTAL LAWS shall mean all applicable federal, state, foreign
and local laws and regulations, and common law relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface, water, groundwater, land surface or subsurface strata, wetlands,
wildlife, aquatic species, vegetation and natural resources), including, without
limitation, laws and regulations relating to emissions, discharges, Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials. Environmental Laws include, but
are not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"); the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA"); the Resource Conservation Recovery Act ("RCRA"); Oil
Pollution Act of 1990 ("OPA"); the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"); the Toxic Substances Control Act ("TSCA"); the Hazardous
Material Transportation Act; the Clean Air Act; the Federal Water Pollution
Control Act; the Safe Drinking Water Act; and their state and local counterparts
or equivalents.
ENVIRONMENTAL PERMITS shall mean all Permits required under
Environmental Laws.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and regulations promulgated thereunder.
ERISA AFFILIATE shall mean any trade or business (whether or not
incorporated) under common control with the Lessee within the meaning of Section
414(b) or 414(c) of the Code.
ERISA EVENT shall mean (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Lessee or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as
5
<PAGE>
defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) the filing of a
notice of intent to terminate the treatment of a plan amendment as a termination
under Section 4041 or 4041A of ERISA or the commencement of proceedings by the
PBGC to terminate a Pension Plan subject to Title IV of ERISA; (d) a failure by
the Lessee or any ERISA Affiliate to make required contributions to a Pension
Plan or other Plan subject to Section 412 of the Code; (e) an event or condition
which might reasonably by expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Pension Plan; (f) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the
Lessee; or (g) an application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code with respect to any
Pension Plan.
EVENT OF DEFAULT shall have the meaning set forth in Section 20
hereof.
EVENT OF LOSS shall mean with respect to the Facility any of the
following events: (i) loss of the Facility or the use thereof due to theft,
disappearance, destruction, damage beyond repair or rendition of the Facility
permanently unfit for commercial operation for any reason whatsoever; (ii) any
damage to the Facility which results in an insurance settlement with respect to
the Facility on the basis of a total loss; (iii) the requisition of title to the
Leased Property or any part thereof by the act of the United States government
or any other Governmental Authority; (iv) the condemnation, confiscation or
seizure of, or requisition of use ("Requisition of Use") of the Leased Property
or any part thereof by the act of the United States Government or any other
Governmental Authority which constitutes a total taking thereof, (v) the
Requisition of Use of the Leased Property or any part thereof by the act of the
United States Government or any other Governmental Authority which has rendered
the operation of the Facility uneconomic to the Lessee. The date of such Event
of Loss shall be the date of such theft, disappearance, destruction, damage,
condemnation, confiscation, seizure, requisition of title, Requisition of Use or
unfitness for use for the stated period.
EXPECTED TAXES shall mean net income taxes imposed by any federal or
state Governmental Authority on the Lessor with respect to any Rent received by
the Lessor.
FACILITY shall mean the sawmill facility to be constructed on the
Parcel, as more fully described in the Construction Contract and the
Construction Budget and shall be comprised of the Components.
6
<PAGE>
FINAL COMPLETION DATE shall mean the date on and as of which the
Lessee has delivered to the Lessor a fully executed Officer's Certificate in the
form of EXHIBIT D hereto.
FINAL SURVEY shall mean an ALTA/ACSM survey of the Parcel and any
necessary easements, rights of way or similar property rights benefiting the
Parcel, showing the location of all Components, easements, encroachments and
other survey matters together with a certification from the surveyor, such
survey and certification shall be in form and substance satisfactory to the
Lessor.
GAAP shall mean generally accepted accounting principals in the United
States of America in effect from time to time.
GENERAL PARTNER shall mean the general partner of the Lessee, Crown
Pacific Management Limited Partnership, a Delaware limited partnership, or any
successor general partner of the Lessee.
GOVERNMENT ACTION shall mean all actions, authorizations, consents,
approvals, waivers, exceptions, variances, franchises, filings, orders, permits,
licenses, exemptions, publications, notices to and declarations of or with any
Governmental Authority, including, without limitation, those pertaining to
Environmental Laws and Environmental Permits.
GOVERNMENTAL AUTHORITY shall mean and include any Federal, state,
municipal or other governmental department, commission, board, bureau, court,
legislature, agency, instrumentality or authority, domestic, foreign,
transnational or international.
GROUND LEASE shall mean the Ground Lease dated as of December 19, 1997
between the Ground Lessor and the Ground Lessee, conveying to the Lessor a
leasehold estate in the Parcel.
GROUND LESSEE shall mean the Lessor as ground lessee under the Ground
Lease.
GROUND LESSOR shall mean the Lessee as ground lessor under the Ground
Lease.
HCMA shall mean HCMA Consulting Group, Inc., an Oregon corporation.
7
<PAGE>
HAZARDOUS MATERIALS shall mean (i) all substances defined as such in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40
C.F.R.(S)300.5, (ii) any substance that, whether by its nature or use, is
subject to regulation under any Environmental Law or with respect to which any
Federal, state or local Environmental Law of Governmental Authority requires
environmental investigation, monitoring or remediation and (iii) all substances
defined as such by, or regulated as such under, any Environmental Law.
INDEMNIFIED PERSON shall mean the Lessor, its successors, assigns and
affiliates, and the directors, officers, employees and agents of the foregoing.
INDEPENDENT AUDITOR shall have the meaning set forth in Section
18(a)(i).
INSURANCE REQUIREMENTS shall mean all of the insurance requirements
set forth in Section 14(a) through (c) hereof.
IRS shall mean the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions.
LAW shall mean any law (including, without limitation, any zoning law
or ordinance, any Environmental Law or Legal Requirements), treaty, directive,
statue, rule, regulation, ordination, order, directive, code, interpretation,
judgment decree, injunction, writ, determination, award, Permit, license,
authorization, direction, requirement or decision of or agreement with or by any
Governmental Authority or any official or officer thereof having jurisdiction of
the matter in question.
LEASE shall mean this Lease and shall include each Lease Supplement
entered into pursuant to the terms hereof.
LEASE SUPPLEMENT shall mean a supplement to this Lease duly executed
and delivered by the Lessor and the Lessee pursuant to, and in accordance with,
the terms hereof, in the form of EXHIBIT A hereto.
LEASE TERM shall mean the period commencing on the Closing Date and
ending on the Lease Termination Date or such shorter period as may result from
earlier termination as provided herein.
LEASE TERMINATION DATE shall mean the earlier of (i) the Final
Completion Date, (ii) September 30, 1998 and (iii) the date on which this Lease
is terminated pursuant to the terms hereof.
8
<PAGE>
LEASED PROPERTY shall mean the Parcel and the Facility.
LEGAL REQUIREMENTS shall mean (i) all Laws, foreseen or unforeseen,
ordinary or extraordinary, or arising from any restriction of record or
otherwise, which now or at any time hereafter may be applicable to the Lessor,
as owner of the Facility, the Lessee, as lessee hereunder, or the Leased
Property or any part thereof, or any of the adjoining sidewalks, or the
maintenance, management, ownership, construction, operation, mortgaging,
occupancy, possessing, use, non-use or condition of the Leased Property or any
part thereof; (ii) and any other governmental rules, orders and determinations
now or hereafter enacted, made or issued, and applicable to the Lessor, as owner
of the Facility, the Lessee, as lessee hereunder, or the Leased Property or any
part thereof or to the maintenance, management, ownership, construction,
operation, mortgaging, occupancy, possession, use, non-use or condition thereof
whether or not presently contemplated; and (iii) all agreements, Permits,
covenants, and restrictions applicable to the Leased Property or any part
thereof or the maintenance, management, ownership, construction, operation,
mortgaging, occupancy, possession, use, non-use or condition thereof.
LESSEE shall mean Crown Pacific Limited Partnership, a Delaware
limited partnership, and its permitted successors and assigns.
LESSOR shall mean SELCO Service Corporation, an Ohio corporation, and
its permitted successors and assigns.
LESSOR'S LIENS shall mean any Lien on or against the Leased Property
arising as a result of (i) Claims against the Lessor which are not related to
the transactions contemplated by the Operative Documents, (ii) any act or
omission of the Lessor which is not related to the transactions contemplated by
the Operative Documents or is in violation of any of the terms of the Operative
Documents or (iii) Claims against the Lessor with respect to Taxes or expenses
against which the Lessee is not required to indemnify Lessor pursuant to any of
the Operative Documents.
LIEN shall mean any interest in property securing an obligation owed
to, or claimed by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to any security interest, mortgage, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes;
the term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property.
9
<PAGE>
MANDATORY ALTERATION shall have the meaning set forth in Section 11(d)
hereof.
MATERIAL ADVERSE EFFECT shall mean (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Lessee; (b) a material
impairment of the ability of the Lessee to perform under this Lease or any other
Operative Document and to avoid any Event of Default; (c) a material adverse
effect upon the legality, validity, binding effect or enforceability against the
Lessee of any Operative Document or; (d) a material adverse effect on the
continued economic operation of the Leased Property.
MAXIMUM REQUISITION FUNDING AMOUNT shall mean $18,040,922.33.
MEMORANDUM OF LEASE shall mean the Memorandum of Lease dated as of
December 19, 1997 between the Lessor and the Lessee.
MEMORANDUM OF GROUND LEASE shall mean the Memorandum of Ground Lease
dated as of December 19, 1997 between the Ground Lessor and the Ground Lessee.
MGP GENERAL PARTNERS shall mean, collectively, Freemont Timber, Inc.,
a Delaware corporation, and HS Corp. of Oregon, an Oregon corporation, the sole
general partners of the General Partner, and any successor general partner of
the General Partner.
MODIFICATION shall mean any improvement, modification, alteration or
addition to the Leased Property.
NEW LEASE NOTIFICATION shall have the meaning set forth in Section
19(a) hereof.
NONSEVERABLE MODIFICATION shall mean a Modification to the Leased
Property which is not a Severable Modification.
NPL shall mean the National Priorities List.
OFFICER'S CERTIFICATE of any Person shall mean a certificate signed by
a president, any vice president and/or any other duly authorized and responsible
officer of such Person.
OPERATIVE DOCUMENTS shall mean and include this Lease, the Lease
Supplements, the Construction Contract, the Construction Contracts Assignment,
the Ground Lease, the Memorandum of Lease and the Memorandum of Ground Lease.
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ORDER shall mean and include any order, writ, injunction, decree,
judgment, award, determination, direction or demand of any Governmental
Authority.
OVERDUE RATE shall mean a rate per annum equal to the greater of (i)
2% above the Basic Rent Rate then in effect, or for any period after the Lease
Termination Date, the Basic Rent Rate for the last Rental Period or (ii) 2%
above the Prime Rate.
PARCEL shall mean the real property described on Schedule 1 hereto.
PARTS shall mean all appliances, parts, instruments, appurtenances,
accessories and other equipment of whatever nature, which may from time to time
be incorporated or installed in or attached to and become a part of the Leased
Property as originally constituted.
PENSION PLAN shall mean a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Lessee or any ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plans years.
PERMIT shall mean any order, authorization, consent, approval,
license, ruling, permit, certification, exemption, filing or registration by or
with any Governmental Authority.
PERMITTED ENCUMBRANCES shall have the meaning set forth in the Ground
Lease.
PERMITTED LIENS shall mean all Liens permitted by Section 10 hereof.
PERSON shall mean any individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company, trust,
unincorporated association or organization or joint venture, a government or any
department or agency thereof, or any other entity.
PLAN shall mean an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Lessee or any ERISA Affiliate sponsors or maintains or to
which the Lessee makes, is making, or is obligated to make contributions and
includes any Pension Plan.
PRIME RATE shall mean the rate of interest per annum publicly
announced from time to time by Key Bank National Association as its prime
rate in effect at its
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principal office in Cleveland, Ohio; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as
being effective.
RELEASE shall mean the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migrating into
the environment of any Hazardous Material through or in the air, soil, surface
water or groundwater.
REMEDIAL ACTION shall mean actions required to (i) clean up, remove,
treat or in any other way address Hazardous Materials in the environment, (ii)
prevent the Release or further Release or minimize the further Release of
Hazardous Materials, or (iii) investigate and determine if a remedial response
is needed, to design such a response and post-remedial investigation,
monitoring, operation, maintenance and care.
RENT shall have the meaning set forth in Section 3(c) hereof.
RENTAL PERIOD shall mean the following periods: (i) the Closing Date
through December 31, 1997 and (ii) each calendar month thereafter through the
Lease Termination Date; PROVIDED, that with respect to the calendar month in
which the Lease Termination Date occurs, the Rental Period for that month, if
the Lease Termination Date is not the last day of such month, shall be the first
day of such calendar month through the Lease Termination Date.
REPLACEMENT PARTS shall have the meaning set forth in Section 11(c)
hereof.
REPORTABLE EVENT shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
REQUISITION shall mean a requisition by the Lessee for Requisition
Fundings substantially in the form of EXHIBIT B.
REQUISITION FUNDING shall have the meaning set forth in Section 5(b)
hereof.
REQUISITION FUNDING CONDITIONS shall mean the conditions to each
Requisition Funding set forth in Sections 6(b) and 6(c) hereof.
REQUISITION FUNDING DATE shall mean the Closing Date and the first
Business Day of any month thereafter through the Lease Termination Date.
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REQUISITION OF USE shall have the meaning set forth in the definition
of Event of Loss.
SEVERABLE MODIFICATION shall mean any Modification to the Leased
Property permitted hereunder which can be readily removed therefrom without
impairing the current or residual value, utility or remaining useful life of the
Leased Property.
SUBSIDIARY of any Person shall mean any corporation, partnership,
limited liability company, limited liability partnership, joint venture, trust
or estate of which (or in which) more than 50% of (a) the Voting Stock of such
corporation, (b) the interest in the capital or profits of such partnership,
limited liability company, limited liability partnership, or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
SUPPLEMENTAL RENT shall have the meaning set forth in Section 3(c)
hereof.
TAX or TAXES shall mean, without limitation, any fee (including
license, filing, recording, transfer, mortgage and registration fees), foreign,
Federal, state or local tax (including any income, gross receipts, withholding,
franchise, excise, sales, use, value added, mortgage, real, personal, tangible
or intangible property tax or any tax similar to any of the foregoing taxes),
interest equalization, recording, transfer or stamp tax (including deed stamp
tax), assessment (including any maintenance charge, owner association dues or
charges), levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any foreign, Federal, state or local
government or agency, or governmental authority, together with any addition to
tax, penalty, fine or interest thereon, other than Expected Taxes.
TITLE INSURANCE POLICY shall have the meaning set forth in Section
6(a)(vii).
TOTAL FUNDINGS means an amount equal to all Requisition Fundings made
by the Lessor hereunder.
UNFUNDED PENSION LIABILITY shall mean the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Pension Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
UPDATED TITLE POLICY shall mean an update of the Title Insurance
Policy in form and substance satisfactory to the Lessor, including the removal
of the survey exception.
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VOTING STOCK shall mean, as to any corporation, all stock of any class
or classes (however designated), or other securities of any kind, having
ordinary voting rights for an election of a majority of the directors (or
Persons performing similar functions) of such corporation, other than shares or
securities having such power only by reason of the happening of a contingency.
SECTION 2. LEASE OF THE LEASED PROPERTY.
Upon the terms and subject to the conditions set forth in this Lease
and each Lease Supplement, and in consideration for the rents and covenants
herein stipulated to be performed by the Lessee, the Lessor hereby leases to the
Lessee the Leased Property. This Lease shall be effective with respect to any
Components described on Schedule 1 to each Lease Supplement executed and
delivered by the Lessor and the Lessee from time to time. Such Components shall
be subject to the terms and conditions of this Lease from and after the date on
which a Lease Supplement relating to such Components is executed and delivered
for the period commencing on the date of execution and delivery of such Lease
Supplement. Simultaneously with the delivery of each Requisition pursuant to
Section 5 hereof, the Lessee shall deliver to the Lessor an executed Lease
Supplement with respect to the Components included in the Actual Project Costs
described in such Requisition.
SECTION 3. TERM AND RENT.
(a) TERM. The term of this Lease shall begin on the Closing Date and
shall end on the Lease Termination Date.
(b) BASIC RENT. On the first Business Day immediately succeeding the
last day of each Rental Period (each a "Basic Rent Payment Date"), the Lessee
shall pay to the Lessor, as basic rent (herein referred to as "Basic Rent") for
such Rental Period, an amount determined as follows:
(i) an amount equal to the aggregate amount of Actual Project
Costs advanced by the Lessor pursuant to Section 5 hereof from the date
hereof through and including such Basic Rent Payment Date, MULTIPLIED BY
(ii) the Basic Rent Rate, DIVIDED BY
(iii) 360, and MULTIPLIED BY
(iv) the actual number of days in such Rental Period.
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The Lessee agrees not to prepay any payment of Basic Rent except as specifically
provided by the terms hereof.
(c) SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor or such
other Person as shall be entitled thereto the following amounts (herein referred
to as "Supplemental Rent" and, together with all Basic Rent, as "Rent"):
(i) on the date provided herein or in the applicable Operative
Document or if no such date shall be so provided then on demand, any amount
payable hereunder (other than Basic Rent) which the Lessee assumes the
obligation to pay, or agrees to pay, under this Lease or any other
Operative Document to the Lessor or others; and
(ii) on demand, to the extent permitted by applicable law,
interest (computed on the basis of a 360-day year and actual days elapsed)
at the Overdue Rate on any payment of Rent not paid when due for any period
during which the same shall be overdue.
The expiration or other termination of the Lessee's obligation to pay Basic Rent
hereunder shall not limit or modify the obligations of the Lessee with respect
to Supplemental Rent.
(d) PAYMENTS. All amounts payable by the Lessee hereunder shall be
paid in lawful money of the United States of America and in immediately
available funds by wire transfer by 2:00 p.m. (New York City time) on the
applicable Basic Rent Payment Date or on the date when due, unless any such due
date is not a Business Day, in which case payment shall be due and payable on
the next succeeding Business Day, at an account designated by the Lessor or to
such other Person in the United States of America or in such other manner as the
Lessor from time to time may designate to the Lessee by written instructions.
SECTION 4. CONSTRUCTION AGENT.
(a) APPOINTMENT OF CONSTRUCTION AGENT. The Lessor hereby appoints
the Lessee to act as the Lessor's agent (the Lessee, in such capacity, is herein
called the "CONSTRUCTION AGENT"), and the Construction Agent hereby agrees to
act as the Lessor's agent, to construct the Facility in a manner consistent with
the Construction Contract, the Approved Construction Budget, the Construction
Schedule and Construction Agreements and to undertake such other duties and
obligations as are set forth herein.
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(b) TERM OF AGENCY RELATIONSHIP. The agency relationship created
herein between the Construction Agent and the Lessor shall commence as of the
date hereof and shall end on the sooner to occur of: (i) the Lease Termination
Date; (ii) the giving of notice by the Lessor of such termination upon the
occurrence of an Event of Default; or (iii) the Final Completion Date. No
termination of the agency relationship hereunder nor any failure on the part of
the Lessor to perform its obligations under any Operative Document (other than
its failure to make, or cause to make available, the proceeds of each
Requisition Funding in accordance with the terms hereof) shall limit or
otherwise affect the Lessor's rights against the Construction Agent for any
breach or failure to perform hereunder.
(c) DUTIES OF CONSTRUCTION AGENT. In connection with the
construction of the Facility, the Construction Agent shall on the Lessor's
behalf:
(i) construct, and/or cause the renovation and construction
of, the Facility in a good and workmanlike manner and in accordance with
prudent industry practice and free and clear of all Liens (other than
Permitted Liens) arising out of the same;
(ii) cause such construction to be carried on (i) with
diligence and continuity (subject to delays or interruptions resulting from
adverse weather, labor or materials shortages, strikes or other labor
difficulties, acts of God, or other similar circumstances beyond the
reasonable control of the Lessee) so that the Final Completion Date is
achieved by no later than September 30, 1998, (ii) substantially in
accordance with the Construction Agreements, the Construction Contract,
Approved Construction Budget and the Construction Schedule, (iii) in
accordance in all material respects with all Legal Requirements and
Applicable Permits and (iii) in accordance with all Insurance Requirements;
(iii) pay, or cause to be paid, in accordance with prudent
industry practice, all costs and expenses of such construction, including,
without limitation, all Actual Project Costs, if any, in excess of an
amount equal to the Maximum Requisition Funding Amount (without
reimbursement by or other obligation of the Lessor), including, to the
extent required, payment of all amounts owing to contractors and
subcontractors, and perform all obligations arising out of such
construction;
(iv) subject to the provisions of paragraph (e) below,
negotiate and enter into (on behalf of the Lessor) such design,
construction contracts, subcontracts, change orders or amendments thereto
(collectively, the "Construction Agreements") as the Construction Agent may
deem necessary or
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advisable in connection with the construction of the Facility; provided,
that such Construction Agreements shall be with reputable contractors and
subcontractors duly licensed (to the extent required by Applicable Law) to
perform their obligations under such Construction Agreements and bonded by
such reputable bonding companies, in such amounts, payable in favor of the
Lessor, as are consistent with prudent industry standards and the Lessee's
customary standards and practices;
(v) subject to the limitations set forth in paragraph (e)
below, prepare and adopt such modifications, amendments and supplements to
the Approved Construction Budget and the Construction Schedule as the
Construction Agent may deem necessary or advisable;
(vi) apply for and procure, at its own cost and expense, any
and all Applicable Permits required to be obtained, maintained or held by
either the Construction Agent or the Lessor as and when required by any
Legal Requirement to be obtained and maintain all such Permits in full
force and effect to the extent required by Applicable Law;
(vii) deliver to the Lessor monthly progress reports on the
construction of the Facility no later than January 15, 1998 and on the 15th
of each month thereafter, which reports shall set forth the status of the
construction to date, including a statement setting forth the percentage of
the Facility completed, and certify that the construction has been
performed in a good and workmanlike manner, substantially in accordance
with the Construction Agreements, the Approved Construction Budget and the
Construction Schedule;
(viii) at the cost and expense of the Construction Agent, allow
the Lessor or its agent to examine and obtain copies of all Construction
Agreements, Applicable Permits, invoices, purchase orders or receipts for
Actual Project Costs, construction plans, requests for proposal, bids, and
all other information related to the construction of the Facility as the
Lessor may reasonably request; and
(ix) deliver to the Lessor copies of any periodic reports
prepared by, or provided to, the Lessee or the Construction Agent in
connection with the construction and operation of the Facility.
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(d) RIGHT TO RECEIVE CONSTRUCTION COSTS.
(i) During the course of the construction of the Facility,
the Construction Agent may, in compliance with the procedures set forth in
Section 5 hereof, request payment by the Lessor of Actual Project Costs.
(ii) Subject to and in accordance with Section 5 hereof, the
Lessor shall make available, or cause to be made available, the proceeds of
each Requisition Funding as directed by the Construction Agent in the
Requisition relating thereto. The Construction Agent will use the proceeds
of each Requisition Funding received by it only to pay the Actual Project
Costs set forth in the Requisition for such Requisition Funding and title
to the Components acquired with proceeds of each Requisition Funding shall
be vested in the Lessor.
(e) CERTAIN LIMITATIONS ON SCOPE OF AGENCY RELATIONSHIP. The
Construction Agent:
(i) may amend or revise the Approved Construction Budget to
reflect amendments or revisions to the Construction Contract or
Construction Schedule made in accordance with the terms hereof and thereof,
PROVIDED, HOWEVER, that the Construction Agent shall not, without the prior
written consent of the Lessor, amend or revise the Approved Construction
Budget to increase the total actual and projected amount of the Actual
Project Costs to an amount which exceeds the sum of the Maximum Requisition
Funding Amount plus ten percent (10%) of the Maximum Requisition Funding
Amount; and
(ii) shall not, without the prior written consent of the
Lessor, request or make any changes in the design, drawing, specifications,
or construction of any part of the Facility that would (i) reduce the
current or residual fair market value or useful life of the Facility;
(ii) materially change the use of the Facility; or (iii) result in the
failure to complete the construction the Facility (A) in a good and
workmanlike manner and in accordance with prudent industry practice and
free and clear of all Liens (other than Permitted Liens) arising out of the
same and (B) in compliance with all applicable Legal Requirements,
Applicable Permits and Insurance Requirements; and
(iii) shall not amend or revise the Construction Schedule to
extend the scheduled date for completion of the construction of the
Facility beyond September 30, 1998.
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SECTION 5. ACQUISITION OF COMPONENTS; FINANCING.
(a) ACQUISITION. In order to finance the acquisition by the Lessor
of the Components and to finance the cost of construction of the Facility, the
Lessor, as more fully described below, will advance to the Construction Agent on
behalf of the Lessor the Actual Project Costs.
(b) REQUISITIONS. No more than ten (10) and no less than five (5)
Business Days prior to each Requisition Funding Date, the Construction Agent
shall submit to the Lessor a Requisition requesting an advance on the
immediately succeeding Requisition Funding Date in an amount not to exceed the
amount of Actual Project Costs incurred since the immediately preceding
Requisition Funding Date (such amount, a "Requisition Funding"). Each
Requisition shall constitute a representation and warranty by the Construction
Agent and the Lessee that the conditions precedent to such Requisition Funding
have been satisfied.
(c) REQUISITION FUNDINGS. Subject to the satisfaction of the
conditions set forth in Section 6(a) hereof, with respect to the Closing Date,
and Sections 6(b) and, if applicable, 6(c) hereof with respect to each other
Requisition Funding Date, the Lessor shall make a Requisition Funding on the
applicable Requisition Funding Date; PROVIDED, HOWEVER, that the Lessor shall
(i) not be obligated to make a Requisition Funding on the Closing Date in an
amount in excess of $2,392,094.51 or a Requisition Funding on January 2, 1998 in
an amount in excess of $1,000,000, unless prior to such applicable date the
Lessor shall have received the Final Survey and the Updated Title Policy and
(ii) not be obligated to make a Requisition Funding if after making such
Requisition Funding the aggregate amount of the Total Fundings would exceed the
Maximum Requisition Funding Amount. All Requisition Fundings shall be made to
the Construction Agent in immediately available funds at the account or accounts
designated in the Requisition submitted with respect to such Requisition
Funding.
SECTION 6. CONDITIONS PRECEDENT.
(a) CONDITIONS PRECEDENT TO THE CLOSING DATE. The obligations set
forth in Sections 2, 4 and 5 hereof shall be subject to the fulfillment, to the
satisfaction of the Lessor, on or before the Closing Date, of the following
conditions precedent:
(i) DUE AUTHORIZATION, EXECUTION AND DELIVERY. The Operative
Documents shall have been duly authorized, executed and delivered by all
parties thereto and shall be in full force and effect. No condition or
event shall exist or have occurred which would constitute a Default or
Event of Default under any of
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the Operative Documents by any party thereto and the Lessee shall have
delivered an Officer's Certificate to such effect dated the Closing Date.
(ii) REPRESENTATIONS. The representations and warranties of
the Lessee set forth in the Operative Documents shall be true and correct
on and as of the Closing Date, and the Lessee shall have delivered an
Officer's Certificate dated the Closing Date to such effect.
(iii) OPINIONS. The following opinions, dated the Closing Date
and addressed to the Lessor, shall have been delivered to the Lessor:
(A) an opinion of Ball Janik, LLP, special counsel to
the Lessee, addressed to the Lessor in form and substance reasonably
satisfactory to the Lessor and its counsel; and
(B) an opinion of Davis Wright Tremaine LLP,
Washington counsel, addressed to the Lessor, as to Washington law and
in form and substance reasonably satisfactory to the Lessor and its
counsel.
(iv) PROCEEDINGS SATISFACTORY AND OTHER EVIDENCE. All
partnership, corporate and other proceedings taken or to be taken in
connection with the transactions contemplated by the Operative Documents
and all documents, papers and authorizations relating thereto shall be
reasonably satisfactory to the Lessor and its counsel. The Lessor and its
counsel shall receive copies of such documents and papers as they have
reasonably requested, in form and substance reasonably satisfactory to
them, including but not limited to the Operative Documents.
(v) SECRETARY'S CERTIFICATES; GOOD STANDING CERTIFICATES;
ETC. The Lessor shall have received on or before the Closing Date the
following, each dated the Closing Date (unless otherwise specified) in form
and substance satisfactory to the Lessor:
(A) copies of the resolutions of the board of
directors of each MGP General Partner, as general partners of the
General Partner, as general partner of the Lessee, and the executive
committee of the Board of Control of the General Partner, in each case
approving the execution, delivery and performance by the General
Partner on behalf of the Lessee of the Operative Documents and the
transactions contemplated thereby, certified as of the Closing Date by
the Secretary or an Assistant Secretary
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of such MGP General Partners and the General Partner, as the case
may be;
(B) a certificate of the Secretary or Assistant
Secretary of the General Partner certifying the names and true
signatures of the officers of the General Partner, as general partner
of the Lessee, authorized to execute, deliver and perform, as
applicable this Lease and the other Operative Documents on behalf of
the Lessee;
(C) the partnership certificate of the Lessee and the
General Partner as in effect on the Closing Date, certified by the
Secretary of State (or similar, applicable Governmental Authority) of
the state of formation of such entities as of a recent date and by the
Secretary or Assistant Secretary of the General Partner as of the
Closing Date, and each of the Lessee's Partnership Agreement and the
General Partner's Partnership Agreement as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the General
Partner as of the Closing Date;
(D) the articles or certificate of incorporation of
each MGP General Partner as in effect on the Closing Date, certified
by the Secretary of State (or similar, applicable Governmental
Authority) of the state of incorporation of such MGP General Partner
as of a recent date and by the Secretary or Assistant Secretary of
such MGP General Partner as of the Closing Date, and the bylaws of
each MGP General Partner as in effect on the Closing Date, certified
by the Secretary or Assistant Secretary of such MGP General Partner as
of the Closing Date; and
(E) a good standing certificate for the Lessee, the
General Partner and the MGP General Partners from the Secretary of
State (or similar, applicable Governmental Authority) of its state of
incorporation or formation, as applicable, and with respect to the
Lessee, the States of Idaho, Washington and Oregon, as of a recent
date, together with a bring-down certificate by facsimile, dated the
Closing Date;
(vi) CLOSING FEES. The Lessee shall have paid, or caused to
be paid, accrued fees and expenses of the Lessor (including the reasonable
fees and expenses of New York, Washington and Idaho counsels to the
Lessor).
(vii) TITLE AND SURVEY; FLOOD HAZARD.
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(A) The Ground Lessor shall have granted to the Ground
Lessee a good and marketable leasehold estate in the Parcel, free and
clear of all Liens, except Permitted Encumbrances. The Ground Lessee
shall have received from a title insurance company acceptable to the
Ground Lessee (the "Title Company") an ALTA prepaid title insurance
policy in a form acceptable to the Ground Lessee insuring the Ground
Lessee's leasehold estate in the Parcel together with any necessary
easements, rights-of-way or similar property rights in an amount not
less than $18,040,922.33; subject only to such exceptions as shall be
approved by the Ground Lessee, including a pending disbursements
clause and containing all endorsements required by the Ground Lessee,
including without limitation, a comprehensive endorsement, a
contiguity endorsement, an endorsement providing mechanics' lien
coverage and an endorsement insuring access to duly open public roads
(the "Title Insurance Policy").
(B) The Lessor shall have received a preliminary
survey of the Parcel.
(C) Evidence that the Parcel is not in a flood hazard
zone or evidence of flood hazard insurance.
(viii) PERMITS AND CERTAIN PROPERTY MATTERS. All Permits that
are or will become Applicable Permits (including, without limitation, those
identified on Schedule 6(a)(viii), shall have been obtained, except
Applicable Permits customarily obtained or which are permitted by Law to be
obtained after the Closing Date (and the Lessee, having completed all
appropriate due diligence in connection therewith, shall have no reason to
believe that such Permits will not be granted in the usual course of
business prior to the date that such Permits are required by Law). All
such obtained Permits shall be in proper form, shall be in full force and
effect and shall not be subject to any further appeal, consent or contest
or to any unsatisfied condition that may allow modification or revocation.
The Lessee shall have delivered an Officer's Certificate certifying
satisfaction of the foregoing condition, together with a copy of each
Permit required to be obtained as of the Closing Date pursuant to this
Section 6(a)(viii).
(ix) DOCUMENTS RELATING TO THE PARCEL. The Lessee shall
deliver, or cause to be delivered, to the Lessor documentation with respect
to the condition of the Parcel, the real estate Taxes applicable to the
Parcel and such other documents and agreements relating to the construction
and operation of the
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Facility or any part thereof as the Lessor may reasonably request, in form
and substance reasonably acceptable to the Lessor.
(x) INSURANCE. The Lessee shall be in compliance with all
Insurance Requirements and all insurance policies required by Section 14
hereof shall be in full force and effect. The Lessee shall deliver, or
cause to be delivered, to the Lessor (a) certificates of insurance,
applicable reinsurance cover notes or other satisfactory assurances,
evidencing the coverage of such policies in compliance with the Insurance
Requirements; and (b) copies of the exceptions to coverage of such
policies.
(xi) TAXES. Evidence of the Taxes payable for the Parcel
shall be provided to the Lessor. All Taxes, fees and other charges which
have become due and payable in connection with the execution and delivery
of the Operative Documents shall have been paid by the Lessee and evidence
shall be provided to the Lessor that the Parcel is a legally subdivided tax
lot.
(xii) ENVIRONMENTAL MATTERS. A Phase I and Phase II
environmental audit of the Parcel by the Environmental Consultant shall
have been conducted, at the sole cost and expense of the Lessee, and the
Lessor shall have received a copy of the Environmental Consultant's report
on its environmental audit, which (i) shall conclude that (A) no
environmental hazards exist on the Parcel that are unacceptable to the
Lessor and (B) neither the Parcel, the Components nor the Facility are
likely to create any environmental hazards based upon anticipated and
permitted practices and procedures and (ii) shall otherwise be in form and
substance satisfactory to the Lessor (in its sole discretion).
(xiii) NO EVENT OF DEFAULT. No event has occurred and no
condition exists which, assuming that all Operative Documents had been
signed prior to the Closing Date, would constitute a Default or an Event of
Default.
(xiv) APPRAISAL. The Lessee shall cause an appraisal of the
Leased Property (the "APPRAISAL") to be delivered to the Lessor, which
Appraisal shall be in form and substance satisfactory to the Lessor. The
Appraisal shall be prepared by the Appraiser at the expense of the Lessee.
(xv) NO MATERIAL ADVERSE CHANGE, ETC. No Applicable Law shall
prohibit, and no litigation, governmental investigation or other proceeding
shall be pending or threatened in which there is a reasonable possibility,
in the reasonable judgment of the Lessor, of an unfavorable judgment,
decree, order or
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other determination which could prevent or make unlawful, or impose any
material adverse condition upon, the Leased Property or any material part
thereof or the acquisition, use, ownership, maintenance, management,
operation or leasing thereof or the construction of the Facility or any
transaction contemplated hereby or by any other Operative Document or the
Lessee performance of its obligations hereunder or thereunder. Since
December 31, 1996, there shall not have occurred any material adverse
change in the Lessee's (i) business, financial position or results of
operations or (ii) ability to perform its respective obligations under any
Operative Document to which it is a party, and the Lessee shall have
delivered an Officer's Certificate to such effect.
(xvi) INITIAL REQUISITION. The Lessee shall have delivered a
Requisition to the Lessor at least five (5) Business Days prior to the
Closing Date.
(xvii) RECORDING AND FILING. The Memorandum of Ground Lease,
the Memorandum of Lease and a UCC precautionary financing statement shall
have been duly recorded, published, registered and filed by the Lessee, in
such manner and in such places as the Lessor and its counsel shall
determine to be necessary or appropriate to publish notice thereof and
protect the validity and effectiveness thereof and to establish, create,
perfect, preserve and protect the rights of the parties thereto and their
respective successors and assigns, and all Taxes, fees and other charges in
connection with such recording, publishing, registration and filing thereof
shall have been paid by the Lessee.
(xviii) CONSENTS AND APPROVALS. All Governmental Actions which
are required to have been taken, given, obtained, filed or recorded, as the
case may be, on or prior to the Closing Date by, from or with any
Governmental Authority, and all other consents, filings or approvals which
are required to have been taken, given, obtained, filed or recorded, as the
case may be, on or prior to the Closing Date by, from or with any other
Person, in each case, (a) in connection with the transactions contemplated
by the Operative Documents or to authorize the execution, delivery and
performance by the Lessee or the Lessor and each of the Operative Documents
to which it is a party, or the legality, validity, binding effect or
enforceability thereof as against the Lessee, (b) in order that the Leased
Property may be leased, used and operated for its intended purposes and the
Facility may be constructed thereon as contemplated hereby, or (c)
otherwise in connection with the transactions contemplated by the Operative
Documents, shall have been duly taken, given, obtained, filed or recorded,
as the case may be, and all such approvals shall have been duly taken,
given, obtained, filed or recorded, as the case may be, shall be in full
force and effect on the Closing Date,
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shall not be subject to any pending proceedings or appeals (administrative,
judicial or otherwise) and shall be adequate to authorize the consummation
of the transactions contemplated by the Operative Documents and the
performance by the Lessee of its obligations thereunder to which it is a
party, except such as may be required to be taken, obtained, given,
accomplished or renewed from time to time in connection with the
maintenance or operation of the Leased Property or which are otherwise
required in connection with the transactions contemplated by the Operative
Documents which have been applied for but which cannot be obtained, or
which are not normally applied for or taken, given or obtained, prior to
the Closing Date, and which in the normal course would be granted; PROVIDED
that the failure to obtain such Governmental Actions, consents or approvals
by the Closing Date would not materially adversely affect the ability of
the Lessee to perform its obligations under any Operative Document to which
it is a party.
(xix) SATISFACTION WITH CONTEMPLATED TRANSACTIONS. The Ground
Lessee shall be satisfied, in its sole discretion, with its review of the
Parcel and all material matters in connection with the leasing thereof by
the Ground Lessee.
(xx) ADDITIONAL DOCUMENTS. The Lessor shall have received
such other approvals, certificates or documents as the Lessor may
reasonably request to evidence satisfaction of the conditions set forth in
this Section 6(a).
(b) CONDITIONS PRECEDENT TO EACH REQUISITION FUNDING SUBSEQUENT TO
THE CLOSING DATE. The obligations of the Lessor to make Requisition Fundings
subsequent to the Closing Date as set forth in Section 5 hereof shall be subject
to the fulfillment, to the satisfaction of the Lessor, by, on or as of the date
of such requested Requisition Funding, of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Lessee set forth in the Operative Documents shall be true
and correct as if made on and as of the date of such Requisition Funding.
(ii) COMPLIANCE; NO DEFAULT, ETC. The Lessee shall be in
compliance with its obligations under the Operative Documents on such date
and there shall exist no Default or Event of Default under the Operative
Documents.
(iii) REQUISITION; USE OF PROCEEDS. The Lessor shall have
received a timely and complete Requisition pursuant to and in compliance
with Section 5(a). All proceeds of the Requisition Fundings shall have
been applied solely to Actual Project Costs, and the Lessee shall certify
the same in each
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Requisition and provide such other evidence with respect to the use of such
proceeds as may be reasonably requested by the Lessor.
(iv) COMPLIANCE WITH LAW. The Leased Property, the
construction, and operation of the Facility and the Lessee and the
Construction Agent shall be in material compliance with all Laws including,
without limitation, all building and construction Laws and Environmental
Laws applicable to the Leased Property.
(v) NO MATERIAL ADVERSE EVENT. No Applicable Law shall
prohibit, and no litigation, governmental investigation or other proceeding
shall be pending or threatened in which there is a reasonable possibility,
in the judgment of the Lessor, of an unfavorable judgment, decree, order or
other determination which could prevent or make unlawful, or impose any
material adverse condition upon, the Leased Property or the construction or
operation of the Facility or any transaction contemplated hereby or by any
other Operative Document or the ability of the Lessee to perform its
obligations hereunder or thereunder, and the Lessee shall certify the same
in each Requisition.
(vi) LEGALITY. The making of any Requisition Funding, and
maintenance thereof, by the Lessor shall not be prohibited by any
Applicable Law and shall not subject to any Tax, penalty, liability or
other onerous condition under or pursuant to any Applicable Law.
(vii) PERMITS. All Permits that are or will become Applicable
Permits shall have been obtained, except Applicable Permits customarily
obtained or which are permitted by Law to be obtained after the date of the
requested Requisition Funding (and the Lessee, having completed all
appropriate diligence in connection therewith, shall have no reason to
believe that such Permits will not be granted in the usual course of
business prior to the date that such Permits are required by Law). All
such obtained Permits shall be in proper form, in full force and effect and
not subject to any appeal, consent or further contest or to any unsatisfied
condition (other than conditions relating to completion in the future) that
may allow modification or revocation.
(viii) NO PROPERTY DAMAGE. None of the Leased Property shall
have suffered an Event of Loss, or any other damage or destruction which
renders the Leased Property unusable in whole or in material part and,
under Applicable Law, the Leased Property may be used for the purposes
contemplated by the
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Lessee in accordance with this Lease, and the Lessee shall certify the same
in each Requisition.
(ix) TITLE INSURANCE POLICY UPDATE. The Title Insurance
Policy shall have been endorsed and re-dated as required by the Lessor to
cover each Requisition Funding, including, without limitation, a mechanics
lien endorsement, with no title exceptions objectionable to the Lessor.
(x) ADDITIONAL DOCUMENTS. The Lessor shall have received
such other approvals, certificates or documents as the Lessor may
reasonably request to evidence satisfaction of the conditions set forth in
this Section 6(b).
(c) CONDITIONS PRECEDENT TO ANY REQUISITION FUNDING SUBSEQUENT TO
JANUARY 1, 1998. The obligations of the Lessor to make Requisition Fundings
subsequent to January 1, 1998 as set forth in Section 5 hereof shall be subject
to the fulfillment, to the satisfaction of the Lessor, by, on or as of the date
of such requested Requisition Funding, of the following conditions:
(i) OTHER CONDITIONS. The Lessee shall have satisfied the
conditions precedent set forth in Section 6(b) hereof.
(ii) DELIVERY OF FINAL SURVEY AND UPDATED TITLE POLICY. The
Lessor shall have received the Final Survey and the Updated Title Policy.
SECTION 7. NET LEASE; NON-TERMINABILITY.
(a) This Lease is a net lease and, except as otherwise expressly
provided in this Lease, any present or future Law to the contrary
notwithstanding, shall not terminate, nor shall the Lessee be entitled to any
abatement, reduction, set-off, counterclaim, defense or deduction with respect
to any Rent or other sum payable hereunder. Except as otherwise expressly
provided in this Lease, the obligations of the Lessee shall not be affected by
reason of: (i) any damage to or destruction of the Leased Property or any part
thereof by any cause whatsoever (including, without limitation, by fire, Event
of Loss or act of God or enemy or any other force majeure event); (ii) any
Requisition of Use, including, without limitation, a temporary Requisition of
Use of the Leased Property or any part thereof; (iii) any prohibition,
limitation, restriction or prevention of the Lessee's use, occupancy or
enjoyment of the Leased Property or any part thereof by any Person; (iv) any
matter affecting title to the Leased Property or any part thereof; (v) any
eviction of the Lessee from, or loss of possession by the Lessee of, the Leased
Property or any part thereof, by reason of title paramount or otherwise;
(vi) any default by the Lessor hereunder; (vii) the invalidity or
unenforceability of any
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provision hereof or in the other Operative Documents or the impossibility or
illegality of performance by the Lessor or the Lessee or both; (viii) any action
of any Governmental Authority; or (ix) any other cause or occurrence whatsoever,
whether similar or dissimilar to the foregoing. The parties intend that the
obligations of the Lessee hereunder shall continue unaffected unless such
obligations shall have been modified or terminated pursuant to an express
provision of this Lease.
(b) The Lessee shall remain obligated under this Lease in accordance
with its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting the Lessor or any action with respect
to this Lease which may be taken by any trustee, receiver or liquidator or by
any court. Except as expressly permitted in this Lease, the Lessee waives all
rights to terminate or surrender this Lease, or to any abatement or deferment of
Rent or other sums payable hereunder or under the other Operative Documents.
The Lessee shall remain obligated under this Lease in accordance with its terms,
and the Lessee hereby waives any and all rights now or hereafter conferred by
Law or otherwise to modify or to avoid strict compliance with its obligations
under this Lease. All payments made to or for the benefit of the Lessor
hereunder as required hereby shall be final, and the Lessee shall not seek to
recover any such payment or any part thereof for any reason whatsoever, absent
manifest error.
SECTION 8. RETURN OF THE LEASED PROPERTY.
(a) RETURN. If upon the expiration or termination of this Lease, the
Lessee or its designee has not purchased the Facility as provided in Section 19
hereof or the Lessee shall not have entered into new leasing arrangements
pursuant to Section 19 hereof, the Lessee shall surrender the Leased Property
and the Facility shall be surrendered in the operating condition, efficiency,
utility and with the useful life the Facility had upon the completion of its
construction, except as repaired, rebuilt, replaced, renovated, altered, added
to or built as permitted or required hereby and except for ordinary wear and
tear. To the extent that the Facility is not in compliance with the above, upon
such expiration or termination (except as a consequence of a Event of Loss, as
to which Section 13 hereof applies), the Lessee shall pay to Lessor (or on
behalf of the Lessor) such additional amounts as are required to place it in
compliance therewith.
(b) NO LIENS. The Lessee shall also surrender the Leased Property to
the Lessor free and clear of all Liens, easements, consents and restrictive
covenants and agreements affecting the Leased Property (other than Lessor's
Liens and Permitted Encumbrances).
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(c) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Lessee shall also
surrender the Leased Property in a condition such that they are in compliance
with all applicable Environmental Laws (irrespective of whether the deadline for
such compliance would otherwise expire after the Lease Termination Date).
Nothing contained in this Section 8 shall relieve or discharge or in any way
affect the obligation of the Lessee to cure promptly pursuant to this Lease any
violations of Legal Requirements referred to in this Lease, or to pay and
discharge any Liens against the Leased Property. The Lessee shall cooperate, to
the fullest extent, with the Lessor, its subsequent lessees, operators or
purchasers to effect the transfer of all of Lessee's Applicable Permits for the
Leased Property to such Persons.
(d) REMOVAL AND REPAIR. The Lessee, at its sole cost and expense,
shall remove from the Leased Property on or prior to such expiration or
termination, all property situated thereon which is not owned by the Lessor and
shall repair any damage caused by such removal and shall restore the Facility to
the condition and working order (or reasonable equivalent thereof) in which it
existed immediately prior to the installation of such property, except for
ordinary wear and tear. Lessee shall indemnify and hold harmless the Lessor,
its successors and assigns against any loss, liability, cost, expense, penalty
or claim arising out of the Lessee's removal of such property from the Leased
Property including, without limitation, any environmental liability arising
therefrom. Any such property of the Lessee not so removed shall become the
property of the Lessor, and the Lessor may cause such property to be removed
from the Leased Property and disposed of, and the cost of any such removal and
disposition of the Lessee's property and of repairing any damage caused by such
removal and of the restoration of the Leased Property to the condition and
working order (or reasonable equivalent thereof) in which the Leased Property
existed immediately prior to the installation of such property, ordinary wear
and tear excepted, shall be borne by the Lessee.
(e) SURVIVAL. The obligations of the Lessee under this Section 8
shall survive the expiration or any termination of this Lease (whether by
operation of Law or otherwise) for all matters described in this Section 8 which
occur or arise prior to such expiration or termination or arise out of or result
from facts, events, claims, liabilities, actions or conditions occurring,
arising or existing on or before such expiration or termination.
SECTION 9. WARRANTY OF THE LESSOR.
(a) QUIET ENJOYMENT. During the term of this Lease, the Lessor
covenants that, unless a Default or an Event of Default has occurred and is
continuing, it will not, and will not permit any party claiming by or under the
Lessor (subject to the
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terms, covenants and provisions of the Ground Lease) to, (i) grant, create or
suffer to exist any Lien upon the Leased Property (or any part thereof or
interest therein) other than the Permitted Encumbrances (excluding therefrom any
Lessor's Lien); or (ii) interfere with the peaceful and quiet possession and
enjoyment of the Leased Property by the Lessee.
(b) LIMITED LESSOR WARRANTY. The warranties set forth in paragraph
(a) of this Section are in lieu of all other warranties of the Lessor, other
than as specifically set forth in the other Operative Documents, whether
written, oral or implied, with respect to this Lease or any of the Leased
Property, and the Lessor shall not be deemed to have modified in any respect the
obligations of the Lessee pursuant to Section 7 hereof, which obligations are
absolute and unconditional.
(c) THE LESSEE REPRESENTS, WARRANTS, ACKNOWLEDGES AND AGREES THAT (I)
THE FACILITY IS OF THE SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY THE
LESSEE, (II) THE LESSEE IS SATISFIED THAT THE LEASED PROPERTY IS SUITABLE FOR
ITS PURPOSES, (III) THE LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF
SUCH KIND AND (IV) THE LEASED PROPERTY IS LEASED HEREUNDER SUBJECT TO ALL
APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED,
WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR, EXPRESS OR
IMPLIED, AS TO THE TITLE, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS,
CONDITION, DESIGN, OPERATION, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT,
ABSENCE OF LATENT DEFECTS OR FITNESS FOR USE OF THE LEASED PROPERTY (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO THE LEASED PROPERTY (OR ANY PART THEREOF), OTHER THAN
AS SPECIFICALLY SET FORTH IN THE OPERATIVE DOCUMENTS. It is agreed that except
as expressly provided herein all risks incident to the matters discussed in the
preceding sentence, as between the Lessor and Lessee, are to be borne by the
Lessee. Except to the extent otherwise expressly stated, the foregoing
provisions are intended to be a complete exclusion and negation of any
representations or warranties by the Lessor, express or implied, with respect to
the Leased Property, or any part thereof, whether arising pursuant to the
Uniform Commercial Code or any similar law now or hereafter in effect, or
otherwise. The Lessor authorizes the Lessee, at the Lessee's expense, to assert
for the Lessor's account, during the Lease Term, so long as no Event of Default
shall have occurred and be continuing, all of the Lessor's rights under any
applicable manufacturer's or contractor's warranty and the Lessor agrees to
cooperate with the Lessee in asserting such rights; PROVIDED, HOWEVER, that the
Lessee shall
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indemnify and hold the Lessor harmless from and against any and all claims, and
all costs, expenses, damages, losses and liabilities incurred or suffered by the
Lessor in connection with, as a result of, or incidental to, any action by the
Lessee pursuant to the above authorization. Any amount received by the Lessee
as payment under any such warranty shall be applied to restore the Facility to
the condition required by Section 11 hereof and any excess shall be paid to the
Lessee.
SECTION 10. LIENS.
The Lessee will not directly or indirectly create, incur, assume or
suffer to exist any Liens on or with respect to any of the Leased Property or
any part thereof, the Lessor's title thereto or any interest of the Lessor
therein (and the Lessee will promptly, at its own expense, take such action as
may be necessary duly to discharge any such Lien), except (a) the respective
rights of the Lessor and the Lessee as herein and in the other Operative
Documents provided, (b) Lessor's Liens, (c) Liens for taxes either not yet due
or being contested by the Lessee in good faith with due diligence and by
appropriate proceedings (and with respect to which the Lessee shall have secured
a stay of execution pending such contest and adequate reserves are maintained
with respect thereto, in accordance with GAAP), provided that counsel for the
Lessor shall have determined that the nonpayment of any such tax or the contest
of any such payment in such proceedings does not, in the opinion of such
counsel, adversely affect the title, property or rights of the Lessor in the
Leased Property, (d) inchoate materialmen's, mechanics', workmen's, repairmen's,
employees' or other like Liens arising in the ordinary course of business of the
Lessee for amounts either not yet due or being contested by the Lessee in good
faith with due diligence and by appropriate proceedings (and with respect to
which the Lessee shall have secured a stay of execution pending such contest and
adequate reserves are maintained with respect thereto, in accordance with GAAP),
if counsel for the Lessor shall have determined that the contest of any such
payment in such proceedings does not, in the opinion of such counsel, adversely
affect the title, property or rights of the Lessor in the Leased Property, (e)
easements, rights-of-way and other similar encumbrances arising in the ordinary
course of the Lessee's business and necessary for the operation or the
construction of the Facility which do not impose material financial obligations
on the Lessee and which do not diminish the current or residual value or
interfere with the ordinary intended use of the Leased Property, and (f)
Permitted Encumbrances.
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE AND USE;
REPLACEMENT PARTS; MODIFICATIONS.
(a) MAINTENANCE AND OPERATION. The Lessee shall operate, maintain,
inspect, service, repair and overhaul the Facility in accordance with prudent
industry
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practice and such operating standards as shall be applied by the Lessee or its
Affiliates with respect to similar property owned or leased by the Lessee or its
Affiliates and in any event shall keep the Facility in as good operating
condition as when delivered to the Lessee hereunder, ordinary wear and tear
excepted. Throughout the Lease Term, the possession, operation and maintenance
of the Facility shall be at the sole risk and expense of the Lessee.
(b) COMPLIANCE AND USE. The Lessee agrees that the maintenance, use
and operation, as applicable, of the Leased Property will, in all material
respects, be in compliance with all Applicable Laws. Subject to the provisions
of Section 15 hereof, the Leased Property will at all times (i) be used solely
in the conduct of the Lessee's business and (ii) be and remain in the possession
and control of the Lessee.
(c) REPLACEMENT PARTS. Except as otherwise provided in the
succeeding paragraph (d) of this Section, the Lessee, at its own cost and
expense, will promptly replace all Parts which may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use (such replacement parts hereinafter called
"Replacement Parts").
In addition, in the ordinary course of maintenance, service, repair,
overhaul or testing, the Lessee may, at its own cost and expense, remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, PROVIDED that the
Lessee shall, at its own cost and expense, replace such Parts as promptly as
practicable. All Replacement Parts shall be free and clear of all Liens and
shall be in as good operating condition as, and shall have a value and utility
at least equal to, the Parts replaced assuming such replaced Parts were in the
condition and repair required to be maintained by the terms hereof. All Parts
at any time removed from the Facility shall remain the property of the Lessor,
no matter where located, until such time as such Parts shall be replaced by
Replacement Parts which have been incorporated or installed in or attached to
and become a part of the Facility and which meet the requirements for
Replacement Parts specified above. Immediately upon any Replacement Part
becoming incorporated or installed in or attached to and becoming a part of any
of the Facility as above provided, without further act, (i) title to the removed
Part shall thereupon vest in the Lessee, free and clear of all rights of the
Lessor, and shall no longer be deemed a Part hereunder, (ii) title to such
Replacement Part shall thereupon vest in the Lessor, and (iii) such Replacement
Part shall become subject to this Lease and be deemed part of the Facility for
all purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Facility. The Lessee agrees to cooperate with
the Lessor in the preparation, execution
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and filing of such documents as may be reasonably required to create, perfect
and maintain the Lessor's ownership in any such Replacement Part.
The Lessee shall notify the Lessor of any Replacement Part or any
series of related Replacement Parts (whether related by type or function) for
any Leased Property installed and having a cost per Replacement Part or such
series of related Replacement Parts, as the case may be, of $250,000 or more.
(d) MODIFICATIONS. The Lessee may, without the prior written consent
of the Lessor, but solely at Lessee's expense, either (i) repair the Facility by
the installation of a Replacement Part, or (ii) affix, install or make any
Nonseverable Modification or Severable Modification as the Lessee may deem
desirable in the proper conduct of its business, PROVIDED, that no such
Modification diminishes the current or residual value, utility, useful life or
condition of the Facility below the current or residual value, utility, useful
life or condition thereof immediately prior to the making, affixing or
installing of such Modification, assuming the Facility was then of the value or
utility and in the condition required to be maintained by the terms of this
Lease.
The Lessee shall, at its expense, make such Modifications to any of
the Facility ("Mandatory Alteration") as may be required from time to time to
meet the requirements of any Applicable Law or of any Governmental Authority
having jurisdiction, or any applicable Permit, deed, conveyance, lease,
agreement, easement or instrument.
Title to each Nonseverable Modification and each Mandatory Alteration
shall, upon installation or affixation to the Facility, vest in the Lessor and
thereupon such Nonseverable Modification or Mandatory Alteration, as the case
may be, shall become a part of the Facility for all purposes hereof and become
subject to this Lease.
Title to any Severable Modification (other than a Mandatory
Alteration) shall remain in, and be acquired at the expense of, the Lessee. So
long as no Event of Default shall have occurred and be continuing, the Lessee
may remove any Severable Modification (other than a Mandatory Alteration) at any
time prior to the expiration or termination of this Lease so long as such
removal shall not materially reduce the current or residual value, utility,
useful life or condition of the Facility below the current or residual value,
utility, useful life or condition the Facility would have had at such time if
such Severable Modification had not been made. Notwithstanding anything in this
Lease to the contrary, upon the occurrence and during the continuance of an
Event of Default, if this Lease shall be declared to be in default pursuant to
Section 20 hereof, any interest of
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the Lessee in any Severable Modification at such time shall, without further
act, become the property of the Lessor.
The Lessee shall notify the Lessor of any Mandatory Alterations,
Nonseverable Modifications and Severable Modifications or any series of related
Modifications (whether related by type or function) for the Facility installed
and having an estimated cost per Modification or such series of related
Modifications, as the case may be, in excess of $500,000. In the event any
Nonseverable Modification or Mandatory Alteration or such series of related
Modifications (whether related by type or function) shall have a cost per
Modification or such series of related Modifications, as the case may be
(including installation), in excess of $500,000, the Lessee at its sole cost and
expense shall furnish the Lessor with a full warranty bill of sale, in form and
substance satisfactory to the Lessor, conveying title to such Nonseverable
Modification or Mandatory Alteration to the Lessor.
(e) PROTECTION OF INTERESTS. The Lessee agrees to take such action
as shall reasonably be required from time to time by the Lessor to protect the
respective interests of the Lessor in the Leased Property.
(f) ENCROACHMENTS. Except for Permitted Encumbrances, in the event
that all or any part of the Facility or any Modification shall encroach upon any
property or right-of-way adjoining or adjacent to the Leased Property or any
part thereof, or shall violate any agreements or conditions affecting the Leased
Property or any part thereof, or shall obstruct any easement or right-of-way to
which the Leased Property or any part thereof may be subject, then the Lessee
shall, at its sole cost and expense, either (i) contest such matter, (ii) obtain
valid and effective Permits for or consents to such encroachments and/or
violations (without any liability to the Lessor for which it is not indemnified
by the Lessee) or waivers or settlements of all claims, liabilities and damages
resulting therefrom, or (iii) make such changes, including alteration or
removal, to the Facility or the Modification (as the case may be) and take such
other action as shall be reasonably necessary to rectify such encroachments,
violations, hindrances, obstructions or impairments, subject to the Lessor's
consent if and to the extent required by paragraph (d) of this Section.
SECTION 12. INSPECTION REPORTS.
(a) INSPECTION. The Lessor shall have the right (which may be
delegated to its consultants, representatives and agents), but not the duty, to
inspect the Leased Property or any part thereof and records directly related to
the construction and operation of the Leased Property or any part thereof and to
discuss with the Construction
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Agent, the general contractor, subcontractors and officers of the Lessee such of
the affairs, finances, construction and accounts as are relevant to the
Operative Documents or as are necessary or advisable for the Lessor to evaluate
the progress, costs and quality of the construction of the Facility, in all
cases, at reasonable times and in compliance with and subject to Lessee's and
the Construction Agent's reasonable security and safety procedures, in effect
from time to time. Any such inspection shall be made after advance written
notice to the Lessee is given; PROVIDED, HOWEVER, that no advance written notice
need be given if the Lessor, in its sole discretion, has reason to believe that
a Default or Event of Default has occurred or other exigent or emergency
conditions exist; and PROVIDED FURTHER, that all such inspections upon the
occurrence and during the continuance of a Default or an Event of Default (i)
shall be at the expense of the Lessee (and shall otherwise be at the expense of
the Lessor) and (ii) shall be broad enough to provide the Lessor, its
consultants, representatives and agents with access to the Leased Property or
any part thereof and to the Lessor's books and records relating to the
management, operation, use, construction, renovation or occupancy of the Leased
Property or any part thereof as they may require for any purpose, including,
without limitation, for marketing, selling, operating or otherwise disposing of
the Leased Property or any part thereof.
(b) LIABILITY; DAMAGE. The Lessee shall give prompt written notice
to the Lessor of each accident likely to result in damages against the Lessee
or, as the case may be, in excess of $750,000 in any way relating to or arising
out of the alleged or apparent improper manufacture, financing, construction,
purchase, acceptance, rejection, ownership, acquisition, delivery, nondelivery,
lease, sublease, preparation, installation, storage, maintenance, repair,
transportation, transfer of title, abandonment, possession, rental, use,
operation, condition, sale, return, importation, exportation, or other
disposition of the Leased Property or any portion thereof; promptly upon the
Lessee becoming aware of same, and on request shall furnish to the Lessor
information as to the time, place and nature thereof, the names and addresses of
the parties involved, any Persons injured, witnesses and owners of any property
damaged, and such other information as may be known to it and shall promptly
upon request, if such request is deemed reasonable under the circumstances by
the Lessee, furnish the Lessor with copies of all material correspondence,
papers, notices and documents whatsoever received by the Lessee (not otherwise
subject to the attorney-client privilege) in connection therewith. In any case,
the Lessor, at its own expense, may inspect all correspondence, papers, notices
and documents whatsoever received by the Lessee (not otherwise subject to the
attorney-client privilege) in connection therewith. In addition, the Lessee
shall give prompt written notice to the Lessor of any damage, loss of use or
destruction of the Leased Property or any part thereof which, in the aggregate,
exceed $750,000 and which would not otherwise constitute an Event of Loss with
respect thereto.
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(c) LIENS. Upon the attachment of an aggregate amount of $250,000 or
more of Liens on all the Leased Property or any part thereof (in either case
excluding any Liens for taxes not yet due and payable), the Lessee shall
promptly (and in no event later than ten (10) Business Days after it shall have
obtained knowledge thereof) notify the Lessor of the attachment of all such
Liens and the full particulars thereof unless the same shall have been removed
or discharged by the Lessee.
(d) NOTICES OF NONCOMPLIANCE WITH APPLICABLE LAWS. The Lessee shall
furnish to the Lessor, within five (5) days after receipt thereof, a copy of any
notice or order of any Governmental Authority asserting that the Lessee is not
in compliance with, or may be liable for contamination originating from or on
the Parcel or the Facility under any Applicable Law, in any case in any respect
material to the value of the Leased Property or any part thereof or the
respective interests of the Lessor therein.
(e) PLANS AND SPECIFICATIONS; OPERATING MANUALS. The Lessee shall
maintain or cause its Affiliates to maintain throughout the Lease Term, and keep
on file at its office, a complete set of plans and specifications, including
"as-built" plans and specifications as and when available, with respect to the
Facility (which shall reflect all material Parts incorporated or installed in or
attached to the Facility and all material Modifications made pursuant to Section
11 hereof; PROVIDED, HOWEVER, that such plans and specifications shall as of any
date not be required to reflect any such Parts so incorporated, installed or
attached or any such Modification made within thirty (30) days prior to such
date). Other than any part of the Leased Property which shall have been
transferred to the Lessee pursuant to the terms hereof, upon the expiration of
the Lease Term, the Lessee shall deliver to the Lessor or to the Lessor's
designee a complete set, current as of the date of such return or retaking, of
such plans and specifications and all work drawings and similar documents with
respect to the Leased Property.
SECTION 13. LOSS OR DESTRUCTION; REQUISITION OF USE.
(a) EVENT OF LOSS. Upon the occurrence of an Event of Loss with
respect to Leased Property or any part thereof, the Lessee shall within five (5)
Business Days after the occurrence of such Event of Loss give the Lessor written
notice thereof. If the remaining portion of the Leased Property not suffering
such Event of Loss is not capable of functioning for its intended purpose, the
Lessee shall pay to the Lessor on the next Rent Payment Date occurring after the
occurrence of such Event of Loss as compensation for such Event of Loss an
amount equal to the Total Fundings made by the Lessor from the date hereof
through such Basic Rent Payment Date, together with (i) all Basic Rent due and
owing on or prior to such date and (ii) all Supplemental Rent due and owing
prior to such date and any other Supplemental Rent as to which there is no
dispute
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and which is agreed to become due and owing within 60 days of such date,
whereupon (1) this Lease and the obligations of the Lessee hereunder shall
terminate and (2) the Lessor shall transfer all right and interest of the Lessor
in and to the Leased Property, as is and where is, to the Lessee, free and clear
of Lessor's Liens but otherwise without representation or warranty, and the
Lessor shall, at the Lessee's expense, execute and deliver to the Lessee a bill
of sale or such other documents as the Lessee may reasonably request to evidence
the valid consummation of such transfer.
If, however, an Event of Loss has occurred with respect to the Leased
Property or any part thereof and the portions thereof not suffering such Event
of Loss are capable of functioning for their intended purpose, then the Lessee
shall as promptly as possible rebuild or cause to be rebuilt (or replace or
cause to be replaced) the portions of the Leased Property suffering such Event
of Loss which such rebuilt Leased Property (or replacement) shall have at least
the same current and residual value, utility and remaining useful life as it had
prior to the Event of Loss (assuming such Leased Property has been maintained in
accordance with the terms of this Lease). Any replacement portions of Leased
Property shall be subject to this Lease and the Lessor shall have title thereto.
In the case of a Requisition of Use with respect to any portion of the
Leased Property which does not constitute an Event of Loss, such Requisition of
Use shall not terminate this Lease with respect to such portion of the Leased
Property and each and every obligation of the Lessee with respect thereto shall
remain in full force and effect. So long as no Event of Default shall have
occurred and be continuing under this Lease, the Lessee shall be entitled to all
sums attributable to the period the Leased Property or any portion thereof is
subject to this Lease, received by reason of any such Requisition of Use;
PROVIDED that if the Lessor determines that as a result of such partial taking
there is a reduction in the residual value of such Leased Property, the Lessee
will pay to the Lessor that portion of such sums as shall compensate the Lessor
for such reduction.
All condemnation awards and other moneys received by the Lessee or the
Lessor on account of an Event of Loss, other than insurance proceeds, shall be
applied as follows: FIRST, to purchase any Components from the Lessor or rebuild
or replace any Components contemplated by this Section 13(a) if not theretofore
paid by the Lessee, or to reimburse the Lessee for the payment therefor; SECOND,
to the Lessee to compensate it for the loss of the fair value of its leasehold
interest under this Lease, if any; and THIRD, any balance remaining shall be
remitted to the Lessor.
The Lessor authorizes the Lessee, at the Lessee's expense, to assert
for the Lessor's account, during the Lease Term, so long as no Event of Default
shall have
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occurred hereunder, all of the Lessor's rights and interests in the course of
any condemnation or requisition proceedings and the Lessor agrees to cooperate
with the Lessee in asserting such rights; PROVIDED, HOWEVER, that the Lessee
shall indemnify and hold the Lessor harmless from and against any and all
claims, and all costs, expenses, damages, losses and liabilities incurred or
suffered by the Lessor in connection with, as a result of, or incidental to, any
action by the Lessee pursuant to the above authorization.
(b) RISK OF LOSS; NO RELEASE OF OBLIGATIONS. Except as provided in
this Section, the Lessee shall bear the risk of loss and shall not be released
from its obligations hereunder in the event of any damage to the Leased Property
or any part thereof or any Event of Loss relating thereto.
SECTION 14. INSURANCE.
(a) The Lessee will purchase and maintain, or cause to be purchased
and maintained, insurance with respect to the Leased Property of the following
types and in the following amounts (or in such greater amounts as may become
necessary from time to time to prevent the Lessor and the Lessee from becoming
co-insurers of any loss), and in no event in amounts less than those maintained
by the Lessee or its Affiliates for other similar facilities owned and/or
operated by them:
(i) PROPERTY INSURANCE: Property damage insurance on an "all
risk" basis, boiler and machinery insurance, including coverage against
damage or loss caused by fire, earthquake, earth movement, flood,
subsidence and collapse and providing (1) coverage equal to one hundred
percent (100%) of the full replacement cost value of the Leased Property
and the Lessee's leasehold interest (with only those deductibles approved
by the Lessor, and, if required by the Lessor, an agreed amount
endorsement), (2) transit coverage during the construction of the Facility
and (3) coverage for foundations and other property below the surface of
the ground;
(ii) GENERAL LIABILITY INSURANCE: Comprehensive general
liability (including contractual, completed operations and product
liability) insurance against claims for bodily injury (including death),
personal injury and property damage occurring on, in or in respect of the
Leased Property or resulting from activities on or related to the Leased
Property, in the minimum combined single limit amount of $15,000,000, for
each occurrence for bodily injury (or death) and/or property damage;
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(iii) WORKERS' COMPENSATION INSURANCE: Workers' compensation
insurance at statutory levels and employers' liability insurance or
self-insurance as permitted by Law;
(iv) BUILDER'S RISK INSURANCE: During the construction of the
Facility, builder's "all risks" and "general risks" insurance or equivalent
coverage (with sublimits and deductibles as are acceptable to Lessor),
including fire, earth movement, earthquake, flood, subsidence and collapse,
business interruption/extra expense and testing and commissioning coverage
with respect to the Leased Property and any on-site and off-site work and
materials related thereto protecting the Lessee, the Lessor and all
contractors and subcontractors in an amount not less than the full
replacement cost of such on-site and off-site work;
(v) FLOOD INSURANCE: To the extent that any portion of the
Parcel may lie in a flood zone, flood insurance in the maximum available
amount;
(vi) BUSINESS INTERRUPTION INSURANCE: Business interruption
insurance to cover loss resulting from delay of the completion of the
Facility and, after completion, loss of use, total or partial, of the
Leased Property or any part thereof in an amount sufficient at all times to
pay Basic Rent with respect to the Leased Property for a period adequate to
cover the period of loss of use of the Leased Property or any part thereof
plus any other amounts payable by the Lessee to the Lessor during such
period in connection with the transactions contemplated by the Operative
Documents. Such policy shall provide that the amount payable thereunder
shall not be less than the Base Rent and such other amounts during the
entire Lease Term.
(vii) OTHER INSURANCE: Such other insurance, including
automobile liability, in such amounts and against such risks, as is either
(x) customarily carried by companies owning, operating or leasing property
or conducting businesses similar and/or similarly situated to the Leased
Property and/or the Lessee, or (y) reasonably requested from time to time
by Lessor to the extent available on commercially reasonable terms.
Such insurance shall be written by companies which have a Best
Insurance Guide rating of "A-XI" or better (or an equivalent rating from another
publication of a similar nature as shall be in current use by the Lessor and the
Lessee) or as otherwise agreed to by the Lessor, selected by the Lessee, and all
policies of property insurance shall name the Lessor as loss payee and all
liability policies (other than the policies referred to in clause (vii) above)
shall name the Lessor as additional insured and shall
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identify the Lessor as the owner of the Facility. In addition, all insurance
required hereunder shall be in form and with coverage and deductibles
satisfactory to the Lessor. Notwithstanding the foregoing, in no event will the
Lessee be required to maintain coverage in amounts in excess of those maintained
for businesses similar in size and nature to the Lessee.
(b) The insurance referred to in Sections 14(a)(i) and (iv) for the
Leased Property (as appropriate) may be a blanket policy and shall (i) at all
times be in an amount at least equal to one hundred percent (100%) of the full
replacement cost value of the Leased Property (as appropriate) and the Lessee's
leasehold interest; (ii) provide that the interests of the Lessor shall be
insured regardless of any intentional or willful breach or violation by the
Lessee of any warranties, declarations or conditions contained in such
insurance; (iii) provide that such insurance shall not be invalidated by any
act, omission or negligence of the Lessee or the Lessor, nor by any foreclosure
or other proceedings or notices thereof relating to the Leased Property (as
appropriate) or any part thereof, nor by legal title to, or ownership of the
Leased Property or any part thereof being or becoming vested in or by Lessor or
its agents, nor by occupancy or use of the Leased Property or any part thereof
for purposes more hazardous than permitted by such policy; and (iv) provide that
all partial loss insurance claims in excess of $10,000,000 pertaining to the
Leased Property (as appropriate) or any part thereof shall be adjusted by the
insurers thereunder with the Lessor.
All policies of insurance required to be maintained pursuant to
Section 14(a)(ii) which cover liability for bodily injury or property damage
shall provide that all provisions of such insurance, except the limits of
liability (which shall be applicable to all insureds as a group) and liability
premiums (which shall be solely a liability of the Lessee), shall operate in the
same manner as if there were a separate policy covering each such insured and/or
additional insured, without right of contribution from any other insurance which
may be carried by an insured and/or additional insured.
Every policy required under Section 14(a) shall (i) expressly provide
that it will not be canceled or terminated except upon thirty (30) days' written
notice to the Lessor and the Lessee; (ii) include a waiver of all rights of
subrogation against the Lessor and any recourse against the Lessor for payment
of any premiums or assessments under any policy; (iii) not contain a provision
relieving the insurer thereunder of liability for any loss by reason of the
existence of other policies of insurance covering the Leased Property or any
part thereof against the peril involved, whether collectible or not; and (iv)
provide that no claims shall be paid thereunder without ten (10) days' advance
written notice to the Lessor. The Lessee shall advise the Lessor promptly of
any policy cancellation or any change adversely affecting the coverage provided
thereby.
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(c) The Lessee shall deliver to the Lessor the certificates of
insurance and any other documentation required by the Lessor evidencing the
existence of all insurance which is required to be maintained by the Lessee
hereunder including descriptions of the previously mentioned Insurance
Requirements, such delivery to be made (i) within thirty (30) days after the
issuance of any additional policies or amendments or supplements to any of such
insurance, and (ii) at least thirty (30) days prior to the expiration date of
any such insurance. The Lessee shall notify the Lessor of any nonrenewal of any
policy required hereunder and shall cause each insurer under each policy
required hereunder to give the Lessor notice of any lapse under any such policy.
The Lessee shall not obtain or carry separate insurance concurrent in form, or
contributing in the event of loss, with that required by this Section 14 unless
the Lessor is named as loss payee therein. The Lessee shall immediately notify
the Lessor whenever any such separate insurance is obtained and shall deliver to
the Lessor the certificates of insurance and any other documentation (other than
blanket policies) required by Lessor evidencing the same as is required
hereunder. All insurance policies and endorsements shall be fully prepaid and
nonassessable.
(d) The requirements of this Section 14 shall not be construed to
negate or modify the Lessee's obligations under Section 23 hereof.
SECTION 15. SUBLETTING; ASSIGNABILITY; AMENDMENT
OF CONTRACTS.
(a) The Lessee shall not sublet the Leased Property, or any part
thereof, unless (i) at the time of any such sublease, no Default or Event of
Default or shall have occurred and be continuing; (ii) any such sublease shall
by its terms be expressly made subject and subordinate to the terms of this
Lease (and the Ground Lease) and shall expire on or before the Lease Termination
Date; (iii) the Lessee shall provide the Lessor with notice of such sublease
sixty (60) days prior to the effective date of such sublease; (iv) the Lessee
shall provide the Lessor ten (10) Business Days prior to the effective date of
such sublease with a conformed copy of the instrument creating such sublease;
(v) the Lessor has consented to such sublease, which consent shall not be
unreasonably withheld; and (vi) such sublease shall be made on commercially
reasonable terms.
(b) No sublease pursuant to this Section 15 shall modify or limit any
right or power of the Lessor hereunder or affect or reduce any obligation of the
Lessee hereunder, and all such obligations of the Lessee shall continue in full
force and effect as obligations of a principal and not of a guarantor or surety,
as though no subletting had been made or occupancy permitted.
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(c) If the Lessee shall request, in connection with any sublease,
that the Lessor execute an attornment and non-disturbance agreement with respect
to such sublease, the Lessor shall consider each such sublease on a case-by-case
basis and may in its sole discretion consent to its execution and delivery of an
attornment and non-disturbance agreement.
(d) Except as permitted in Section 15(a), the Lessee shall not
mortgage, pledge, assign or otherwise encumber its interest in and to this Lease
or in and to any sublease or the rentals payable thereunder without the prior
written consent of the Lessor, except that the Lessee may assign its right to
purchase the Facility pursuant to Section 19 without the consent of the Lessor
so long as the Lessee remains liable for the performance and payment of the
purchase obligation.
(e) Any sublease made, and any mortgage, pledge or assignment of the
Lessee's interest hereunder or under any such sublease granted, otherwise than
as expressly permitted by this Section 15, shall be null and void and of no
force or effect.
SECTION 16. REPRESENTATIONS AND WARRANTIES OF LESSOR.
The Lessor represents and warrants to the Lessee that on the Closing
Date:
(a) DUE ORGANIZATION. The Lessor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and
has the corporate power and authority to enter into and perform its obligations
under this Lease and each other Operative Document to which it is a party.
(b) AUTHORIZATION; EXECUTION; ENFORCEABILITY. The execution,
delivery and performance by the Lessor of this Lease and each other Operative
Document to which it is a party and of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Lessor and do not and will not require the consent or approval of any
shareholder of the Lessor. This Lease and each other Operative Document to
which the Lessor is a party have been duly authorized, executed and delivered by
the Lessor and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are legal, valid and
binding obligations of the Lessor, enforceable against the Lessor in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, liquidation, moratorium or
similar laws affecting creditors' rights generally and by the application of
general equitable principles which may limit the availability of certain
remedies.
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(c) NO VIOLATION. The execution and delivery by the Lessor of this
Lease and each other Operative Document to which it is a party do not and will
not, and the performance by the Lessor of its obligations hereunder and
thereunder do not and will not, (i) violate or be inconsistent with or in
violation of its charter documents or by-laws, (ii) contravene any provision of
any Applicable Law or Governmental Action applicable to it or require any
Governmental Action or (iii) contravene any provision of, or constitute any
default or require any consent under, any provision of any material indenture,
mortgage, contract or other instrument to which the Lessor is a party or by
which it or any of its property is bound.
SECTION 17. REPRESENTATIONS AND WARRANTIES OF LESSEE.
The Lessee represents and warrants to the Lessor that on the Closing
Date:
(a) DUE ORGANIZATION. The Lessee is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the power and authority to carry on its business as presently
conducted and as it is contemplated to be conducted in connection with the
Leased Property, to own or hold under lease its property, and to enter into and
perform its obligations under this Lease and each other Operative Document to
which it is a party. The Lessee is qualified to do business in and is in good
standing under the laws of the States of Washington, Idaho and Oregon and has
not failed to qualify to do business in any jurisdiction where failure so to
qualify could reasonably be expected to materially adversely affect its ability
to conduct its business as it is presently conducted and as it is contemplated
to be conducted in connection with the Leased Property, to own or hold under
lease its property or to perform any of its obligations under this Lease or any
other Operative Document to which it is a party.
(b) AUTHORIZATION. The execution, delivery and performance by the
Lessee of this Lease and each other Operative Document to which it is a party
and of the transactions contemplated hereby and thereby have been duly
authorized by all necessary partnership action on the part of the Lessee and do
not and will not require the consent or approval of any trustee or holder of any
indebtedness or other obligation of the Lessee.
(c) EXECUTION; ENFORCEABILITY. This Lease and each other Operative
Document to which the Lessee is a party have been duly executed and delivered by
the Lessee and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are legal, valid and
binding obligations of the Lessee, enforceable against the Lessee in accordance
with their respective terms, except as such
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enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, liquidation, moratorium or similar laws affecting creditors' or
lessors' rights generally and by the application of general equitable principles
which may limit the availability of certain remedies.
(d) NO VIOLATION. The execution and delivery by the Lessee of this
Lease and each other Operative Document to which it is a party do not and will
not, and the performance by the Lessee of its obligations hereunder and
thereunder do not and will not, (i) violate or be inconsistent with its
partnership agreement or any other organizational documents, (ii) contravene any
Applicable Law or Governmental Action applicable to it; (iii) contravene any
provision of, or constitute a default under, any material indenture, mortgage,
contract or other agreement or instrument to which the Lessee is a party or by
which it or any of its property are bound, and (iv) result in or, require the
creation or imposition of any Lien (other than Permitted Liens) upon any of its
property or assets.
(e) CONSENTS AND APPROVALS. All Governmental Actions which are
required to have been taken, given, obtained, filed or recorded, as the case may
be, on or prior to the Closing Date by, from or with any Governmental Authority
and all other consents, filings or approvals which are required to have been
taken, given, obtained, filed or recorded, as the case may be, on or prior to
the Closing Date by, from or with any other Person, in each case, (i) in
connection with the transactions contemplated by the Operative Documents, or to
authorize the execution, delivery and performance by the Lessee of the Operative
Documents to which it is a party, or the legality, validity, binding effect or
enforceability thereof as against the Lessee, or (ii) in order that the Leased
Property may be leased, used and operated for its intended purpose and the
Facility may be construed thereon as contemplated hereby (including, without
limitation, all Environmental Permits and all approvals, certificates, permits,
authorizations, licenses or other actions relating to the construction of the
Facility), shall have been duly taken, given, obtained, filed or recorded, as
the case may be, and are in full force and effect, are not subject to any
pending proceedings or appeals (administrative, judicial or otherwise) and are
adequate to authorize the consummation by the Lessee of the transactions
contemplated by the Operative Documents and the performance by the Lessee of its
obligations thereunder to which it is a party, except (A) such as may be
required to be taken, obtained, given, accomplished or renewed from time to time
after the Closing Date in connection with the maintenance or operation of the
Leased Property or (B) which are otherwise required in connection with the
transactions contemplated by the Operative Documents which have been applied for
but which cannot be obtained, or which are not normally applied for or taken,
given or obtained, prior to the Closing Date, and which in the normal course
would be granted, PROVIDED that the failure to obtain such
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Governmental Actions, consents, filings and approvals by the Closing Date could
not materially adversely affect the ability of the Lessee to perform its
obligations under this Lease or any other Operative Document to which it is a
party.
(f) LITIGATION. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Lessee, threatened against the
Lessee or affecting Lessee or its property or rights before any Governmental
Authority that questions the validity of any Operative Document or which,
individually or in the aggregate, is reasonably likely (i) materially and
adversely to affect the consummation of the transactions under this Lease or any
other Operative Document to which it is a party or (ii) to have a Material
Adverse Effect. The Lessee is not in default with respect to any order of any
Governmental Authority, where such default could reasonably be expected to have
a Material Adverse Effect or could result in the creation or imposition of any
Lien (other than a Permitted Lien) upon the Leased Property.
(g) NO DEFAULT. No Default or Event of Default has occurred and is
continuing. As of the Closing Date, neither the Lessee nor any of its
Subsidiaries is in default under with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect or could result in the
creation or imposition of a Lien (other than a Permitted Lien) upon the Leased
Property.
(h) EVENT OF LOSS. No Event of Loss has occurred, and the Leased
Property may be used for the purposes contemplated by the Lessee in accordance
with this Lease and the other Operative Documents.
(i) ENVIRONMENTAL COMPLIANCE. (i) The Leased Property complies in
all material respects with all Environmental Laws; all necessary Environmental
Permits have been obtained and are in effect for the Leased Property and to the
best of the Lessee's knowledge, no circumstances exist that could be reasonably
expected to (A) form the basis of an Environmental Action against the Leased
Property that could reasonably be expected to have a Material Adverse Effect or
(B) cause the Leased Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(ii) Neither the Leased Property nor any part thereof is
listed or, to the knowledge of the Lessee, proposed for listing on the NPL
or on CERCLIS or any analogous state list of sites requiring investigation
or cleanup.
(iii) No Hazardous Materials that have been generated at or
transported from the Leased Property or any part thereof have been disposed
at
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any location that is listed or, to the best of the Lessee's knowledge,
proposed for listing on the NPL or on the CERCLIS or any analogous state
list, and all Hazardous Materials generated, used, treated, handled or
stored at or transported to or from the Leased Property or any part thereof
and any property currently or formerly owned or operated by the Lessee have
been disposed of in compliance in all material respects with all
Environmental Laws and applicable Environmental Permits.
(iv) The Lessee has not received any written or other notice,
mandate, order, Lien or request which remains pending under an
Environmental Law concerning any of the Leased Property or any part thereof
or relating to an alleged violation of an Environmental Law concerning the
Leased Property or any part thereof or relating to any potential adverse
action in any way involving environmental, health or safety matters
affecting the Leased Property or any part thereof.
(v) There is no proceeding pending or, to the knowledge of
the Lessee, threatened against the Lessee by any Federal, state, or local
court, tribunal, administrative agency, department, commission, board or
other authority or instrumentality with respect to the presence or release
of any Hazardous Material from the Leased Property or any part thereof.
(vi) To the knowledge of the Lessee, no Hazardous Materials
have been Released from or on the Leased Property or any part thereof for
which remedial action could be required under any Environmental Law or may
be necessary to prevent or eliminate a significant risk to human health or
the environment.
(j) ERISA COMPLIANCE.
(i) Each Plan is in compliance with the applicable provisions
of ERISA, the Code and other federal or state law, except for such
non-compliance which would not reasonably be expected to have a Material
Adverse Effect. Each Plan is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or an
application for such a determination letter will be submitted no later than
the expiration of the remedial amendment period for effecting amendments
required by reason of Section 1140 of the Tax Reform Act of 1986, as
amended, and to the Lessee's knowledge, nothing has occurred which would
cause the loss of such qualification.
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(ii) There are no pending, or to the Lessee's knowledge,
threatened Claims by any Governmental Authority, with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or other
violation of the fiduciary responsibility rule with respect to any Plan
which could reasonably result in a Material Adverse Effect.
(iii) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Pension Plan.
(iv) No Pension Plan (other than the multiemployer plans
within the meaning of Section 3(38) of ERISA) has any Unfunded Pension
Liability.
(v) Neither the Lessee nor any ERISA Affiliate has incurred,
nor does it reasonably except to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and no
delinquent under Section 4007 of ERISA).
(vi) Neither the Lessee nor any ERISA Affiliate has
transferred any Unfunded Pension Liability to any Person or otherwise
engaged in a transaction that could be subject to Section 4069 of ERISA.
(k) DESCRIPTION OF COMPONENTS. The descriptions set forth in
Schedule 1 to each of the Lease Supplements are true and accurate descriptions
in all material respects of each Component described therein.
(l) CERTAIN DOCUMENTS. True, correct and complete copies of the
Operative Documents have been delivered to the Lessor. Each of the Operative
Documents is in full force and effect, and no material breach thereof by the
Lessee or, to the Lessee's knowledge, by any other party thereto, has occurred
and is continuing.
(m) PAYMENT OF TAXES, ETC. All Taxes, fees and other charges due and
payable in connection with the execution, delivery and filing of all documents
and instruments, including the Operative Documents, and the performance of the
transactions contemplated by the Operative Documents, have been paid in full.
(n) INVESTMENT COMPANY ACT. The Lessee is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
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(o) HOLDING COMPANY. The Lessee is not subject to regulation as a
"holding company," an "affiliate" of a "holding company," or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(p) NO MATERIAL ADVERSE CHANGE; ADVERSE CONDITIONS. There has not
occurred a material adverse change in the business, operations or financial
condition of the Lessee since December 31, 1996. No Applicable Law prohibits,
and no litigation, governmental investigation or other proceeding is pending or
overtly threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon, the acquisition,
construction, installation, use, ownership, operation or leasing of, or the
Lessor's ownership of, the Leased Property or any part thereof.
(q) INSURANCE. The Lessee is in compliance with all Insurance
Requirements, and all insurance policies required by Section 14 hereof are in
full force and effect.
(r) COMPLIANCE. The Leased Property and each part thereof is in
material compliance with all Applicable Laws.
(s) NO MATERIAL MISSTATEMENTS. No information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Lessee to the
Lessor in connection with the negotiation of this Lease or any other Operative
Document or any transaction contemplated hereby or thereby, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, taken as a
whole and taken in the light of the circumstances under which they were, are or
will be made, not misleading.
(t) TITLE AND INTEREST. The Lessor has a good and indefeasible
leasehold interest in the Parcel and good and marketable title to the Facility
(together with any necessary easements or rights-of-way or similar property
rights), free and clear of all Liens and deed restrictions except Permitted
Encumbrances, in the case of the Parcel, and Permitted Liens, in the case of the
Facility.
(u) COMPLIANCE WITH LAW. The Lessee is not in violation of any Law
(including any Environmental Law) with respect to the Leased Property or any
part thereof, with respect to the construction of the Facility or installation
of any of the Components, or with respect to its leasing, ownership or operation
of the Leased Property or any part thereof, or with respect to the conduct of
its business relating to the Leased Property or any part thereof or with respect
to its assets which, individually or in the
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aggregate, would be reasonably likely to result in a Material Adverse Effect.
The Lessee has not received any notice of, or citation for, any violation of any
Law which has not been resolved, which notice or citation relates to the
ownership, leasing or operation of the Leased Property or any part thereof or
the construction of the Facility.
(v) RECORDATION AND FILING. The Memorandum of Ground Lease and the
Memorandum of Lease have been duly recorded, published, registered and filed and
are in a form sufficient to publish notice of the interests purported to be
created by the Ground Lease and this Lease, respectively. Upon the recordation
of the Memorandum of Ground Lease in Clallam County, Washington, the Memorandum
of Ground Lease will have been recorded or filed in such place in which
recording or filing is required to publish notice, under Applicable Law, of the
interests created by the Ground Lease and to protect the validity and
effectiveness thereof, and all Taxes, fees and other public charges payable in
connection with the filing and recordation of the Ground Lease have been paid.
Upon the recordation of the Memorandum of Lease in Clallam County, Washington,
the Memorandum of Lease will have been recorded or filed in such place in which
recording or filing is required to publish notice, under Applicable Law, of the
interests created by this Lease and to protect the validity and effectiveness
thereof, and all Taxes, fees and other public charges payable in connection with
the filing and recordation of the Memorandum of Lease have been paid.
(w) RIGHTS TO PROPERTY, ETC. (i) The Ground Lease grants to the
Ground Lessee all rights-of-way, easements and real property licenses,
environmental allowances, rights in real property (including, without
limitation, fixtures and appurtenances), utilities and other services necessary
for the day-to-day operation of the Facility when constructed or installed on
the Parcel and (A) such rights-of-way, easements, licenses, environmental
allowances, utilities and other services are valid and in full force and effect
and all consents from third parties necessary to enter into the Ground Lease and
the Lease Agreement have been obtained, (B) there is presently no default by the
Ground Lessor or, to the Ground Lessor's knowledge, by any other party thereto
with respect to any such rights-of-way, easements, licenses, utilities and other
services, which would materially and adversely affect such services and (C) all
utility services necessary for the construction of each of the applicable
Components and for the operation of the Facility for its intended purposes are
installed and operational.
(ii) None of the Permitted Encumbrances will interfere in any
material respect with the use or possession of the Leased Property or any
part thereof or any other asset used in connection therewith or the use of
or the exercise by the Lessor of its rights either under any Operative
Document or to the Leased Property.
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(iii) The Lessee has given any and all notices required to be
given in connection with the construction of the Facility pursuant to any
easements, right-of-way, licenses or other agreements affecting the Parcel.
(iv) Each of the Components, when constructed or installed,
will be situated wholly within the boundary lines of the Parcel and do not
and will not encroach upon any contiguous or adjoining property; except as
disclosed in writing, neither the Parcel nor any part thereof is considered
part of a larger tax lot; none of the Components when constructed or
installed will violate any rights granted under any easements or rights of
way or any covenants or restrictions affecting the Parcel or any part
thereof, and any future violation will not result in a reversion or
forfeiture of title, right of re-entry or power of termination; and the
easements, rights-of-way, covenants and restrictions affecting the Parcel
or any part thereof do not and will not interfere in any material respect
with the use or occupancy of the Leased Property or any part thereof, or
any asset owned or used in connection therewith, nor will the exercise of
rights or remedies thereunder result in any damage to the Leased Property
or any part thereof or diminution of value of the Leased Property or any
part thereof.
(x) CONSTRUCTION BUDGET AND RELATED MATTERS. The Construction Budget
has been prepared in good faith on the basis of reasonable assumptions and
accurately includes all Actual Project Costs currently anticipated to be
incurred in connection with achieving completion of the Facility by the Final
Completion Date. The Construction Schedule accurately describes estimated dates
of completion of the stages of construction of the Facility.
(y) TRADE SECRETS AND PATENTS. (i) The leasing of the Parcel by
Lessor, the ownership of the Facility by the Lessor and the leasing and
operation of the Facility by the Lessee, including the construction or
installation and the proposed operation of the Facility, do not and will not
conflict with, infringe on, or otherwise violate any copyright, trademark, trade
name, trade secret or patent rights of any other Person.
(ii) The Lessee has all rights to all patents, patent
applications, trademarks (whether registered or not), trademark
applications, trade names, proprietary computer software, "know-how" and
copyrights used or to be used in the ordinary course of the operation of
the Facility (the "INTELLECTUAL PROPERTY RIGHTS") that are necessary for
the operation thereof, including the right to assign the Intellectual
Property Rights. There is no judicial proceeding pending or, to the
knowledge of the Lessee, threatened, involving any claim of any
infringement, misuse or misappropriation by the Lessee or any Affiliate
thereof of any patent,
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trademark, trade name, copyright, license or similar intellectual property
right owned by any third party related to the Intellectual Property Rights.
(z) CREDIT AGREEMENT. Attached hereto as EXHIBIT F is a true,
correct and complete copy of the Credit Agreement as in effect on the Closing
Date.
(aa) FLOOD ZONE. The Parcel is not in a flood hazard zone.
(bb) NO FARMING OR AGRICULTURAL USE . The Leased Property is not and
will not be used principally for farming or agricultural purposes.
SECTION 18. ADDITIONAL COVENANTS.
The Lessee covenants and agrees that:
(a) FINANCIAL STATEMENTS. The Lessee shall deliver to the Lessor, in
form and detail satisfactory to the Lessor:
(i) as soon as available, but not later than 90 days after
the end of each fiscal year, a copy of the audited consolidated balance
sheet of the Lessee and its Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, partners' equity
and cash flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, identifying any material
change in accounting policies or financial reporting practices by the
Lessee or any of its consolidated Subsidiaries, and accompanied by the
opinion of Price Waterhouse LLP or another nationally-recognized
independent public accounting firm ("INDEPENDENT AUDITOR") which report
shall state that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Lessee's or any
Subsidiary's records;
(ii) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidated balance sheet of the Lessee and its
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, partners' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter,
identifying any material change in accounting policies or financial
reporting practices by the Lessee or any of its consolidated Subsidiaries,
and certified by a General Partner as fairly presenting, in accordance with
GAAP
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(subject to ordinary, good faith year-end audit adjustments), the financial
position and the results of operations of the Lessee and its Subsidiaries;
(iii) as soon as available, but not later than 90 days after
the end of each fiscal year, a copy of an unaudited consolidating balance
sheet of the Lessee and its Subsidiaries as at the end of such year and the
related consolidating statement of income for such year, certified by a
General Partner as having been developed and used in connection with the
preparation of the financial statements referred to in clause (i), above;
(iv) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidating balance sheets of the Lessee and its
Subsidiaries, and the related consolidating statements of income for such
quarter, all certified by a General Partner as having been developed and
used in connection with the preparation of the financial statements
referred to in clause (ii), above.
(b) NOTICES. The Lessee shall promptly notify the Lessor:
(i) of the occurrence of any Default or Event of Default, and
of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(ii) of any matter that has resulted or if adversely
determined would reasonably be expected to result in a Material Adverse
Effect, including (A) breach or non-performance of, or any default under, a
Contractual Obligation of the Lessee, (B) any dispute, litigation,
investigation, proceeding or suspension which may exist at any time between
the Lessee and any Governmental Authority; or (C) the commencement of, or
any material development in, any litigation or proceeding affecting the
Lessee, including pursuant to any applicable Environmental Laws;
(iii) any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of the Lessee delivered to the
Lessor pursuant to Section 18(a)(i);
(iv) of any material labor controversy resulting in or
threatening to result in any strike, work stoppage, boycott, shutdown or
other labor disruption against or involving the Lessee, or any of its
Subsidiaries; or
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(v) of any assertion or determination by any Governmental
Authority that the Lessee shall no longer be classified as a partnership
not taxable as a corporation under the Code.
Each notice under this Section shall be accompanied by a written
statement by the General Partner setting forth details of the occurrence
referred to therein, and stating what action the Lessee or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under clause (b)(i) above shall describe with particularity any and all clauses
or provisions of this Lease or other Operative Document that have been (or
foreseeably will be) breached or violated.
(c) CREDIT AGREEMENT. The Lessee shall comply, and shall cause each
of its Subsidiaries to comply, with all covenants of the Lessee or such
Subsidiary in the Credit Agreement, and all notices, certificates, reports and
other documents required to be delivered by the Lessee thereunder shall be
simultaneously delivered to the Lessor. Such covenants (together will any
applicable defined terms) shall constitute, and are hereby expressly made, a
part of this Lease; PROVIDED that if there is any conflict between the terms of
this Lease and the terms of the Credit Agreement, then the terms of this Lease
shall govern.
(d) FURTHER ASSURANCES. The Lessee shall (i) ensure that all written
information, exhibits and reports prepared by the Lessee, and (ii) use its best
efforts to ensure that all written information, exhibits and reports not
prepared by the Lessee and, in each case, furnished to the Lessor do not and
will not contain any untrue statement of a material fact and do not and will not
omit to state any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Lessor and correct any defect or error that
may be discovered in this Lease or any other Operative Document or in the
execution, acknowledgment or recordation hereof or thereof.
(e) "AS-BUILT" SURVEY. Not less than ten (10) days prior to the end
of the Lease Term, the Lessee shall deliver an "as-built" survey of the Parcel
showing the Facility, together with an updated surveyor's certification in form
and substance satisfactory to the Lessor.
(f) ENVIRONMENTAL EVENT. The Lessee shall promptly, but in any case
within five (5) Business Days, notify the Lessor if (i) any environmental event
has occurred or any environmental condition is discovered in, on, from or
involving the Leased Property or any part thereof (including, but not limited
to, the presence, emission or release of Hazardous Materials or the violation of
any applicable Environmental Law)
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that could reasonably be anticipated to result in penalties or other liabilities
in excess of $500,000 or (ii) the Lessee has received notification that it, the
Leased Property or any part thereof is the subject of a proceeding that could
reasonably be expected to result in any ordered remediation or corrective action
or other liability related to an environmental event or condition with respect
to the Leased Property or any part thereof the cost of which liability is
reasonably expected to exceed $500,000 (each of (i) and (ii) an "Environmental
Event").
Following the receipt of a notice pursuant to the immediately
preceding paragraph, the Lessor, may require the Lessee to conduct, or cause to
be conducted, an environmental study by an environmental consultant reasonably
satisfactory to the Lessor (the cost and expenses of such environmental
consultant shall be borne by the Lessee) of the Leased Property or any
applicable part thereof on which such Environmental Event or release shall have
occurred, the scope of which study shall be limited to confirming the magnitude
and anticipated cost of the liability resulting in the Environmental Event and
to provide a copy of the environmental consultant's report on its audit to the
Lessor. Notwithstanding the foregoing, if a pattern, in the opinion of the
Lessor, of such Environmental Events exists, the Lessor may conduct a more
comprehensive environmental study of the Leased Property or the applicable part
thereof to determine the scope and nature of such pattern. If it is the opinion
of the Lessor that an Environmental Event has occurred or exists and a Permitted
Remediation (as defined below) is not available or the Environmental Event
cannot be cured through a Permitted Remediation or the Environmental Event will
result in the cessation of operation of the Facility or the applicable part
thereof for 30 days or more such Environmental Event shall constitute an
Environmental Trigger with respect to the Leased Property or the applicable part
thereof and shall, at the option of the Lessor, be deemed an Event of Loss with
respect to the Leased Property or the applicable part thereof (an "Environmental
Trigger"). A "Permitted Remediation" means any remediation of an Environmental
Event (a) the cost of which remediation is not anticipated, in the sole opinion
of the Lessor, to exceed $5,000,000, (b) during and after which such
Environmental Event could not be expected to result in any additional
environmental liability incurred by the Lessor for which the Lessor has not
received additional indemnification in an amount and from a Person satisfactory
to the Lessor, in its sole and absolute discretion and (c) permitted and
effected in compliance with all applicable Environmental Laws.
Irrespective of whether an Environmental Trigger has occurred, the
Lessee shall immediately initiate, at its sole cost and expense, such actions as
may be necessary to comply in all material respects with all applicable
Environmental Laws and to alleviate any significant risk to human health or the
environment if the same arises from a condition on or in respect of the Leased
Property or any part thereof, whether existing
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prior to, on or after the date of this Lease. Once the Lessee commences such
actions, the Lessee shall thereafter diligently and expeditiously proceed to
comply materially and in a timely manner with all Environmental Laws and to
eliminate any significant risk to human health or the environment.
SECTION 19. OPTIONS UPON LEASE TERMINATION.
(a) NEW LEASE TRANSACTION. Within 60 days prior to the Lease
Termination Date, the Lessee shall notify (the "New Lease Notification") the
Lessor in writing that it desires to enter into a new lease with respect to the
Facility in the form of either (i) a single investor tax lease on substantially
the terms set forth on EXHIBIT E hereto or (ii) a leverage tax lease with
financial institutions arranged by Key Global Finance on terms to be agreed to
between the Lessee and such financial institutions. Upon receipt of such New
Lease Notification, the Lessee and the Lessor or Key Global Finance shall
negotiate in good faith with respect to such new leasing arrangement. The New
Lease Notification shall be irrevocable; PROVIDED that if the Lessee and the
lessor, in the case of a single investor tax lease, or the financial
institutions arranged by Key Global Finance, in the case of a leverage tax
lease, are unable to reach agreement on the terms of the new leasing
arrangement, neither party shall have any obligation to enter into such
arrangement.
(b) PURCHASE OF FACILITY.
(i) If the Lessee fails to provide the Lessor with a New Lease
Notification in accordance with paragraph (a) above, or if, after delivery of a
New Lease Notification, the Lessee and the Lessor (in the case of a single
investor tax lease) or the financial institutions arranged by Key Global
Finance, Ltd. (in the case of a leverage tax lease), are unable to reach
agreement on the terms of the new leasing arrangement, the Lessee may, within 30
days prior to the Lease Termination Date, irrevocably notify the Lessor that the
Lessee desires to purchase from the Lessor, and the Lessor shall sell to the
Lessee, the Facility. If the Lessee elects to purchase the Facility from the
Lessor, then on the Lease Termination Date the Lessor shall sell, transfer and
convey all of its right, title and interest in to the Facility and under the
Ground Lease, as is and where is, to the Lessee, free and clear of any Lessor
Liens but otherwise without any representation or warranty, upon payment in
immediately available funds by the Lessee to the Lessor of a purchase price
therefor equal to the Total Fundings made by the Lessor from the date hereof
through the date of purchase, together with (i) all Basic Rent due and owing on
or prior to such date of purchase and (ii) all Supplemental Rent due and owing
prior to such date of purchase and any other Supplemental Rent as to which there
is no dispute and which is agreed to become due and owing within 60 days of such
date. Subject to the foregoing,
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on the date of such purchase and sale the Lessor shall, at the expense of the
Lessee, execute and deliver to the Lessee a bill of sale or assignment and such
other documents as the Lessee may reasonably request to evidence the valid
consummation of such transfer.
(ii) If after delivery of a New Lease Notification, the Lessee and the
Lessor, in the case of a single investor tax lease, or the financial
institutions arranged by Key Global Finance, in the case of a leverage tax
lease, are unable to reach agreement on the terms of the new leasing
arrangement, the Lessor may, within 10 days prior to the Lease Termination Date,
notify the Lessee that the Lessor desires to sell to the Lessee, and the Lessee
shall purchase from the Lessor, the Facility. If the Lessor elects to sell the
Facility to the Lessee, then on the Lease Termination Date the Lessor shall
sell, transfer and convey all of its right, title and interest in to the
Facility and under the Ground Lease, as is and where is, to the Lessee, free and
clear of any Lessor Liens but otherwise without any representation or warranty,
upon payment in immediately available funds to the Lessor of a purchase price
therefor equal to the Total Fundings made by Lessor from the date hereof through
the date of purchase, together with (i) all Basic Rent due and owing on or prior
to such date of purchase and (ii) all Supplemental Rent due and owing prior to
such date of purchase and any other Supplemental Rent as to which there is no
dispute and which is agreed to become due and owing within 60 days of such date.
Subject to the foregoing, on the date of such sale and purchase the Lessor
shall, at the expense of the Lessee, execute and deliver to the Lessee a bill of
sale or assignment and such other documents as the Lessee may reasonably request
to evidence the valid consummation of such transfer.
(c) RETURN OF FACILITY. In the event that the transactions
contemplated in paragraph (a) above are not consummated on or before the Lease
Termination Date, and in the event that the Lessee does not elect to purchase
the Facility from the Lessor or the Lessor does not elect to sell the Facility
to the Lessee pursuant to paragraph (b) above, the Lessee shall return the
Facility to the Lessor according to the terms and conditions set forth in
Section 8 hereof. Upon the return of the Facility to the Lessor in accordance
with Section 8 hereof, the Lessee shall have no obligation to pay any amount to
the Lessor with respect to Total Fundings made by the Lessor hereunder.
SECTION 20. EVENTS OF DEFAULT.
Any of the following shall constitute an "Event of Default":
(a) NON-PAYMENT. The Lessee shall fail to pay (i) when and as
required to be paid herein, any amount of Rent or (ii) within 5 days after the
same becomes due, any amount of Supplemental Rent;
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(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made or deemed made by the Lessee set forth herein or in any other Operative
Document to which the Lessee is a party, or any representation, warranty,
statement or information contained in any written report, certificate, financial
statement or other instrument furnished in connection with or pursuant hereto to
any other Operative Document, shall prove to have been false in any material
respect when so made or furnished;
(c) COVENANT DEFAULTS. The Lessee shall fail to perform or observe
any other term or covenant contained in this Lease or any other Operative
Document or any other document or certificate delivered pursuant hereto or
thereto, and such failure shall continue unremedied for a period of thirty (30)
days after the earlier of (i) the date upon which the General Partner knew or
reasonably should have known of such failure or (ii) the date upon which written
notice thereof is given to the Lessee by the Lessor; PROVIDED, HOWEVER, that, if
such failure is capable of being cured and provided the Lessee is diligently
pursuing such cure, the time with which such failure may be cured shall be
extended for such period as is reasonably necessary to complete curing thereof
with diligence;
(d) BANKRUPTCY; INSOLVENCY. The Lessee or any of its Subsidiaries
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against the Lessee or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Lessee or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this paragraph (d);
(e) MONETARY JUDGMENTS. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Lessee or any of its Subsidiaries involving in the aggregate a liability (to the
extent not covered by independent third-party insurance as to which the insurer
does not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $5,000,000 or
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more, and the same shall remain unsatisfied, unvacated and unstayed pending
appeal for a period of 30 consecutive days after the entry thereof;
(f) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order or
decree is entered against the Lessee or any of its Subsidiaries which does or
could reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect;
(g) GOVERNMENTAL ACTION. The Lessee shall be prevented or relieved
by any Governmental Authority from performing or observing any monetary payment
or repayment obligation evidenced by this Lease or any other Operative
Documents;
(h) UNENFORCEABILTY OF OPERATIVE DOCUMENTS. Any Operative Document
shall for any reason no longer be in full force and effect in accordance with
its terms;
(i) ABANDONMENT. The Lessee shall have abandoned the Leased Property
or any part thereof;
(j) CREDIT AGREEMENT EVENT OF DEFAULT. An "Event of Default" under
the Credit Agreement shall have occurred and shall not have been waived in
accordance with the terms of the Credit Agreement pursuant to an Approved Credit
Agreement Action;
(k) REPUDIATION OF OPERATIVE DOCUMENTS. Any Operative Document or
any obligation of the Lessee thereunder shall be revoked or repudiated or
attempted to be revoked or repudiated by the Lessee;
(l) UNAUTHORIZED REMOVAL, TRANSFER. The Lessee shall (except as
expressly permitted by the provision of this Lease) attempt to remove, sell,
transfer, encumber, part with possession of, assign or sublet the Leased
Property or any part thereof;
(m) FAILURE TO MAINTAIN INSURANCE. The Lessee shall fail to be in
compliance with the Insurance Requirements, and all other insurance policies
required by Section 14 shall fail to be in full force and effect;
(n) FAILURE TO PURCHASE FACILITY. The Lessee shall fail to purchase
the Facility as and when required pursuant to Section 19(b) hereof;
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(o) DELIVERY OF FINAL SURVEY AND UPDATED TITLE POLICY. The Lessee
shall fail to deliver to the Lessor the Final Survey and the Updated Title
Policy on or prior to January 31, 1998.
SECTION 21. REMEDIES.
If any Event of Default shall have occurred and be continuing, then
and in every such case, (A) in the case of an Event of Default set forth in
Sections 20(d), (m) and (n) hereof, this Lease shall be in default without
further act or notice of any kind (all of which are hereby waived), which for
all purposes hereof and of the other Operative Documents shall be deemed to be a
declaration of default hereunder, and (B) in the case of any other Event of
Default, the Lessor may, at its option, declare this Lease to be in default by
written notice to such effect given to the Lessee, and in either case at any
time thereafter, the Lessor may exercise one or more of the following remedies,
as the Lessor in its sole discretion shall lawfully elect:
(a) the Lessor may demand that the Lessee, and the Lessee shall upon
receipt of written demand of the Lessor, deliver the Leased Property promptly to
the Lessor in the manner and condition required by, and otherwise in accordance
with all the provisions of, Section 8 hereof as if the Leased Property was being
returned at the end of the Lease Term and the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and expenses incurred by the Lessee in
connection therewith; or the Lessor may enter upon the premises of the Leased
Property and take immediate possession of (to the exclusion of the Lessee) the
Leased Property by summary proceedings or otherwise, all without liability to
the Lessor for or by reason of such entry or taking of possession, whether for
the restoration of damage to property caused by such taking or otherwise;
(b) the Lessor may sell all or any part of the Facility and assign
all or any part of its rights under the Ground Lease at public or private sale,
as the Lessor may determine, in a commercially reasonable manner, free and clear
of any rights of the Lessee and without any duty to account to the Lessee with
respect to such action or inaction or any proceeds with respect thereto (except
to the extent provided in paragraph (d) of this Section if the Lessor shall
elect to exercise its rights thereunder), in which event the Lessee's obligation
to pay Basic Rent hereunder for periods commencing after the date of such sale
and assignment shall terminate (except to the extent that Basic Rent is to be
included in computations under paragraph (d) of this Section if the Lessor shall
elect to exercise its rights thereunder);
(c) the Lessor may hold, keep idle or lease to others all or any part
of the Facility as the Lessor in its sole discretion may determine, free and
clear of any rights
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of the Lessee and without any duty to account to the Lessee with respect to such
action or inaction or for any periods with respect to such action or inaction,
except that the Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the Lessee shall have been deprived of use of the Facility
pursuant to this paragraph (c) shall be reduced by the net proceeds, if any,
received by the Lessor from leasing the Facility to any Person other than the
Lessee for the same period or any portion thereof;
(d) the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights under
paragraph (a), (b) or (c) of this Section, demand that the Lessee pay to the
Lessor, and the Lessee shall pay to the Lessor, on the Basic Rent Date specified
in such demand, (A) any unpaid Basic Rent due hereunder prior to such Basic Rent
Date plus (B) an amount equal to the Total Fundings made from the date hereof
through and including such Basic Rent Date (together with interest on such
amounts at the Overdue Rate from such Basic Rent Date to the date of actual
payment); and upon such payment of all amounts then due and payable by the
Lessee hereunder or under any other Operative Document, the Lessor shall
transfer to the Lessee its title and interest in and to the Facility without
recourse or warranty (except as to absence of any Lessor's Liens); or
(e) the Lessor may rescind or terminate this Lease or may
exercise any other right or remedy which may be available to it under Applicable
Law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof; PROVIDED, HOWEVER, that any termination
of the Lease pursuant to the exercise of any such rights and remedies shall not
in any way be deemed to be a release or a waiver by the Lessor of the Lessee's
obligation to pay the sums provided to be paid by the Lessee under this Section.
No termination of this Lease, in whole or in part, or
repossession of all or any part of the Leased Property or exercise of any remedy
under this Section shall, except as specifically provided herein, relieve the
Lessee of any of its liabilities and obligations hereunder, all of which shall
survive such termination, repossession or exercise of remedy. In addition, the
Lessee shall be liable, except as otherwise provided above, for any and all
unpaid Rent due hereunder before, after or during the exercise of any of the
foregoing remedies, including all reasonable legal fees and other costs and
expenses incurred by the Lessor by reason of the occurrence of any Event of
Default or the exercise of the Lessor's remedies with respect thereto, and
including all reasonable costs and expenses of whatsoever kind incurred in
connection with the return of the Facility (including the costs of dismantling
and storage) in the manner and condition required by, and otherwise in
accordance with the provisions of, Section 8 hereof as if the Facility were
being returned at the end of the Lease Term. At any sale of the Facility or any
part
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thereof or the Lessor's interest in the Ground Lease pursuant to this Section
21, the Lessor may bid for and purchase the Facility or such interest in the
Ground Lease.
To the extent permitted by, and subject to the mandatory requirements
of, Applicable Law, and except as otherwise expressly provided in this Section,
each and every right, power and remedy herein specifically given to the Lessor
or otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at Law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
the Lessor, and the exercise or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of the right to exercise at the
same time or thereafter any other right, power or remedy. No delay or omission
by the Lessor in the exercise of any right, remedy or power or in the pursuit of
any remedy shall impair any such right, remedy or power or be construed to be a
waiver of any default on the part of the Lessee or to be an acquiescence
therein. No express or implied waiver by the Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Event of Default.
SECTION 22. RIGHT TO PERFORM FOR LESSEE.
If the Lessee fails to make any payment of Rent required to be made by
it hereunder or fails to perform or comply with any of its agreements contained
herein, the Lessor may make such payment or perform or comply with such
agreement, without any notice to or demand upon Lessee, in each case without
waiving any default hereunder or releasing the Lessee from any obligation;
PROVIDED, HOWEVER, that any such payment or performance by the Lessor shall not
constitute a cure of such Event of Default for purposes of this Lease. The
amount of such payment and the amount of the reasonable expenses incurred in
connection with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, shall constitute Supplemental Rent hereunder,
payable upon demand to the Lessor.
SECTION 23. INDEMNIFICATION.
(a) INDEMNIFICATION. The Lessee agrees to assume liability for, and
to indemnify, protect, save and keep harmless each Indemnified Person, on an
After-Tax Basis, from and against any and all Claims that may be imposed on,
incurred by or asserted against any Indemnified Person (whether because of an
action or omission by such Indemnified Person or otherwise and whether or not
such Indemnified Person shall also be indemnified as to any such Claim by any
other Person), in any way relating to or
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arising out of (i) the Leased Property or any part thereof, (ii) the Operative
Documents or the transactions contemplated thereby, payments made pursuant to
any thereof or the enforcement by any Indemnified Person of any of its rights
under the Operative Documents, or any other transaction contemplated by the
Operative Documents, including the negotiation, execution and delivery of
amendments thereto, (iii) the manufacture, financing, refinancing, design,
construction, inspection, purchase, ownership, acquisition, acceptance,
rejection, delivery, nondelivery, possession, transportation, sublease,
sub-sublease, sub-sub-sublease, mortgaging, granting of a security interest in,
preparation, installation, condition, transfer of title, rental, use, operation,
storage, maintenance, modification, alteration, repair, assembly, sale, return,
registration, abandonment or other application or disposition of all or any part
of the Leased Property or any interest therein, including, without limitation,
(A) Claims or penalties arising from any violation of Law or liability in tort
(strict or otherwise), (B) loss of or damage to any property or the environment
(including, without limitation, all Claims associated with remediation,
response, removal, corrective action, clean-up, Remedial Action, treatment,
compliance, restoration, abatement, encapsulation, containment, revegetation,
monitoring, sampling, investigation, assessment, financial assurance, natural
resource damages, the protection of wildlife and aquatic and vegetation, the
interference with or contamination of any wetland or body of water (whether
surface or subsurface) or aquifer, and any relevant mitigative action under any
Environmental Law and any Claims resulting from or relating to the existence or
presence of any Hazardous Material at, in, or under the Leased Property, or any
parts thereof, or the Release, emission or discharge of any Hazardous Material
into the environment (including air, water vapor, surface water, ground water,
and land (whether surface or subsurface)) or death or injury to any Person, (C)
latent or other defects, whether or not discoverable, and (D) any claim for
patent, trademark or copyright infringement, (iv) any breach of or failure to
perform or observe, or any other breach of or failure to perform or observe, or
any other non-compliance with, any covenant, condition or agreement or other
obligation to be performed by the Lessee under any Operative Document, or the
falsity of any representation or warranty of the Lessee in any of the Operative
Documents or in any certificate delivered by the Lessee, (v) the imposition of
any Lien (other than Permitted Liens) on the Leased Property, or (vi) any
violation of any Applicable Law with respect to the Lessee or the Leased
Property; PROVIDED, HOWEVER, that the Lessee shall not be required to indemnify
any Indemnified Person under this Section 23 for any Claim to the extent
resulting from the willful misconduct or gross negligence of such Indemnified
Person (other than willful misconduct or gross negligence imputed to such
Indemnified Person solely by reason of its interest in the Leased Property).
The obligation to provide indemnities in accordance with the terms of this
Section 23 shall survive the termination of this Lease.
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(b) NOTICES. If the Lessee shall obtain knowledge of any action,
suit, proceeding or written notice of any Claim indemnified against under this
Section 23, the Lessee shall give prompt notice thereof to the appropriate
Indemnified Person or Indemnified Persons, as the case may be, and if any
Indemnified Person shall obtain any such knowledge, such Indemnified Person
shall give prompt notice thereof to the Lessee, PROVIDED that the failure of
such Indemnified Person to so notify the Lessee shall not affect the Lessee's
indemnification obligations under this Section 23 to such Indemnified Person,
except to the extent, if any, that the Lessee demonstrates that defense of the
Claim is prejudiced by the Indemnified Person's failure to give such notice.
(c) CONTESTS. Subject to the rights of insurers under policies of
insurance maintained pursuant to Section 14, the Lessee shall have the right, at
its sole cost and expense, to investigate, and the right in its sole discretion
to defend or contest by appropriate proceedings or compromise, any Claim for
which indemnification is sought under this Section 23, and the Indemnified
Person shall cooperate, at the Lessee's expense, with all reasonable requests of
the Lessee in connection therewith, PROVIDED that the Lessee shall not have the
right without the consent of the Indemnified Person to defend, contest or
compromise any Claim with respect to such Indemnified Person (i) if an Event of
Default shall have occurred and be continuing, (ii) if such proceeding involves
any material danger of the sale, forfeiture or loss of the Leased Property or
any part thereof, or (iii) if such Claim involves a realistic possibility of
criminal sanctions or allegations by a Governmental Authority of criminal
liability to such Indemnified Person, in which event the Indemnified Person
shall be entitled to control and assume responsibility for the defense of such
Claim at the expense of the Lessee. The Lessee shall keep the Indemnified
Person which is the subject of such proceeding fully apprised of the status of
such proceeding and shall provide such Indemnified Person with all information
with respect to such proceeding as such Indemnified Person shall reasonably
request. In the event an Indemnified Person has assumed control of any such
proceeding, it shall keep the Lessee fully apprised of the status of such
proceeding and shall provide the Lessee with all information, including the
receipt of all settlement offers, with respect to such proceeding as such
Indemnified Person shall reasonably request. Where the Lessee or the insurers
under a policy of insurance maintained by the Lessee undertake the defense of an
Indemnified Person with respect to a Claim, no additional legal fees or expenses
of such Indemnified Person in connection with the defense of such Claim shall be
indemnified hereunder unless such fees or expenses were incurred at the request
of the Lessee or such insurers; PROVIDED that, if (i) in the written opinion of
counsel to such Indemnified Person an actual or potential conflict of interest
exists where it is advisable for such Indemnified Person to be represented by
separate counsel or (ii) such Indemnified Person has been indicted or otherwise
charged in a criminal complaint in connection with an indemnifiable Claim and
such Indemnified Person informs the Lessee
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that such Indemnified Person desires to be represented by separate counsel, the
reasonable fees and expenses of such separate counsel shall be borne by the
Lessee. Subject to the requirements of any policy of insurance, an Indemnified
Person may participate at its own expense in any judicial proceeding controlled
by the Lessee pursuant to the preceding provisions and such participation shall
not constitute a waiver of the right to receive the indemnification provided in
this Section 23. Notwithstanding anything to the contrary contained herein,
during the continuance of an Event of Default, the Lessee shall not compromise
any Claim without the consent of the applicable Indemnified Person unless such
Claim is simultaneously discharged fully and unconditionally as to such
Indemnified Person, such consent not to be unreasonably withheld.
(d) SUBROGATION. Upon payment in full of any Claim by the Lessee
pursuant to this Section 23 to or on behalf of an Indemnified Person, the
Lessee, without any further action, shall be subrogated to any and all claims
that such Indemnified Person may have in respect of the matters against which
such indemnity was given (other than claims under any insurance policies
maintained by such Indemnified Person). Such Indemnified Person agrees to
cooperate with the Lessee and to execute such further instruments to permit the
Lessee, at the Lessee's expense, to pursue such claims, to the extent reasonably
requested by the Lessee.
(e) PAYMENTS. Any amount payable to any Indemnified Person pursuant
to this Section 23 shall be paid to such Indemnified Person promptly upon
receipt of a written demand therefor from such Indemnified Person, accompanied
by a written statement describing the basis for such indemnity and the amount so
payable.
SECTION 24. NOTICES.
All communications, demands, consents and notices provided for herein
shall be in writing, by fax (receipt confirmed), by tested telex or by personal
delivery and shall become effective if given by fax, telex or personal delivery,
when received, and if given by mail five (5) days after deposit in the United
States mail with proper postage for first-class mail prepaid, addressed (a) if
to the Lessor, at c/o KeyCorp Leasing, 54 State Street, Albany, New York 12207,
Attention: Sandra Mariano, telephone (518) 486-8186, fax (518) 486-8172, with a
copy to Key Global Finance, 30 Federal Street, Boston, Massachusetts 02110,
Attention: Chief Credit Officer, telephone (617) 654-2700, fax (617) 654-2727,
and (b) if to the Lessee, at 121 S.W. Morrison Street, Suite 1500, Portland,
Oregon 97204, Attention: Roger L. Krage, telephone ((503) 274-2300), fax ((503)
228-4875), or, in each case, at such other address as any of the foregoing
Persons
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<PAGE>
may from time to time designate by notice duly given in accordance with the
provisions of this Section to such other Person.
SECTION 25. SUCCESSORS AND ASSIGNS.
This Lease, including all agreements, covenants, representations and
warranties, shall be binding upon and inure to the benefit of, and may be
enforced by, (a) the Lessor and its successors, assigns and agents, and, where
the context so requires, (i) each Indemnified Person, and (ii) the successors,
assigns and agents of such Indemnified Person, and (b) the Lessee and its
successors and, to the extent permitted hereby, assigns.
SECTION 26. AMENDMENTS AND MISCELLANEOUS.
(a) AMENDMENTS. The terms of this Lease shall not be waived,
altered, modified, amended, supplemented or terminated in any manner whatsoever
except by written agreement signed by the Lessor and the Lessee.
(b) SURVIVAL OF AGREEMENTS. All agreements, indemnities,
representations and warranties contained in this Lease or any agreement,
document or certificate delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Lease and the expiration or
other termination of this Lease.
(c) ENFORCEMENT. Any provision of this Lease which may be determined
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by Applicable Law, the Lessee hereby waives any provision
of law which renders any provision hereof prohibited or unenforceable in any
respect.
(d) ENTIRE AGREEMENT. This Lease represents the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
and all prior understandings. This Lease shall constitute an agreement of lease
and nothing herein shall be construed as conveying to the Lessee any right,
title or interest in or to the Improvements, except as lessee only.
(e) BINDING EFFECT. All provisions contained in this Lease shall be
binding upon, inure to the benefit of and be enforceable by, the respective
permitted successors and assigns of the Lessor and the Lessee to the same extent
as if each successor and assignee were named as a party hereto.
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(f) COUNTERPARTS. The parties may sign this Lease in any number of
counterparts and on separate counterparts, each of which shall be an original
but all of which when taken together shall constitute one and the same
instrument, except that, if this Lease constitutes "chattel paper" within the
meaning of the Uniform Commercial Code only one counterpart stamped or marked
"COUNTERPART NUMBER ONE" or "COUNTERPART NUMBER 1" shall constitute, to the
extent applicable, "chattel paper" or other "collateral" within the meaning of
the Uniform Commercial Code in effect in any jurisdiction.
(g) GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Washington.
(h) SECTIONS, HEADINGS. The division of this Lease into sections,
the provision of a table of contents and the insertion of headings are for the
convenience of reference only and shall not affect the construction or
interpretation of this Lease.
(i) NO MERGER OF TITLE. There shall be no merger of this Lease nor
of the leasehold estate created by this Lease with the fee ownership of the
Parcel, the Facility or the Modifications by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, this Lease or the
leasehold estate created by this Lease or any interest in this Lease or interest
in the fee or leasehold ownership of the Parcel, the Facility or the
Modifications and no such merger shall occur unless and until all Persons having
any interest in (x) the leasehold estate created by this Lease and (y) the
ownership of the Parcels, the Facility or the Modifications, or any part thereof
shall join in a written instrument effecting such merger and shall duly record
the same.
(j) WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING UNDER OR
RELATED TO THIS AGREEMENT, THE OPERATIVE DOCUMENTS OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, THE LESSOR AND THE LESSEE HEREBY AGREE THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY,
IRRESPECTIVE OF WHICH PARTY COMMENCES SUCH ACTION OR PROCEEDING.
(k) TRUE LEASE. The Lessee intends to treat this Lease, for
accounting purposes, as an operating lease. If a court of competent
jurisdiction determines that the transaction represented by this Lease and the
other Operative Documents will be treated as a financing transaction, then in
such event it is the intention of the parties hereto (i) that this Lease be
treated as a mortgage and security agreement and fixture filing, or
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other similar instrument with a power of sale (the "LESSEE MORTGAGE") from
Lessee, as mortgagor, encumbering the Leased Property, and that the Lessee, as
mortgagor, shall be deemed to have hereby granted a security interest and
mortgage to the Lessor in the Leased Property now owned or hereafter acquired
for the purpose of securing the Lessee's payment and performance obligations
under this Lease and the other Operative Documents, (ii) that the Lessor shall
have, as a result of such determination, all of the rights, powers and remedies
of a secured party and mortgage available under Applicable Law to take
possession of and sell (whether by foreclosure, power of sale or otherwise) the
Leased Property, (iii) that the effective date of the Lessee Mortgage shall be
the effective date of this Lease, (iv) that the recording of an instrument
referencing this provision shall be deemed to be the recording of the Lessee
Mortgage and (v) that the Lessee Mortgage shall secure the obligations of the
Lessee under this Lease.
(l) NO CLAIMS AGAINST LESSOR, ETC. Nothing contained in this Lease
shall constitute any consent or request by the Lessor, express or implied, for
the performance of any labor or services or the furnishing of any materials or
other property in respect of the Leased Property or any part thereof, nor as
giving the Lessee any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against the
Lessor in respect thereof. Notice is hereby given that the Lessor shall not be
liable for any labor or services performed or any materials or other property
furnished in respect of the Leased Property or any part thereof and that no
mechanic's or other lien for any such labor, services, materials or other
property shall attach to or affect the interest of the Lessor in the Leased
Property.
(m) LIMITED RECOURSE. Except as otherwise provided in the proviso to
this Section, nothing contained in this Lease or in the other Operative
Documents shall be construed as creating any liability on the part of any past
or present shareholder, limited partner or general partner of the Lessee, the
General Partner, or the MGP General Partners to pay any amount on account of the
Lessee's obligations hereunder or under any other Operative Document to which it
is a party or to perform any covenant of the Lessee contained herein or therein;
PROVIDED, HOWEVER, that nothing in this Section 26(m) shall be construed (i) to
relieve any Person from liability for fraud, concealment, or other intentional
wrongdoing for which such Person would otherwise be liable under any Applicable
Law, either directly or on behalf of the Lessee, (ii) to restrict the joinder in
any action of any necessary party in order to seek enforcement of rights against
the Lessee or any other party to any Operative Document or to restrict
injunctive relief against any Person to the extent necessary to obtain
performance by the Lessee of any of its obligations under any Operative
Document, or (iii) to relieve any Person from liability for distributions,
payments, or other transfers made to such Person in violation of the
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Operative Documents or in violation of or otherwise recoverable under any
Applicable Law.
68
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Lease to
be duly executed by their respective officers thereunto duly authorized on the
date first written above.
SELCO SERVICE CORPORATION, as Lessor
By
------------------------------------------
Name: Andrew G. Mesches
Title: Vice President
CROWN PACIFIC LIMITED PARTNERSHIP, as
Lessee and as Construction Agent
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its General Partner
By
------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO THE
LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT
This LEASE SUPPLEMENT dated [ ], 199__, is made by and between
SELCO SERVICE CORPORATION, an Ohio corporation, as lessor (the "Lessor"), and
CROWN PACIFIC L.P., a Delaware limited partnership, as lessee (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Lease Agreement dated as of December 19, 1997 (hereinafter the "Lease"; unless
otherwise defined herein, the terms defined therein being used herein with the
same meaning) and to which this Lease Supplement is a supplement;
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement for the purposes and otherwise as set forth in Section 2 thereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements confirmed in the Lease and other good and valuable consideration,
receipt of which is hereby acknowledged, the Lessor and the Lessee hereby agree
as follows:
(1) The Lessor does hereby lease to the Lessee, and the Lessee does
hereby lease from the Lessor, the Components described in the Description of
Components attached hereto on Schedule 1.
(2) The Lessee hereby confirms to the Lessor that the Lessee has
unconditionally accepted the Components for all purposes hereof and of the
Lease.
(3) The Lessee hereby confirms that the Components conform to
specifications, are in good working order and repair and without defect in
title, condition, design, operation or fitness for purpose, and are free and
clear of all Liens except Liens permitted by Section 10 of the Lease Agreement;
PROVIDED, HOWEVER, that nothing contained herein or in the Lease shall in any
way diminish or otherwise affect any right which the Lessee or the Lessor may
have with respect to the Components or any portion thereof against any seller,
contractor, subcontractor, manufacturer or installer thereof or others.
(4) This Lease Supplement may be executed in any number of
counterparts and on separate counterparts, each of which shall be an original
but all of which when taken together shall constitute one and the same
instrument, except that, if this Lease Supplement constitutes "chattel paper"
within the meaning of the Uniform
<PAGE>
Commercial Code, only one counterpart stamped or marked "COUNTERPART ONE" or
"COUNTERPART NUMBER 1" shall constitute, to the extent applicable, "chattel
paper" or other "collateral" within the meaning of the Uniform
Commercial Code in effect in any jurisdiction.
(5) All the terms and provisions of the Lease are hereby incorporated
by reference in this Lease Supplement to the same extent as if fully set forth
herein. Without limiting the generality of the foregoing, the representations
and warranties of the Lessee that are set forth in the Lease shall be deemed
incorporated by reference herein with the same effect as though such
representations and warranties are made on and as of the date hereof.
(6) The Lessee hereby represents and warrants as of the date hereof
that no Default or Event of Default has occurred and is continuing under the
Lease.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease Supplement to be duly executed as of the date first written above.
SELCO SERVICE CORPORATION, as Lessor
By
-------------------------------------------
Name: Andrew G. Mesches
Title: Vice President
CROWN PACIFIC LIMITED PARTNERSHIP, as
Lessee
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its General Partner
By
-------------------------------------------
Name:
Title:
A-2
<PAGE>
SCHEDULE 1
to Lease Supplement
DESCRIPTION OF COMPONENTS
The Components shall consist of the following:
<PAGE>
EXHIBIT B TO THE
LEASE AGREEMENT
FORM OF REQUISITION
To: SELCO Service Corporation
CROWN PACIFIC LIMITED PARTNERSHIP
CERTIFIED CONSTRUCTION REQUISITION NO.__
DATED , 199
--------------------------
The undersigned, [Name], [Title*] of Crown Pacific Limited
Partnership, acting as construction agent (the "CONSTRUCTION AGENT") for SELCO
Service Corporation, the lessor (the "LESSOR") pursuant to the Lease Agreement
dated as of December [ ], 1997 (the "LEASE AGREEMENT"), and acting as lessee
(the "LESSEE") thereunder, submits this irrevocable Requisition and certifies,
on behalf of the Lessee the following:
1. The total amount of the Actual Project Costs for which a
Requisition Funding is hereby requested is _______ Dollars ($_____). The
Lessor is hereby requested to make available the proceeds of a Requisition
Funding on [at least 5 Business Days after the submission date] ______ ,
199_, [must be a Requisition Funding Date] subject to the satisfaction or
waiver (as specified in Item 8 below) of all Requisition Funding
Conditions. The Requisition Funding shall be made at [bank], account
number [ ].
2. The proceeds of the Requisition Funding requested herein shall
be used solely to pay Actual Project Costs.
3. No part of the Actual Project Costs paid with the funds advanced
under any previous Requisition is a basis for this Requisition, and none of
the Actual Project Costs which are the subject of this Requisition was
included in any prior Requisition.
4. Attached to this Requisition is a copy of each invoice, purchase
order, receipt or other such document (not previously delivered with a
prior Requisition) (the "INVOICES") for Actual Project Costs, which
Invoices will be, or
- -----------------------------
* To be an "Officer", as defined in the Lease Agreement.
<PAGE>
have been, paid with the proceeds of this Requisition Funding, or, as
applicable, the previous Requisition Fundings.
5. There has been no material change in the estimated time of
completion of the construction of the Facility and the Construction Agent
has no reason to believe that (i) the Final Completion Date cannot be
achieved by September 30, 1998 or (ii) the Actual Project Costs of the
construction of the Facility will exceed the Maximum Requisition Funding
Amount.
6. No Applicable Law prohibits, and no litigation, governmental
investigation or other proceeding is pending or threatened in which there
is a reasonable possibility of an unfavorable judgment, decree, order or
other determination which could prevent or make unlawful, or impose any
material adverse condition upon, the Leased Property or the construction or
operation thereof or any transaction contemplated hereby or by any other
Operative Document or the ability of the Lessee to perform its obligations
hereunder or thereunder.
7. [NOT APPLICABLE TO INITIAL REQUISITION] All amounts previously
advanced pursuant to previous Requisitions were or will be paid to the
parties entitled thereto as specified in such Requisitions.
8. [Except as set forth in this item 8,] all Requisition Funding
Conditions required to be satisfied prior to the Requisition Funding
requested herein have been satisfied. [Identify unfulfilled conditions,
the actions being taken by the Construction Agent and the Lessee to satisfy
such conditions and the date(s) by which the Construction Agent plans to
satisfy such conditions].
9. All of the representations and warranties of the Lessee set forth
in the Operative Documents are true and correct on and as of the date
hereof. The Lessee is in compliance with all of its obligations under the
Operative Documents and there exists no Default or Event of Default under
the Operative Documents.
B-2
<PAGE>
All terms used herein but not defined herein shall have the meanings
assigned to such terms in the Lease.
Dated this ___ day of ______, 199_.
CROWN PACIFIC LIMITED PARTNERSHIP,
as Lessee and Construction Agent
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, its General Partner
By:
-------------------------------------
Name:
Title:
B-3
<PAGE>
EXHIBIT C TO THE
LEASE AGREEMENT
APPROVED CONSTRUCTION BUDGET
[Crown to Provide]
<PAGE>
EXHIBIT D TO THE
LEASE AGREEMENT
[FORM OF FINAL COMPLETION CERTIFICATE]
OFFICER'S CERTIFICATE
This Officer's Certificate is being furnished pursuant to the
requirements of the Lease Agreement, dated as of December 19, 1997, among SELCO
Service Corporation, an Ohio corporation (the "Lessor"), and Crown Pacific
Limited Partnership, a Delaware limited partnership (the "LESSEE" and the
"CONSTRUCTION AGENT") (as the same may be amended, modified or supplemented from
time to time, the "LEASE"). Capitalized terms used but not otherwise defined
herein shall have the meanings set forth in the Lease.
The undersigned, on behalf of the Lessee, hereby certifies that:
1. Completion of the Components as contemplated by the Lease as a
whole has taken place in all respects and the Facility has been constructed. A
permanent certificate of occupancy (the "PCO") for the Facility has been issued
by the applicable Governmental Authority having responsibility for such issuance
and the same is in proper form and not subject to any appeal or contest or to
any unsatisfied conditions (other than conditions relating to completion in the
future) that may allow modification or revocation.
2. All Permits that are or will become Applicable Permits have been
obtained, except Applicable Permits required by Law to be obtained after the
Final Completion Date (as to which the Construction Agent, having completed all
appropriate diligence, has no reason to believe that such Permits will not be
granted in the usual course of business prior to the date that such Permits are
required by Law, and the Lessee has applied for such Permits and satisfied all
legal requirements necessary to authorize continued operation while the Permit
application is pending). All such obtained Permits are in proper form, in full
force and effect and not subject to any appeal or contest or to any unsatisfied
conditions (other than conditions relating to completion in the future) that may
allow modification or revocation.
3. The Leased Property is in compliance in all material respects
with all Applicable Laws. The construction and operation of the Facility is in
accordance in all material respects with all Applicable Laws and all
representations set forth in, or made in connection with, all Permits, as
required for occupancy and operation thereof.
4. The Lessee is in compliance with all Insurance Requirements and
all insurance policies required under Section 14 of the Lease are in force and
effect.
5. The representations and warranties of the Lessee as set forth in
the Operative Documents are true and correct in all material respects as if made
on and as of the date hereof.
<PAGE>
6. The Facility is complete and is ready and available for its
intended use by Lessee.
7. Attached hereto as SCHEDULE A is a true and correct list, as of
the date hereof, of all furniture, fixtures and equipment located on the Parcel.
Dated this ____ day of ______ , 199_.
CROWN PACIFIC LIMITED PARTNERSHIP,
as Construction Agent
By CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, its General Partner
By:
---------------------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT E TO THE
LEASE AGREEMENT
TERMS OF SINGLE INVESTOR TAX LEASE
[To Follow]
<PAGE>
EXHIBIT F TO THE
LEASE AGREEMENT
CREDIT AGREEMENT
<PAGE>
SCHEDULE 1
TO LEASE AGREEMENT
DESCRIPTION OF PARCEL
<PAGE>
SCHEDULE 6(a)(viii)
TO LEASE AGREEMENT
PERMITS
<PAGE>
EXHIBIT 10.16
AFTER RECORDING MAIL TO:
Cindy Wenig, Esq.
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
- --------------------------------------------------------------------------------
GROUND LEASE AGREEMENT
Dated as of December 19, 1997
between
CROWN PACIFIC LIMITED PARTNERSHIP
as Ground Lessor,
and
SELCO SERVICE CORPORATION,
as Ground Lessee
Bonners Ferry, Idaho
- --------------------------------------------------------------------------------
<PAGE>
GROUND LEASE AGREEMENT (this "GROUND LEASE") dated as of December 19,
1997, between CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership,
as Ground Lessor, and SELCO SERVICE CORPORATION, an Ohio corporation, as Ground
Lessee.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Unless the context shall otherwise require, the capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned thereto
in the Lease Agreement dated as of December 19, 1997 between the Ground Lessor,
as lessee and construction agent, and the Ground Lessee, as lessor, with respect
to the Facility, as amended from time to time (the "LEASE AGREEMENT").
ARTICLE II
GRANT
Section 2.01. LEASE OF PARCEL. Ground Lessor is the owner of the
fee estate in and to a certain parcel of land located in Boundary County,
Idaho, as more particularly described on Schedule A attached hereto (the
"PARCEL"). Ground Lessor hereby leases the Parcel to Ground Lessee, and
Ground Lessee hereby leases the Parcel from Ground Lessor, for the Ground
Lease Term (hereinafter defined), subject to all the terms and conditions
hereof, together with all rights of way or uses, licenses, easements,
tenements, hereditaments and appurtenances now or hereafter belonging or
pertaining to the Parcel. Effective from and after the date hereof, Ground
Lessor waives and relinquishes any Lien or other right in the nature of a
landlord's lien or privilege which it might now or hereafter otherwise have
in or with respect to the Parcel or any part thereof.
Section 2.02. PERSONAL PROPERTY. The parties hereto acknowledge
that the title to the Facility and all Components now or hereafter
constructed or installed on the Parcel by any party (including, without
limitation, Ground Lessor or the Lessee under the Lease Agreement) during the
Ground Lease Term (hereinafter defined) are and will be owned by the Ground
Lessee. It is the intention of the parties that the separation of the title
to the Parcel from the title to the Facility is to remain so separated
throughout the Ground Lease Term. The Facility, to the greatest extent
possible, shall for all purposes
<PAGE>
and at all times be and remain personal property under the laws of the state
in which the Parcel and the Facility are located.
ARTICLE III
TERM
Section 3.01. GROUND LEASE TERM. This Ground Lease shall be
effective and the Parcel shall be subject to the terms and conditions of this
Ground Lease from and after the date hereof and shall terminate with respect
to the Parcel on the earlier to occur of (a) the date of Lessee's purchase of
the Facility pursuant to SECTION 19(b) of the Lease Agreement or (b) December
19, 2047, unless sooner terminated as provided or permitted herein (the
"GROUND LEASE TERM").
Section 3.02. ELECTION TO TERMINATE. Ground Lessee may elect to
terminate this Ground Lease at any time upon the payment of $1 to Ground
Lessor. Upon such termination, Ground Lessee's obligations hereunder shall
terminate.
ARTICLE IV
PAYMENTS
Ground Lessee shall pay to Ground Lessor One Hundred Dollars ($100)
as rental payment for the Ground Lease Term, receipt of which is hereby
acknowledged by Ground Lessor.
ARTICLE V
QUIET ENJOYMENT
Ground Lessor represents and warrants that it has full right and
authority to lease the Parcel pursuant to the terms of this Ground Lease and
that it has good and marketable fee title to the Parcel free and clear of all
Liens, except for those exceptions to title set forth on Title Commitment
dated December 19. 1997 #NBG. No. 97-0720 of Chicago Title Insurance Company
(the "PERMITTED ENCUMBRANCES"), and Ground Lessor represents and warrants
that, at all times during the Ground Lease Term, it will defend and hold
harmless Ground Lessee and its successors and assigns in their peaceable,
quiet, exclusive and undisputed enjoyment of the Parcel against the claims of
all Persons.
2
<PAGE>
ARTICLE VI
USE OF THE PARCEL
Ground Lessee may use the Parcel for any legal business purpose,
including, without limitation, the same purpose and business as Lessee may
use the Parcel for under the Lease Agreement.
ARTICLE VII
ALTERATIONS
During the Ground Lease Term, Ground Lessee, in its discretion, may
from time to time alter or improve, or cause to be altered or improved, the
Parcel or any part thereof, in any manner it deems necessary or desirable, to
carry on any activity permitted hereunder, including the construction,
addition, alteration, demolition and removal of any buildings, equipment,
roads or other structures, items of personal property or fixtures and any
grading or landscaping of the Parcel; PROVIDED, HOWEVER, that so long as the
Lease Agreement is in effect, Ground Lessee shall refrain from any action
permitted under this Article VII, except to the extent such action is
undertaken by Ground Lessee in its capacity as Lessor under, and in
accordance with, the Lease Agreement.
ARTICLE VIII
LIENS
Ground Lessor shall not directly or indirectly create, incur,
assume or suffer to exist any Lien on or with respect to the Parcel, the
Facility, title thereto or any interest therein, except Permitted Liens, and
Ground Lessor shall promptly, at its own expense, take such action as may be
necessary to duly discharge any such Lien. If Ground Lessor shall fail to
promptly discharge any such Lien, Ground Lessee, at its option, may cause the
same to be so discharged, and sums expended by Ground Lessee in connection
therewith shall be repaid by Ground Lessor to Ground Lessee on demand.
ARTICLE IX
TAXES AND CHARGES
So long as the Lease Agreement is in effect, Ground Lessor
acknowledges that the Lessee under the Lease Agreement shall be responsible
for the payment of all Taxes due with respect to the Parcel and the Facility.
If the Lease Agreement shall expire
3
<PAGE>
or be terminated and this Ground Lease shall remain in effect, Ground Lessor
shall pay or cause to be paid all Taxes due with respect to the Parcel and
the Facility; PROVIDED, HOWEVER, that Ground Lessor shall not be required to
make any such payments if Ground Lessor shall in good faith be contesting any
such Taxes, so long as such contest does not involve any material danger of
the sale, forfeiture or loss of any part of the Parcel, the Facility, title
thereto or any interest of Ground Lessee therein. If Ground Lessor fails to
make any payment required to be made by Ground Lessor, Ground Lessee at its
option may pay the same and any moneys so paid by Ground Lessee shall be
repaid on an After-Tax Basis by Ground Lessor to Ground Lessee on demand.
ARTICLE X
INSURANCE
So long as the Lease Agreement is in effect, Ground Lessor
acknowledges that the Lessee under the Lease Agreement shall be responsible
for maintaining insurance coverage with respect to the Parcel and the
Facility in accordance with SECTION 14 of the Lease Agreement. If the Lease
Agreement shall expire or be terminated and this Ground Lease shall
thereafter remain in effect, Ground Lessor shall, without cost to Ground
Lessee, maintain or cause to be maintained in effect throughout the remaining
Ground Lease Term, with insurers of recognized responsibility, insurance
policies with respect to the Parcel and the Facility insuring against loss or
damage to the person and property of Ground Lessee and others, all from such
risks and in such amounts as owners of similar properties maintain with
respect to such property, including liability insurance in an amount
reasonably satisfactory to Ground Lessee; PROVIDED, HOWEVER, that Ground
Lessor shall in no event be required to maintain any such insurance in
amounts greater than is generally maintained by responsible owners of similar
property. If the Ground Lessor shall fail to maintain such insurance during
the remaining Ground Lease Term, the Ground Lessee may (but shall be under no
obligation to) maintain or cause such insurance to be maintained at the sole
cost and expense of the Ground Lessor.
ARTICLE XI
CASUALTY OR CONDEMNATION
Any payment, including condemnation awards, received at any time by
Ground Lessor or Ground Lessee from any Governmental Authority or other
Person as a result of the occurrence of an Event of Loss or a Requisition of
Use when the Lease Agreement is in effect shall be distributed in accordance
with SECTION 13 of the Lease Agreement. Any such payment received by Ground
Lessor or Ground Lessee after the Lease Agreement has expired or has been
terminated shall be applied as follows: so much
4
<PAGE>
of such payments as shall be necessary to pay in full all sums owing to
Ground Lessee, as lessor under the Lease Agreement or under any other
Operative Document shall be retained by, or paid over to, Ground Lessee, and
the balance (if any) of such payments shall be retained by, or paid over to
Ground Lessor.
ARTICLE XII
DEFAULT
Notwithstanding anything to the contrary contained in this Ground
Lease, no event, occurrence or failure to perform by (or on behalf of) Ground
Lessee shall constitute a default or an event of default hereunder, and
Ground Lessor shall have no right (whether conferred by statute or otherwise)
to terminate this Ground Lease or to take possession of the Parcel, so long
as any sums remain to be paid at any time by Lessee under the Lease Agreement
or any other Operative Document. After the expiration or termination of the
Lease Agreement, the following events shall constitute an event of default
hereunder:
(a) The Ground Lessee shall consent to the appointment of a
receiver, trustee, liquidator, assignee, trustee, custodian, sequestrator (or
similar official) of itself or for any substantial part of its property, or
the Ground Lessee shall not pay or generally be unable to pay, or admit in
writing its inability to pay, its debts generally as they come due, or shall
make a general assignment for the benefit of creditors;
(b) The Ground Lessee shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law (as now or hereafter
in effect), or the Ground Lessee shall consent to the entry of an order for
relief in an involuntary case under any such law;
(c) An order, judgment or decree shall be entered by any court
having jurisdiction in the premises for relief in respect of the Ground
Lessee in an involuntary case under any applicable bankruptcy, insolvency or
other similar law (as now or hereafter in effect), or appointing a receiver,
liquidator, assignee, or for any substantial part of its property, or
sequestering any substantial part of the property of the Ground Lessee, or,
ordering the winding up or liquidating of the Ground Lessee's affairs, and
any such order, judgment or decree shall remain in force undismissed,
unstayed or unvacated for a period of sixty (60) days after the date of entry
thereof; or
(d) A petition against the Ground Lessee in a proceeding under
applicable bankruptcy laws or other insolvency laws, as now or hereafter in
effect, shall be filed and shall not be withdrawn or dismissed within ninety
(90) days thereafter, or if, under the
5
<PAGE>
provisions of any law providing for reorganization or liquidation of
corporations which may apply to the Ground Lessee, any court of competent
jurisdiction shall assume jurisdiction, custody or control of the Ground
Lessee or of any substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of sixty (60) days.
Ground Lessor shall have the right, after the occurrence and during the
continuance of an event of default hereunder (provided that the Lease
Agreement has terminated or expired), to take possession of the Parcel or to
terminate this Ground Lease by giving thirty (30) days written notice to
Ground Lessee of Ground Lessor's election to terminate same. The remedies
set forth above are exclusive of any other rights or remedies of Ground
Lessor which exist at law or in equity.
ARTICLE XIII
SUBLEASE; ASSIGNMENT; SALE
Section 13.01. BY GROUND LESSEE. Ground Lessee will not assign
this Ground Lease or any of its rights or interests hereunder and will not
sublease all or any portion of the Parcel, except that Ground Lessee may from
time to time:
(a) sublease all or any part of the Parcel and/or the Facility
pursuant to the Lease Agreement;
(b) sublease all or any part of the Parcel and/or the Facility or
assign this Ground Lease or any interests of Ground Lessee hereunder to
any Person after the termination or expiration of the Lease Agreement;
and
(c) assign Ground Lessee's interests hereunder in connection with
an assignment of its interests as Lessor under the Lease Agreement.
In addition, in the event the Ground Lessor enters into a new leasing
arrangement pursuant to Section 19(a) of the Lease Agreement, the Ground
Lessee shall assign its interests hereunder to the lessor under such new
leasing arrangement. Any subletting or assignment permitted hereunder shall
relieve Ground Lessee of its obligations hereunder.
Section 13.02. BY GROUND LESSOR. So long as the Ground Lessee
(including its successors and assigns) is also the Lessor under the Lease
Agreement, Ground Lessor will not sell, transfer or convey the Parcel or any
of its rights or interests in the Parcel or assign this Ground Lease or any
rights or interests of Ground Lessor hereunder.
6
<PAGE>
ARTICLE XIV
NOTICES
Unless otherwise specifically provided herein, all notices and
other communications required or permitted hereunder shall be in writing and
shall be addressed and become effective as provided in the Lease Agreement.
ARTICLE XV
BINDING EFFECT; SUCCESSORS AND ASSIGNS
The terms and provisions of this Ground Lease and the respective
rights and obligations of Ground Lessee and Ground Lessor hereunder shall be
binding upon, and inure to the benefit of, their respective permitted
successors and assigns.
ARTICLE XVI
POSSESSION UPON TERMINATION
Upon termination of the Ground Lease Term, whether by lapse of time
or because of any of the conditions or provisions contained herein, Ground
Lessee will peaceably and quietly yield up and surrender possession of the
Parcel to Ground Lessor without representation or warranty.
ARTICLE XVII
GROUND LESSOR'S BANKRUPTCY
It is expressly understood and agreed that for purposes of
Section 365(h) of the Bankruptcy Code, 11 U.S.C. Section 365(h), (a) Ground
Lessee shall be deemed to be in possession of the Parcel by virtue of the
possessory interest therein granted to Ground Lessee under this Ground Lease
whether or not all or any part of the Parcel has been subleased by Ground
Lessee and (b) in the event of any rejection or disaffirmance of this Ground
Lease in any bankruptcy or similar proceeding relating to Ground Lessor,
Ground Lessee may elect to remain in possession of the Parcel for the balance
of the Ground Lease Term, including all extensions exercisable hereunder, at
the option of Ground Lessee.
7
<PAGE>
ARTICLE XVIII
INDEMNIFICATION
The Ground Lessor hereby agrees to indemnify, protect and keep
harmless each Indemnified Person pursuant to the provisions of SECTION 23 of
the Lease Agreement, which provisions are hereby incorporated herein by
reference as if fully set forth herein.
ARTICLE XIX
THE LEASE AGREEMENT
So long as the Lease Agreement remains in effect or the Lessee
under the Lease Agreement is otherwise liable for amounts in respect thereof
or under the other Operative Documents, Ground Lessor shall look solely to
the Lessee under the Lease Agreement for the performance and discharge of
Ground Lessee's obligations and liabilities under this Ground Lease (other
than with respect to Lessor's Liens and the restrictions on Ground Lessee's
rights of assignment and subleasing under Section 13.01) with the same force
and effect as though Ground Lessee had performed the same, and Ground Lessee
shall have no liability hereunder, no default or event of default shall arise
hereunder and the rights of Ground Lessee hereunder shall not be affected, as
a result of any failure of Ground Lessee to perform or discharge such
liabilities or obligations notwithstanding (a) any continuation of any such
failure after the end of the term of the Lease Agreement or (b) that such
failure first became known or apparent after the end of the term of the Lease
Agreement. No such performance or discharge by or on behalf of the Lessee
under the Lease Agreement shall be deemed an acknowledgment by Ground Lessor
of the Lessee under the Lease Agreement as Ground Lessee hereunder, or a
merger of the Lease Agreement with this Ground Lease or a merger of the
estate of Lessor under the Lease Agreement with the estate of the Lessee
thereunder.
ARTICLE XX
PERSONAL LIABILITY/LIMITED RECOURSE
Section 10.01. PERSONAL LIABILITY. No officer, director,
stockholder or employee of the Ground Lessee shall become personally liable
for the performance or observance of any agreements, obligations, covenants
or conditions to be performed or observed by Ground Lessee under this Ground
Lease, or any liabilities with respect thereto.
8
<PAGE>
Section 10.02. LIMITED RECOURSE. Except as otherwise provided in
the proviso to this SECTION 10.02, nothing contained in this Ground Lease or
in the other Operative Documents shall be construed as creating any liability
on the part of any past or present shareholder, limited partner or general
partner of the Ground Lessor, the General Partner, or the MGP General
Partners to pay any amount on account of the Ground Lessor's obligations
hereunder or under any other Operative Document to which it is a party or to
perform any covenant of the Ground Lessor contained herein or therein;
provided, however, that nothing in this SECTION 10.02 shall be construed (i)
to relieve any Person from liability for fraud, concealment, or other
intentional wrongdoing for which such Person would otherwise be liable under
any Applicable Law, either directly or on behalf of the Ground Lessor, (ii)
to restrict the joinder in any action of any necessary party in order to seek
enforcement of rights against the Ground Lessor or any other party to any
Operative Document or to restrict injunctive relief against any Person to the
extent necessary to obtain performance by the Ground Lessor of any of its
obligations under any Operative Document, or (iii) to relieve any Person from
liability for distributions, payments, or other transfers made to such Person
in violation of the Operative Documents or in violation of or otherwise
recoverable under any Applicable Law.
ARTICLE XXI
MISCELLANEOUS
Section 21.01. SEVERABILITY. Any provision of this Ground Lease
that shall be prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 21.02. AMENDMENT. Neither this Ground Lease nor any of
the terms hereof may be terminated, amended, supplemented, waived or modified
orally, but only by an instrument in writing signed by the party against
which the enforcement of the termination, amendment, supplement, waiver or
modification shall be sought.
Section 21.03. HEADINGS. The Table of Contents and headings of
the various Articles and Sections of this Ground Lease are for convenience of
reference only and shall not modify, define or limit any of the terms or
provisions hereof.
Section 21.04. COUNTERPARTS. This Ground Lease may be executed by
the parties hereto in separate counterparts. All such counterparts shall
together constitute but one and the same instrument.
9
<PAGE>
Section 21.05. GOVERNING LAW. THIS GROUND LEASE SHALL IN ALL
RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF IDAHO
APPLICABLE TO AGREEMENTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 21.06. RECORDING. This Ground Lease or a memorandum
hereof may be recorded by either party hereto in the appropriate real estate
records and Ground Lessor shall pay all costs of recording and all applicable
recording or transfer taxes or related charges.
Section 21.07. ESTOPPEL CERTIFICATES. Ground Lessor will execute,
acknowledge and deliver to Ground Lessee, promptly upon request an estoppel
certificate certifying (a) that this Ground Lease is unmodified and in full
force and effect (or, if there have been modifications, that this Ground
Lease is in full force and effect, as modified, and stating the date of each
instrument so modifying this Ground Lease), (b) the dates, if any, to which
rent has been paid and (c) whether any default exists hereunder known to it
and, if any such default exists, specifying the nature and period of
existence thereof and what action it is taking or proposes to take with
respect thereto, and whether notice thereof has been given to Ground Lessee.
Any such certificate may be relied upon by the Lessor, Ground Lessee and any
prospective purchaser or transferee of Ground Lessee's interest under this
Ground Lease or any part thereof.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have each caused this Ground
Lease to be duly executed and delivered and their corporate seals to be
hereunto affixed and attested as of the day and year first above written.
GROUND LESSOR:
CROWN PACIFIC LIMITED PARTNERSHIP
BY CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its general partner
By:
------------------------------
Name:
Title:
GROUND LESSEE:
SELCO SERVICE CORPORATION
By:
------------------------------
Name:
Title:
<PAGE>
SCHEDULE A
(the Parcel)
<PAGE>
EXHIBIT 10.17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE AGREEMENT
Dated as of December 19, 1997
between
SELCO SERVICE CORPORATION,
as Lessor
and
CROWN PACIFIC LIMITED PARTNERSHIP,
as Lessee and Construction Agent
---------------------
Bonners Ferry Circle Mill
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS; CONSTRUCTION OF REFERENCES . . . . . . . . . . . . 1
SECTION 2. LEASE OF THE LEASED PROPERTY. . . . . . . . . . . . . . . . . .14
SECTION 3. TERM AND RENT . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 4. CONSTRUCTION AGENT. . . . . . . . . . . . . . . . . . . . . . .16
SECTION 5. ACQUISITION OF COMPONENTS; FINANCING. . . . . . . . . . . . . .19
SECTION 6. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . .20
SECTION 7. NET LEASE; NON-TERMINABILITY. . . . . . . . . . . . . . . . . .28
SECTION 8. RETURN OF THE LEASED PROPERTY . . . . . . . . . . . . . . . . .29
SECTION 9. WARRANTY OF THE LESSOR. . . . . . . . . . . . . . . . . . . . .30
SECTION 10. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE AND USE;
REPLACEMENT PARTS; MODIFICATIONS. . . . . . . . . . . . . . .32
SECTION 12. INSPECTION REPORTS. . . . . . . . . . . . . . . . . . . . . . .35
SECTION 13. LOSS OR DESTRUCTION; REQUISITION OF USE . . . . . . . . . . . .37
SECTION 14. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 15. SUBLETTING; ASSIGNABILITY; AMENDMENT OF CONTRACTS . . . . . . .42
SECTION 16. REPRESENTATIONS AND WARRANTIES OF LESSOR. . . . . . . . . . . .43
SECTION 17. REPRESENTATIONS AND WARRANTIES OF LESSEE. . . . . . . . . . . .44
SECTION 18. ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . .52
SECTION 19. OPTIONS UPON LEASE TERMINATION. . . . . . . . . . . . . . . . .55
SECTION 20. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . .57
SECTION 21. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
<PAGE>
Page
----
SECTION 22. RIGHT TO PERFORM FOR LESSEE . . . . . . . . . . . . . . . . . .62
SECTION 23. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .62
SECTION 24. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 25. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . .65
SECTION 26. AMENDMENTS AND MISCELLANEOUS. . . . . . . . . . . . . . . . . .66
EXHIBITS
--------
Exhibit A - Form of Lease Supplement
Exhibit B - Form of Requisition
Exhibit C - Approved Construction Budget
Exhibit D - Form of Officer's Certificate for Final Completion Date
Exhibit E - Terms of Single Investor Tax Lease
Exhibit F - Credit Agreement
SCHEDULES
---------
Schedule 1 - Parcel
Schedule 6(a)(viii) - Permits
ii
<PAGE>
LEASE AGREEMENT
LEASE AGREEMENT dated as of December 19, 1997 between SELCO SERVICE
CORPORATION, an Ohio corporation ("Lessor"), and CROWN PACIFIC LIMITED
PARTNERSHIP, a Delaware limited partnership ("Lessee").
SECTION 1. DEFINITIONS; CONSTRUCTION OF REFERENCES.
In this Lease, unless the context otherwise requires:
(a) All references in this Lease to designated Sections and other
subdivisions are to designated Sections and other subdivisions of this Lease,
and the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Lease as a whole and not to any particular Section or other
subdivision.
(b) The terms defined in this Section or elsewhere in this Lease
shall, for purposes of this Lease and all Exhibits and Schedules hereto, have
the meanings assigned to them in this Section or elsewhere herein and include
the plural as well as the singular and the singular as well as the plural;
except as otherwise indicated, all the agreements or instruments herein defined
shall mean such agreements or instruments as the same may from time to time be
supplemented or amended or the terms thereof waived or modified to the extent
permitted by, and in accordance with, the terms hereof and thereof and of the
other Operative Documents.
(c) Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this Lease,
such determination or computation shall be done in accordance with GAAP at the
time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Lease.
(d) The following terms shall have the following meanings for all
purposes of this Lease:
ACTUAL PROJECT COSTS shall mean, collectively, (i) all amounts paid or
payable to finance the acquisition of the Components, (ii) all amounts paid or
payable as costs for the construction, operation and maintenance of the Facility
and (iii) amounts constituting interest, fees and expenses paid or payable with
respect to the Facility as set forth in the Approved Construction Budget.
<PAGE>
AFFILIATE shall mean, as to a particular entity, a Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such entity, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of such
entity or (iii) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by such entity. As used herein, the term control
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise, the terms
"controlling," "controlled by" and "under common control with" shall have
meanings correlative to the foregoing.
AFTER-TAX BASIS shall mean on a basis such that any payment received
or deemed to have been received by any Person shall, if necessary, be
supplemented by a further payment to that Person so that the sum of the two
payments shall, after deduction of all taxes, penalties, fines, interest,
additions to tax and other charges (taking into account any related credits or
deductions) resulting from the receipt (actual or constructive) of such payments
imposed by or under any Federal, state, local or foreign law or taxing or
governmental authority be equal to the payment received or deemed to have been
received.
APPLICABLE LAW shall mean all applicable laws, rules, codes,
ordinances, permits, certificates, Orders, regulations and treaties of the
United States of America and states, territories and political subdivisions
thereof and of any other Governmental Authority.
APPLICABLE PERMITS shall mean any Permit that is necessary to develop,
build, improve, own, operate or use all or any part of the Leased Property or
any part thereof in accordance with this Lease and the other Operative
Documents.
APPRAISAL shall have the meaning set forth in Section 6(a)(xiv)
hereof.
APPRAISER shall mean Independent Equipment Company.
APPROVED CONSTRUCTION BUDGET shall mean the budget prepared by the
Lessee, in form and substance satisfactory to the Lessor, attached as EXHIBIT C
hereto, which budget specifies the estimated Actual Project Costs including:
(a) all labor, materials and services necessary for the design, engineering and
construction of the Facility, in accordance with the Construction Contract and
the Construction Agreements, and (b) the expenses to be incurred in connection
with the design, engineering and construction of the Facility, as the same may
be amended from time to time in accordance with the provisions of Section 4
hereof and the other Operative Documents.
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APPROVED CREDIT AGREEMENT ACTION shall mean any amendment or
modification to, or waiver under, the Credit Agreement at such times that Key
Bank National Association or any Affiliate of Key Bank National Association is
a "Bank" party to the Credit Agreement.
BASIC RENT shall have the meaning set forth in Section 3(b) hereof.
BASIC RENT PAYMENT DATE shall have the meaning set forth in Section
3(b) hereof.
BASIC RENT RATE shall mean, with respect to each Rental Period, an
interest rate per annum equal to the sum of (i) the rate or interest at which
deposits in U.S. dollars for a one month period are offered in the London
interbank market as quoted on the Reuters Screen page "LIBO" at or about 11:00
A.M. (London time) on the second Business Day prior to the commencement of such
Rental Period, or if such page on such screen ceases to display such
information, such other page as may replace it on that screen for the purpose of
displaying such information PLUS (ii) 125 basis points.
BILL OF SALE shall mean the Bill of Sale by the Ground Lessor in favor
of the Ground Lessee dated the Closing Date, pursuant to which the Lessee
transferred and sold to the Lessor certain Components described therein.
BUSINESS DAY shall mean (a) a day of the year (other than a Saturday
or a Sunday) on which banks are not required or authorized to close in New York
City, Boston, Massachusetts, and San Francisco, California, and (b) if the
applicable Business Day relates to the determination of the Basic Rent Rate, a
day of the year (other than a Saturday or a Sunday) that is also a day on which
dealings are carried on in the London interbank market and banks are open for
business in London.
CERCLIS shall mean the Comprehensive Environmental Response
Compensation and Liability Information System, which is a list maintained by the
United States Environmental Protection Agency of sites where there is a known or
suspected release or potential release of hazardous materials which may require
remediation.
CLAIM shall mean all liabilities (including, without limitation,
negligence, warranty, statutory, product, strict or absolute liability,
liability in tort or otherwise), obligations, responsibilities, losses, damages,
penalties, fines, sanctions, claims, Environmental Claims, actions, causes of
action, suits, investigations, judgments, Liens (including any Lien in favor of
any Governmental Authority for environmental liabilities and costs or violations
of any Environmental Laws), Taxes, costs, expenses and
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disbursements, of any kind or nature, including, without limitation, reasonable
legal fees and expenses and costs of investigation.
CLOSING DATE shall mean December 19, 1997.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMPONENTS shall mean all furniture, fixtures, equipment and other
real or personal property to be constructed or installed on the Parcel on or
after the Closing Date, along with the real and personal property described in
the Warranty Deed and the Bill of Sale, as set forth in detail in the Lease
Supplements, and together shall constitute the Facility.
CONSTRUCTION AGENT shall have the meaning set forth in Section 4(a)
hereof.
CONSTRUCTION AGREEMENTS shall have the meaning set forth in Section
4(c)(iv) hereof.
CONSTRUCTION CONTRACT shall mean the Agreement dated as of July 22,
1997 between Lessee and HCMA relating to the construction of the Facility, as
assigned to the Lessor pursuant to the Construction Contract Assignment.
CONSTRUCTION CONTRACT ASSIGNMENT shall mean the Assignment Agreement
dated as of December 19, 1997 among the Lessee, as assignor, the Lessor, as
assignee, and HCMA.
CONSTRUCTION SCHEDULE shall mean the Construction Schedule for the
Facility, as the same may be amended or supplemented from time to time in
accordance with Section 4 hereof.
CONTRACTUAL OBLIGATION shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
CREDIT AGREEMENT shall mean the Amended and Restated Credit Agreement
dated as of July 31, 1996, as amended October 15, 1996, March 31, 1997, and
October 10, 1997, among the Lessee, Bank of America National Trust and Savings
Association, as Agent, ABN AMRO Bank, N.V. and Societ, Generale, as Co-Agents,
and the other financial institutions party thereto, a copy of which is attached
as EXHIBIT F
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hereto, as it may hereafter be amended or modified or any of its provisions may
hereafter be waived pursuant to any Approved Credit Agreement Action.
DEFAULT shall mean an event which, after the giving of notice or lapse
of time, or both, would constitute an Event of Default.
ENVIRONMENTAL CLAIMS shall mean any Claim, action, cause of action,
investigation or notice (in written form) by any Person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, Remedial Action, Releases, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from (a) the presence,
release into the environment, of any Hazardous Material at any location, whether
or not owned or operated by the Lessee or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
ENVIRONMENTAL CONSULTANT shall mean Century West Engineering
Corporation.
ENVIRONMENTAL LAWS shall mean all applicable federal, state, foreign
and local laws and regulations, and common law relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface, water, groundwater, land surface or subsurface strata, wetlands,
wildlife, aquatic species, vegetation and natural resources), including, without
limitation, laws and regulations relating to emissions, discharges, Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials. Environmental Laws include, but
are not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"); the Federal Insecticide, Fungicide, and
Rodenticide Act ("FIFRA"); the Resource Conservation Recovery Act ("RCRA"); Oil
Pollution Act of 1990 ("OPA"); the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"); the Toxic Substances Control Act ("TSCA"); the Hazardous
Material Transportation Act; the Clean Air Act; the Federal Water Pollution
Control Act; the Safe Drinking Water Act; and their state and local counterparts
or equivalents.
ENVIRONMENTAL PERMITS shall mean all Permits required under
Environmental Laws.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and regulations promulgated thereunder.
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ERISA AFFILIATE shall mean any trade or business (whether or not
incorporated) under common control with the Lessee within the meaning of Section
414(b) or 414(c) of the Code.
ERISA EVENT shall mean (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Lessee or any ERISA Affiliate from a
Pension Plan subject to Section 4063 of ERISA during a plan year in which it was
a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a
cessation of operations which is treated as such a withdrawal under Section
4062(e) of ERISA; (c) the filing of a notice of intent to terminate the
treatment of a plan amendment as a termination under Section 4041 or 4041A of
ERISA or the commencement of proceedings by the PBGC to terminate a Pension Plan
subject to Title IV of ERISA; (d) a failure by the Lessee or any ERISA Affiliate
to make required contributions to a Pension Plan or other Plan subject to
Section 412 of the Code; (e) an event or condition which might reasonably by
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; (f) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon the Lessee; or (g) an
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Pension Plan.
EVENT OF DEFAULT shall have the meaning set forth in Section 20
hereof.
EVENT OF LOSS shall mean with respect to the Facility any of the
following events: (i) loss of the Facility or the use thereof due to theft,
disappearance, destruction, damage beyond repair or rendition of the Facility
permanently unfit for commercial operation for any reason whatsoever; (ii) any
damage to the Facility which results in an insurance settlement with respect to
the Facility on the basis of a total loss; (iii) the requisition of title to the
Leased Property or any part thereof by the act of the United States government
or any other Governmental Authority; (iv) the condemnation, confiscation or
seizure of, or requisition of use ("Requisition of Use") of the Leased Property
or any part thereof by the act of the United States Government or any other
Governmental Authority which constitutes a total taking thereof, (v) the
Requisition of Use of the Leased Property or any part thereof by the act of the
United States Government or any other Governmental Authority which has rendered
the operation of the Facility uneconomic to the Lessee. The date of such Event
of Loss shall be the date of such theft, disappearance, destruction, damage,
condemnation, confiscation, seizure, requisition of title, Requisition of Use or
unfitness for use for the stated period.
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EXPECTED TAXES shall mean net income taxes imposed by any federal or
state Governmental Authority on the Lessor with respect to any Rent received by
the Lessor.
FACILITY shall mean the sawmill facility to be constructed on the
Parcel, as more fully described in the Construction Contract and the
Construction Budget and shall be comprised of the Components and the existing
planner and tray sorter facility and dry kiln facility located on the Parcel.
FINAL COMPLETION DATE shall mean the date on and as of which the
Lessee has delivered to the Lessor a fully executed Officer's Certificate in the
form of EXHIBIT D hereto.
FINAL SURVEY shall mean an ALTA/ACSM survey of the Parcel and any
necessary easements, rights of way or similar property rights benefiting the
Parcel, showing the location of all Components, easements, encroachments and
other survey matters together with a certification from the surveyor, such
survey and certification shall be in form and substance satisfactory to the
Lessor.
GAAP shall mean generally accepted accounting principals in the United
States of America in effect from time to time.
GENERAL PARTNER shall mean the general partner of the Lessee, Crown
Pacific Management Limited Partnership, a Delaware limited partnership, or any
successor general partner of the Lessee.
GOVERNMENT ACTION shall mean all actions, authorizations, consents,
approvals, waivers, exceptions, variances, franchises, filings, orders, permits,
licenses, exemptions, publications, notices to and declarations of or with any
Governmental Authority, including, without limitation, those pertaining to
Environmental Laws and Environmental Permits.
GOVERNMENTAL AUTHORITY shall mean and include any Federal, state,
municipal or other governmental department, commission, board, bureau, court,
legislature, agency, instrumentality or authority, domestic, foreign,
transnational or international.
GROUND LEASE shall mean the Ground Lease dated as of December 19, 1997
between the Ground Lessor and the Ground Lessee, conveying to the Lessor a
leasehold estate in the Parcel.
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GROUND LESSEE shall mean the Lessor as ground lessee under the Ground
Lease.
GROUND LESSOR shall mean the Lessee as ground lessor under the Ground
Lease.
HCMA shall mean HCMA Consulting Group, Inc., an Oregon corporation.
HAZARDOUS MATERIALS shall mean (i) all substances defined as such in
the National Oil and Hazardous Substances Pollution Contingency Plan, 40
C.F.R.(S)300.5, (ii) any substance that, whether by its nature or use, is
subject to regulation under any Environmental Law or with respect to which any
Federal, state or local Environmental Law of Governmental Authority requires
environmental investigation, monitoring or remediation and (iii) all substances
defined as such by, or regulated as such under, any Environmental Law.
INDEMNIFIED PERSON shall mean the Lessor, its successors, assigns and
affiliates, and the directors, officers, employees and agents of the foregoing.
INDEPENDENT AUDITOR shall have the meaning set forth in Section
18(a)(i).
INSURANCE REQUIREMENTS shall mean all of the insurance requirements
set forth in Section 14(a) through (c) hereof.
IRS shall mean the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions.
LAW shall mean any law (including, without limitation, any zoning law
or ordinance, any Environmental Law or Legal Requirements), treaty, directive,
statue, rule, regulation, ordination, order, directive, code, interpretation,
judgment decree, injunction, writ, determination, award, Permit, license,
authorization, direction, requirement or decision of or agreement with or by any
Governmental Authority or any official or officer thereof having jurisdiction of
the matter in question.
LEASE shall mean this Lease and shall include each Lease Supplement
entered into pursuant to the terms hereof.
LEASE SUPPLEMENT shall mean a supplement to this Lease duly executed
and delivered by the Lessor and the Lessee pursuant to, and in accordance with,
the terms hereof, in the form of EXHIBIT A hereto.
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LEASE TERM shall mean the period commencing on the Closing Date and
ending on the Lease Termination Date or such shorter period as may result from
earlier termination as provided herein.
LEASE TERMINATION DATE shall mean the earlier of (i) the Final
Completion Date, (ii) September 30, 1998 and (iii) the date on which this Lease
is terminated pursuant to the terms hereof.
LEASED PROPERTY shall mean the Parcel and the Facility.
LEGAL REQUIREMENTS shall mean (i) all Laws, foreseen or unforeseen,
ordinary or extraordinary, or arising from any restriction of record or
otherwise, which now or at any time hereafter may be applicable to the Lessor,
as owner of the Facility, the Lessee, as lessee hereunder, or the Leased
Property or any part thereof, or any of the adjoining sidewalks, or the
maintenance, management, ownership, construction, operation, mortgaging,
occupancy, possessing, use, non-use or condition of the Leased Property or any
part thereof; (ii) and any other governmental rules, orders and determinations
now or hereafter enacted, made or issued, and applicable to the Lessor, as owner
of the Facility, the Lessee, as lessee hereunder, or the Leased Property or any
part thereof or to the maintenance, management, ownership, construction,
operation, mortgaging, occupancy, possession, use, non-use or condition thereof
whether or not presently contemplated; and (iii) all agreements, Permits,
covenants, and restrictions applicable to the Leased Property or any part
thereof or the maintenance, management, ownership, construction, operation,
mortgaging, occupancy, possession, use, non-use or condition thereof.
LESSEE shall mean Crown Pacific Limited Partnership, a Delaware
limited partnership, and its permitted successors and assigns.
LESSOR shall mean SELCO Service Corporation, an Ohio corporation, and
its permitted successors and assigns.
LESSOR'S LIENS shall mean any Lien on or against the Leased Property
arising as a result of (i) Claims against the Lessor which are not related to
the transactions contemplated by the Operative Documents, (ii) any act or
omission of the Lessor which is not related to the transactions contemplated by
the Operative Documents or is in violation of any of the terms of the Operative
Documents or (iii) Claims against the Lessor with respect to Taxes or expenses
against which the Lessee is not required to indemnify Lessor pursuant to any of
the Operative Documents.
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LIEN shall mean any interest in property securing an obligation owed
to, or claimed by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to any security interest, mortgage, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes;
the term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property.
MANDATORY ALTERATION shall have the meaning set forth in Section 11(d)
hereof.
MATERIAL ADVERSE EFFECT shall mean (a) a material adverse change in,
or a material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of the Lessee; (b) a material
impairment of the ability of the Lessee to perform under this Lease or any other
Operative Document and to avoid any Event of Default; (c) a material adverse
effect upon the legality, validity, binding effect or enforceability against the
Lessee of any Operative Document or; (d) a material adverse effect on the
continued economic operation of the Leased Property.
MAXIMUM REQUISITION FUNDING AMOUNT shall mean $16,959,077.67.
MEMORANDUM OF LEASE shall mean the Memorandum of Lease dated as of
December 19, 1997 between the Lessor and the Lessee.
MEMORANDUM OF GROUND LEASE shall mean the Memorandum of Ground Lease
dated as of December 19, 1997 between the Ground Lessor and the Ground Lessee.
MGP GENERAL PARTNERS shall mean, collectively, Freemont Timber, Inc.,
a Delaware corporation, and HS Corp. of Oregon, an Oregon corporation, the sole
general partners of the General Partner, and any successor general partner of
the General Partner.
MODIFICATION shall mean any improvement, modification, alteration or
addition to the Leased Property.
NEW LEASE NOTIFICATION shall have the meaning set forth in Section
19(a) hereof.
NONSEVERABLE MODIFICATION shall mean a Modification to the Leased
Property which is not a Severable Modification.
NPL shall mean the National Priorities List.
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OFFICER'S CERTIFICATE of any Person shall mean a certificate signed by
a president, any vice president and/or any other duly authorized and responsible
officer of such Person.
OPERATIVE DOCUMENTS shall mean and include this Lease, the Lease
Supplements, the Construction Contract, the Construction Contracts Assignment,
the Ground Lease, the Memorandum of Lease, the Memorandum of Ground Lease, the
Bill of Sale and the Warranty Deed.
ORDER shall mean and include any order, writ, injunction, decree,
judgment, award, determination, direction or demand of any Governmental
Authority.
OVERDUE RATE shall mean a rate per annum equal to the greater of (i)
2% above the Basic Rent Rate then in effect, or for any period after the Lease
Termination Date, the Basic Rent Rate for the last Rental Period or (ii) 2%
above the Prime Rate.
PARCEL shall mean the real property described on Schedule 1 hereto.
PARTS shall mean all appliances, parts, instruments, appurtenances,
accessories and other equipment of whatever nature, which may from time to time
be incorporated or installed in or attached to and become a part of the Leased
Property as originally constituted.
PENSION PLAN shall mean a pension plan (as defined in Section 3(2) of
ERISA) subject to Title IV of ERISA which the Lessee or any ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the
immediately preceding five (5) plans years.
PERMIT shall mean any order, authorization, consent, approval,
license, ruling, permit, certification, exemption, filing or registration by or
with any Governmental Authority.
PERMITTED ENCUMBRANCES shall have the meaning set forth in the Ground
Lease.
PERMITTED LIENS shall mean all Liens permitted by Section 10 hereof.
PERSON shall mean any individual, partnership, corporation, limited
liability company, limited liability partnership, joint stock company, trust,
unincorporated
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association or organization or joint venture, a government or any department or
agency thereof, or any other entity.
PLAN shall mean an employee benefit plan (as defined in Section 3(3)
of ERISA) which the Lessee or any ERISA Affiliate sponsors or maintains or to
which the Lessee makes, is making, or is obligated to make contributions and
includes any Pension Plan.
PRIME RATE shall mean the rate of interest per annum publicly
announced from time to time by Key Bank National Association as its prime rate
in effect at its principal office in Cleveland, Ohio; each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.
PURCHASE PRICE shall mean $2,453,200 which represents the amount paid
by the Lessor to the Lessee for the real and personal property described in the
Bill of Sale and the Warranty Deed.
RELEASE shall mean the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migrating into
the environment of any Hazardous Material through or in the air, soil, surface
water or groundwater.
REMEDIAL ACTION shall mean actions required to (i) clean up, remove,
treat or in any other way address Hazardous Materials in the environment, (ii)
prevent the Release or further Release or minimize the further Release of
Hazardous Materials, or (iii) investigate and determine if a remedial response
is needed, to design such a response and post-remedial investigation,
monitoring, operation, maintenance and care.
RENT shall have the meaning set forth in Section 3(c) hereof.
RENTAL PERIOD shall mean the following periods: (i) the Closing Date
through December 31, 1997 and (ii) each calendar month thereafter through the
Lease Termination Date; PROVIDED, that with respect to the calendar month in
which the Lease Termination Date occurs, the Rental Period for that month, if
the Lease Termination Date is not the last day of such month, shall be the first
day of such calendar month through the Lease Termination Date.
REPLACEMENT PARTS shall have the meaning set forth in Section 11(c)
hereof.
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REPORTABLE EVENT shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
REQUISITION shall mean a requisition by the Lessee for Requisition
Fundings substantially in the form of EXHIBIT B.
REQUISITION FUNDING shall have the meaning set forth in Section 5(b)
hereof.
REQUISITION FUNDING CONDITIONS shall mean the conditions to each
Requisition Funding set forth in Sections 6(b) and 6(c) hereof.
REQUISITION FUNDING DATE shall mean the Closing Date and the first
Business Day of any month thereafter through the Lease Termination Date.
REQUISITION OF USE shall have the meaning set forth in the definition
of Event of Loss.
SEVERABLE MODIFICATION shall mean any Modification to the Leased
Property permitted hereunder which can be readily removed therefrom without
impairing the current or residual value, utility or remaining useful life of the
Leased Property.
SUBSIDIARY of any Person shall mean any corporation, partnership,
limited liability company, limited liability partnership, joint venture, trust
or estate of which (or in which) more than 50% of (a) the Voting Stock of such
corporation, (b) the interest in the capital or profits of such partnership,
limited liability company, limited liability partnership, or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more of
its other Subsidiaries or by one or more of such Person's other Subsidiaries.
SUPPLEMENTAL RENT shall have the meaning set forth in Section 3(c)
hereof.
TAX or TAXES shall mean, without limitation, any fee (including
license, filing, recording, transfer, mortgage and registration fees), foreign,
Federal, state or local tax (including any income, gross receipts, withholding,
franchise, excise, sales, use, value added, mortgage, real, personal, tangible
or intangible property tax or any tax similar to any of the foregoing taxes),
interest equalization, recording, transfer or stamp tax (including deed stamp
tax), assessment (including any maintenance charge, owner association dues or
charges), levy, impost, duty, charge or withholding of any kind or nature
whatsoever, imposed or assessed by any foreign, Federal, state or local
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government or agency, or governmental authority, together with any addition to
tax, penalty, fine or interest thereon, other than Expected Taxes.
TITLE INSURANCE POLICY shall have the meaning set forth in Section
6(a)(vii).
TOTAL FUNDINGS means an amount equal to all Requisition Fundings made
by the Lessor hereunder plus the Purchase Price.
UNFUNDED PENSION LIABILITY shall mean the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Pension Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
UPDATED TITLE POLICY shall mean an update of the Title Insurance
Policy in form and substance satisfactory to the Lessor, including the removal
of the survey exception.
VOTING STOCK shall mean, as to any corporation, all stock of any class
or classes (however designated), or other securities of any kind, having
ordinary voting rights for an election of a majority of the directors (or
Persons performing similar functions) of such corporation, other than shares or
securities having such power only by reason of the happening of a contingency.
WARRANTY DEED shall mean the Warranty Deed by the Ground Lessor in
favor of the Ground Lessee dated the Closing Date, pursuant to which the Lessee
transferred and sold to the Lessor certain Components described therein.
SECTION 2. LEASE OF THE LEASED PROPERTY.
Upon the terms and subject to the conditions set forth in this Lease
and each Lease Supplement, and in consideration for the rents and covenants
herein stipulated to be performed by the Lessee, the Lessor hereby leases to the
Lessee the Leased Property. This Lease shall be effective with respect to any
Components described on Schedule 1 to each Lease Supplement executed and
delivered by the Lessor and the Lessee from time to time and as described in the
Bill of Sale and the Warranty Deed. Such Components shall be subject to the
terms and conditions of this Lease from and after the date on which a Lease
Supplement relating to such Components is executed and delivered for the period
commencing on the date of execution and delivery of such Lease Supplement.
Simultaneously with the delivery of each Requisition pursuant to Section 5
hereof, the Lessee shall deliver to the Lessor an executed Lease Supplement with
respect to the Components included in the Actual Project Costs described in such
Requisition.
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SECTION 3. TERM AND RENT.
(a) TERM. The term of this Lease shall begin on the Closing Date and
shall end on the Lease Termination Date.
(b) BASIC RENT. On the first Business Day immediately succeeding the
last day of each Rental Period (each a "Basic Rent Payment Date"), the Lessee
shall pay to the Lessor, as basic rent (herein referred to as "Basic Rent") for
such Rental Period, an amount determined as follows:
(i) an amount equal to the aggregate amount of Actual
Project Costs advanced by the Lessor pursuant to Section 5 hereof from the
date hereof through and including such Basic Rent Payment Date, MULTIPLIED
BY
(ii) the Basic Rent Rate, DIVIDED BY
(iii) 360, and MULTIPLIED BY
(iv) the actual number of days in such Rental Period.
The Lessee agrees not to prepay any payment of Basic Rent except as specifically
provided by the terms hereof.
(c) SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor or such
other Person as shall be entitled thereto the following amounts (herein referred
to as "Supplemental Rent" and, together with all Basic Rent, as "Rent"):
(i) on the date provided herein or in the applicable
Operative Document or if no such date shall be so provided then on demand,
any amount payable hereunder (other than Basic Rent) which the Lessee
assumes the obligation to pay, or agrees to pay, under this Lease or any
other Operative Document to the Lessor or others; and
(ii) on demand, to the extent permitted by applicable law,
interest (computed on the basis of a 360-day year and actual days elapsed)
at the Overdue Rate on any payment of Rent not paid when due for any period
during which the same shall be overdue.
The expiration or other termination of the Lessee's obligation to pay Basic Rent
hereunder shall not limit or modify the obligations of the Lessee with respect
to Supplemental Rent.
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(d) PAYMENTS. All amounts payable by the Lessee hereunder shall be
paid in lawful money of the United States of America and in immediately
available funds by wire transfer by 2:00 p.m. (New York City time) on the
applicable Basic Rent Payment Date or on the date when due, unless any such due
date is not a Business Day, in which case payment shall be due and payable on
the next succeeding Business Day, at an account designated by the Lessor or to
such other Person in the United States of America or in such other manner as the
Lessor from time to time may designate to the Lessee by written instructions.
SECTION 4. CONSTRUCTION AGENT.
(a) APPOINTMENT OF CONSTRUCTION AGENT. The Lessor hereby appoints
the Lessee to act as the Lessor's agent (the Lessee, in such capacity, is herein
called the "CONSTRUCTION AGENT"), and the Construction Agent hereby agrees to
act as the Lessor's agent, to construct the Facility in a manner consistent with
the Construction Contract, the Approved Construction Budget, the Construction
Schedule and Construction Agreements and to undertake such other duties and
obligations as are set forth herein.
(b) TERM OF AGENCY RELATIONSHIP. The agency relationship created
herein between the Construction Agent and the Lessor shall commence as of the
date hereof and shall end on the sooner to occur of: (i) the Lease Termination
Date; (ii) the giving of notice by the Lessor of such termination upon the
occurrence of an Event of Default; or (iii) the Final Completion Date. No
termination of the agency relationship hereunder nor any failure on the part of
the Lessor to perform its obligations under any Operative Document (other than
its failure to make, or cause to make available, the proceeds of each
Requisition Funding in accordance with the terms hereof) shall limit or
otherwise affect the Lessor's rights against the Construction Agent for any
breach or failure to perform hereunder.
(c) DUTIES OF CONSTRUCTION AGENT. In connection with the
construction of the Facility, the Construction Agent shall on the Lessor's
behalf:
(i) construct, and/or cause the renovation and construction
of, the Facility in a good and workmanlike manner and in accordance with
prudent industry practice and free and clear of all Liens (other than
Permitted Liens) arising out of the same;
(ii) cause such construction to be carried on (i) with
diligence and continuity (subject to delays or interruptions resulting from
adverse weather, labor or materials shortages, strikes or other labor
difficulties, acts of God, or other similar circumstances beyond the
reasonable control of the Lessee) so that the Final Completion Date is
achieved by no later than September 30, 1998,
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(ii) substantially in accordance with the Construction Agreements, the
Construction Contract, Approved Construction Budget and the Construction
Schedule, (iii) in accordance in all material respects with all Legal
Requirements and Applicable Permits and (iii) in accordance with all
Insurance Requirements;
(iii) pay, or cause to be paid, in accordance with prudent
industry practice, all costs and expenses of such construction, including,
without limitation, all Actual Project Costs, if any, in excess of an
amount equal to the Maximum Requisition Funding Amount (without
reimbursement by or other obligation of the Lessor), including, to the
extent required, payment of all amounts owing to contractors and
subcontractors, and perform all obligations arising out of such
construction;
(iv) subject to the provisions of paragraph (e) below,
negotiate and enter into (on behalf of the Lessor) such design,
construction contracts, subcontracts, change orders or amendments thereto
(collectively, the "Construction Agreements") as the Construction Agent may
deem necessary or advisable in connection with the construction of the
Facility; provided, that such Construction Agreements shall be with
reputable contractors and subcontractors duly licensed (to the extent
required by Applicable Law) to perform their obligations under such
Construction Agreements and bonded by such reputable bonding companies, in
such amounts, payable in favor of the Lessor, as are consistent with
prudent industry standards and the Lessee's customary standards and
practices;
(v) subject to the limitations set forth in paragraph (e)
below, prepare and adopt such modifications, amendments and supplements to
the Approved Construction Budget and the Construction Schedule as the
Construction Agent may deem necessary or advisable;
(vi) apply for and procure, at its own cost and expense, any
and all Applicable Permits required to be obtained, maintained or held by
either the Construction Agent or the Lessor as and when required by any
Legal Requirement to be obtained and maintain all such Permits in full
force and effect to the extent required by Applicable Law;
(vii) deliver to the Lessor monthly progress reports on the
construction of the Facility no later than January 15, 1998 and on the 15th
of each month thereafter, which reports shall set forth the status of the
construction to date, including a statement setting forth the percentage of
the Facility completed,
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and certify that the construction has been performed in a good and
workmanlike manner, substantially in accordance with the Construction
Agreements, the Approved Construction Budget and the Construction Schedule;
(viii) at the cost and expense of the Construction Agent, allow
the Lessor or its agent to examine and obtain copies of all Construction
Agreements, Applicable Permits, invoices, purchase orders or receipts for
Actual Project Costs, construction plans, requests for proposal, bids, and
all other information related to the construction of the Facility as the
Lessor may reasonably request; and
(ix) deliver to the Lessor copies of any periodic reports
prepared by, or provided to, the Lessee or the Construction Agent in
connection with the construction and operation of the Facility.
(d) RIGHT TO RECEIVE CONSTRUCTION COSTS.
(i) During the course of the construction of the Facility,
the Construction Agent may, in compliance with the procedures set forth in
Section 5 hereof, request payment by the Lessor of Actual Project Costs.
(ii) Subject to and in accordance with Section 5 hereof, the
Lessor shall make available, or cause to be made available, the proceeds of
each Requisition Funding as directed by the Construction Agent in the
Requisition relating thereto. The Construction Agent will use the proceeds
of each Requisition Funding received by it only to pay the Actual Project
Costs set forth in the Requisition for such Requisition Funding and title
to the Components acquired with proceeds of each Requisition Funding shall
be vested in the Lessor.
(e) CERTAIN LIMITATIONS ON SCOPE OF AGENCY RELATIONSHIP. The
Construction Agent:
(i) may amend or revise the Approved Construction Budget to
reflect amendments or revisions to the Construction Contract or
Construction Schedule made in accordance with the terms hereof and thereof,
PROVIDED, HOWEVER, that the Construction Agent shall not, without the prior
written consent of the Lessor, amend or revise the Approved Construction
Budget to increase the total actual and projected amount of the Actual
Project Costs to an amount which exceeds the sum of the Maximum Requisition
Funding Amount plus ten percent (10%) of the Maximum Requisition Funding
Amount; and
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(ii) shall not, without the prior written consent of the
Lessor, request or make any changes in the design, drawing, specifications,
or construction of any part of the Facility that would (i) reduce the
current or residual fair market value or useful life of the Facility;
(ii) materially change the use of the Facility; or (iii) result in the
failure to complete the construction the Facility (A) in a good and
workmanlike manner and in accordance with prudent industry practice and
free and clear of all Liens (other than Permitted Liens) arising out of the
same and (B) in compliance with all applicable Legal Requirements,
Applicable Permits and Insurance Requirements; and
(iii) shall not amend or revise the Construction Schedule to
extend the scheduled date for completion of the construction of the
Facility beyond September 30, 1998.
SECTION 5. ACQUISITION OF COMPONENTS; FINANCING.
(a) ACQUISITION. In order to finance the acquisition by the Lessor
of the Components and to finance the cost of construction of the Facility, the
Lessor, as more fully described below, will advance to the Construction Agent on
behalf of the Lessor the Actual Project Costs.
(b) REQUISITIONS. No more than ten (10) and no less than five (5)
Business Days prior to each Requisition Funding Date, the Construction Agent
shall submit to the Lessor a Requisition requesting an advance on the
immediately succeeding Requisition Funding Date in an amount not to exceed the
amount of Actual Project Costs incurred since the immediately preceding
Requisition Funding Date (such amount, a "Requisition Funding"). Each
Requisition shall constitute a representation and warranty by the Construction
Agent and the Lessee that the conditions precedent to such Requisition Funding
have been satisfied.
(c) REQUISITION FUNDINGS. Subject to the satisfaction of the
conditions set forth in Section 6(a) hereof, with respect to the Closing Date,
and Sections 6(b) and, if applicable, 6(c) hereof with respect to each other
Requisition Funding Date, the Lessor shall make a Requisition Funding on the
applicable Requisition Funding Date; PROVIDED, HOWEVER, that the Lessor shall
(i) not be obligated to make a Requisition Funding on the Closing Date in an
amount in excess of $3,588,567.11 or a Requisition Funding on January 2, 1998 in
an amount in excess of $1,000,000, unless prior to such applicable date the
Lessor shall have received the Final Survey and the Updated Title Policy and
(ii) not be obligated to make a Requisition Funding if after making such
Requisition Funding the aggregate amount of the Total Fundings less the Purchase
Price would exceed
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the Maximum Requisition Funding Amount. All Requisition Fundings shall be made
to the Construction Agent in immediately available funds at the account or
accounts designated in the Requisition submitted with respect to such
Requisition Funding.
SECTION 6. CONDITIONS PRECEDENT.
(a) CONDITIONS PRECEDENT TO THE CLOSING DATE. The obligations set
forth in Sections 2, 4 and 5 hereof shall be subject to the fulfillment, to the
satisfaction of the Lessor, on or before the Closing Date, of the following
conditions precedent:
(i) DUE AUTHORIZATION, EXECUTION AND DELIVERY. The
Operative Documents shall have been duly authorized, executed and delivered
by all parties thereto and shall be in full force and effect. No condition
or event shall exist or have occurred which would constitute a Default or
Event of Default under any of the Operative Documents by any party thereto
and the Lessee shall have delivered an Officer's Certificate to such effect
dated the Closing Date.
(ii) REPRESENTATIONS. The representations and warranties of
the Lessee set forth in the Operative Documents shall be true and correct
on and as of the Closing Date, and the Lessee shall have delivered an
Officer's Certificate dated the Closing Date to such effect.
(iii) OPINIONS. The following opinions, dated the Closing
Date and addressed to the Lessor, shall have been delivered to the Lessor:
(A) an opinion of Ball Janik, LLP, special counsel to
the Lessee, addressed to the Lessor in form and substance reasonably
satisfactory to the Lessor and its counsel; and
(B) an opinion of Davis Wright Tremaine LLP, Idaho
counsel, addressed to the Lessor, as to matters of Idaho law, and in
form and substance reasonably satisfactory to the Lessor and its
counsel.
(iv) PROCEEDINGS SATISFACTORY AND OTHER EVIDENCE. All
partnership, corporate and other proceedings taken or to be taken in
connection with the transactions contemplated by the Operative Documents
and all documents, papers and authorizations relating thereto shall be
reasonably satisfactory to the Lessor and its counsel. The Lessor and its
counsel shall receive copies of such documents and papers as they have
reasonably requested, in form and substance reasonably satisfactory to
them, including but not limited to the Operative Documents.
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(v) SECRETARY'S CERTIFICATES; GOOD STANDING CERTIFICATES;
ETC. The Lessor shall have received on or before the Closing Date the
following, each dated the Closing Date (unless otherwise specified) in form
and substance satisfactory to the Lessor:
(A) copies of the resolutions of the board of
directors of each MGP General Partner, as general partners of the
General Partner, as general partner of the Lessee, and the executive
committee of the Board of Control of the General Partner, in each case
approving the execution, delivery and performance by the General
Partner on behalf of the Lessee of the Operative Documents and the
transactions contemplated thereby, certified as of the Closing Date by
the Secretary or an Assistant Secretary of such MGP General Partners
and the General Partner, as the case may be;
(B) a certificate of the Secretary or Assistant
Secretary of the General Partner certifying the names and true
signatures of the officers of the General Partner, as general partner
of the Lessee, authorized to execute, deliver and perform, as
applicable this Lease and the other Operative Documents on behalf of
the Lessee;
(C) the partnership certificate of the Lessee and the
General Partner as in effect on the Closing Date, certified by the
Secretary of State (or similar, applicable Governmental Authority) of
the state of formation of such entities as of a recent date and by the
Secretary or Assistant Secretary of the General Partner as of the
Closing Date, and each of the Lessee's Partnership Agreement and the
General Partner's Partnership Agreement as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the General
Partner as of the Closing Date;
(D) the articles or certificate of incorporation of
each MGP General Partner as in effect on the Closing Date, certified
by the Secretary of State (or similar, applicable Governmental
Authority) of the state of incorporation of such MGP General Partner
as of a recent date and by the Secretary or Assistant Secretary of
such MGP General Partner as of the Closing Date, and the bylaws of
each MGP General Partner as in effect on the Closing Date, certified
by the Secretary or Assistant Secretary of such MGP General Partner as
of the Closing Date; and
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(E) a good standing certificate for the Lessee, the
General Partner and the MGP General Partners from the Secretary of
State (or similar, applicable Governmental Authority) of its state of
incorporation or formation, as applicable, and with respect to the
Lessee, the States of Idaho, Washington and Oregon, as of a recent
date, together with a bring-down certificate by facsimile, dated the
Closing Date;
(vi) CLOSING FEES. The Lessee shall have paid, or caused to
be paid, accrued fees and expenses of the Lessor (including the reasonable
fees and expenses of New York, Washington and Idaho counsels to the
Lessor).
(vii) TITLE AND SURVEY; FLOOD HAZARD.
(A) The Ground Lessor shall have granted to the Ground
Lessee a good and marketable leasehold estate in the Parcel, free and
clear of all Liens, except Permitted Encumbrances. The Ground Lessee
shall have received from a title insurance company acceptable to the
Ground Lessee (the "Title Company") an ALTA prepaid title insurance
policy in a form acceptable to the Ground Lessee insuring the Ground
Lessee's leasehold estate in the Parcel together with any necessary
easements, rights-of-way or similar property rights in an amount not
less than $19,459,077.67; subject only to such exceptions as shall be
approved by the Ground Lessee, including a pending disbursements
clause and containing all endorsements required by the Ground Lessee,
including without limitation, a comprehensive endorsement, a
contiguity endorsement, an endorsement providing mechanics' lien
coverage and an endorsement insuring access to duly open public roads
(the "Title Insurance Policy").
(B) The Lessor shall have received a preliminary
survey of the Parcel.
(C) Evidence that the Parcel is not in a flood hazard
zone or evidence of flood hazard insurance.
(viii) PERMITS AND CERTAIN PROPERTY MATTERS. All Permits that
are or will become Applicable Permits (including, without limitation, those
identified on Schedule 6(a)(viii), shall have been obtained, except
Applicable Permits customarily obtained or which are permitted by Law to be
obtained after the Closing Date (and the Lessee, having completed all
appropriate due diligence in connection therewith, shall have no reason to
believe that such Permits will not be
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granted in the usual course of business prior to the date that such Permits
are required by Law). All such obtained Permits shall be in proper form,
shall be in full force and effect and shall not be subject to any further
appeal, consent or contest or to any unsatisfied condition that may allow
modification or revocation. The Lessee shall have delivered an Officer's
Certificate certifying satisfaction of the foregoing condition, together
with a copy of each Permit required to be obtained as of the Closing Date
pursuant to this Section 6(a)(viii).
(ix) DOCUMENTS RELATING TO THE PARCEL. The Lessee shall
deliver, or cause to be delivered, to the Lessor documentation with respect
to the condition of the Parcel, the real estate Taxes applicable to the
Parcel and such other documents and agreements relating to the construction
and operation of the Facility or any part thereof as the Lessor may
reasonably request, in form and substance reasonably acceptable to the
Lessor.
(x) INSURANCE. The Lessee shall be in compliance with all
Insurance Requirements and all insurance policies required by Section 14
hereof shall be in full force and effect. The Lessee shall deliver, or
cause to be delivered, to the Lessor (a) certificates of insurance,
applicable reinsurance cover notes or other satisfactory assurances,
evidencing the coverage of such policies in compliance with the Insurance
Requirements; and (b) copies of the exceptions to coverage of such
policies.
(xi) TAXES. Evidence of the Taxes payable for the Parcel
shall be provided to the Lessor. All Taxes, fees and other charges which
have become due and payable in connection with the execution and delivery
of the Operative Documents shall have been paid by the Lessee and evidence
shall be provided to the Lessor that the Parcel is a legally subdivided tax
lot.
(xii) ENVIRONMENTAL MATTERS. A Phase I and Phase II
environmental audit of the Parcel by the Environmental Consultant shall
have been conducted, at the sole cost and expense of the Lessee, and the
Lessor shall have received a copy of the Environmental Consultant's report
on its environmental audit, together with an update thereof, which (i)
shall conclude that (A) no environmental hazards exist on the Parcel that
are unacceptable to the Lessor and (B) neither the Parcel, the Components
nor the Facility are likely to create any environmental hazards based upon
anticipated and permitted practices and procedures and (ii) shall otherwise
be in form and substance satisfactory to the Lessor (in its sole
discretion).
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(xiii) NO EVENT OF DEFAULT. No event has occurred and no
condition exists which, assuming that all Operative Documents had been
signed prior to the Closing Date, would constitute a Default or an Event of
Default.
(xiv) APPRAISAL. The Lessee shall cause an appraisal of the
Leased Property (the "APPRAISAL") to be delivered to the Lessor, which
Appraisal shall be in form and substance satisfactory to the Lessor. The
Appraisal shall be prepared by the Appraiser at the expense of the Lessee.
(xv) NO MATERIAL ADVERSE CHANGE, ETC. No Applicable Law
shall prohibit, and no litigation, governmental investigation or other
proceeding shall be pending or threatened in which there is a reasonable
possibility, in the reasonable judgment of the Lessor, of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon, the Leased
Property or any material part thereof or the acquisition, use, ownership,
maintenance, management, operation or leasing thereof or the construction
of the Facility or any transaction contemplated hereby or by any other
Operative Document or the Lessee performance of its obligations hereunder
or thereunder. Since December 31, 1996, there shall not have occurred any
material adverse change in the Lessee's (i) business, financial position or
results of operations or (ii) ability to perform its respective obligations
under any Operative Document to which it is a party, and the Lessee shall
have delivered an Officer's Certificate to such effect.
(xvi) INITIAL REQUISITION. The Lessee shall have delivered a
Requisition to the Lessor at least five (5) Business Days prior to the
Closing Date.
(xvii) RECORDING AND FILING. The Memorandum of Ground Lease,
the Memorandum of Lease and a UCC precautionary financing statement shall
have been duly recorded, published, registered and filed by the Lessee, in
such manner and in such places as the Lessor and its counsel shall
determine to be necessary or appropriate to publish notice thereof and
protect the validity and effectiveness thereof and to establish, create,
perfect, preserve and protect the rights of the parties thereto and their
respective successors and assigns, and all Taxes, fees and other charges in
connection with such recording, publishing, registration and filing thereof
shall have been paid by the Lessee.
(xviii) CONSENTS AND APPROVALS. All Governmental Actions which
are required to have been taken, given, obtained, filed or recorded, as the
case may be, on or prior to the Closing Date by, from or with any
Governmental
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Authority, and all other consents, filings or approvals which are required
to have been taken, given, obtained, filed or recorded, as the case may be,
on or prior to the Closing Date by, from or with any other Person, in each
case, (a) in connection with the transactions contemplated by the Operative
Documents or to authorize the execution, delivery and performance by the
Lessee or the Lessor and each of the Operative Documents to which it is a
party, or the legality, validity, binding effect or enforceability thereof
as against the Lessee, (b) in order that the Leased Property may be leased,
used and operated for its intended purposes and the Facility may be
constructed thereon as contemplated hereby, or (c) otherwise in connection
with the transactions contemplated by the Operative Documents, shall have
been duly taken, given, obtained, filed or recorded, as the case may be,
and all such approvals shall have been duly taken, given, obtained, filed
or recorded, as the case may be, shall be in full force and effect on the
Closing Date, shall not be subject to any pending proceedings or appeals
(administrative, judicial or otherwise) and shall be adequate to authorize
the consummation of the transactions contemplated by the Operative
Documents and the performance by the Lessee of its obligations thereunder
to which it is a party, except such as may be required to be taken,
obtained, given, accomplished or renewed from time to time in connection
with the maintenance or operation of the Leased Property or which are
otherwise required in connection with the transactions contemplated by the
Operative Documents which have been applied for but which cannot be
obtained, or which are not normally applied for or taken, given or
obtained, prior to the Closing Date, and which in the normal course would
be granted; PROVIDED that the failure to obtain such Governmental Actions,
consents or approvals by the Closing Date would not materially adversely
affect the ability of the Lessee to perform its obligations under any
Operative Document to which it is a party.
(xix) SATISFACTION WITH CONTEMPLATED TRANSACTIONS. The Ground
Lessee shall be satisfied, in its sole discretion, with its review of the
Parcel and all material matters in connection with the leasing thereof by
the Ground Lessee.
(xx) ADDITIONAL DOCUMENTS. The Lessor shall have received
such other approvals, certificates or documents as the Lessor may
reasonably request to evidence satisfaction of the conditions set forth in
this Section 6(a).
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(b) CONDITIONS PRECEDENT TO EACH REQUISITION FUNDING SUBSEQUENT TO
THE CLOSING DATE. The obligations of the Lessor to make Requisition Fundings
subsequent to the Closing Date as set forth in Section 5 hereof shall be subject
to the fulfillment, to the satisfaction of the Lessor, by, on or as of the date
of such requested Requisition Funding, of the following conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Lessee set forth in the Operative Documents shall be true
and correct as if made on and as of the date of such Requisition Funding.
(ii) COMPLIANCE; NO DEFAULT, ETC. The Lessee shall be in
compliance with its obligations under the Operative Documents on such date
and there shall exist no Default or Event of Default under the Operative
Documents.
(iii) REQUISITION; USE OF PROCEEDS. The Lessor shall have
received a timely and complete Requisition pursuant to and in compliance
with Section 5(a). All proceeds of the Requisition Fundings shall have
been applied solely to Actual Project Costs, and the Lessee shall certify
the same in each Requisition and provide such other evidence with respect
to the use of such proceeds as may be reasonably requested by the Lessor.
(iv) COMPLIANCE WITH LAW. The Leased Property, the
construction, and operation of the Facility and the Lessee and the
Construction Agent shall be in material compliance with all Laws including,
without limitation, all building and construction Laws and Environmental
Laws applicable to the Leased Property.
(v) NO MATERIAL ADVERSE EVENT. No Applicable Law shall
prohibit, and no litigation, governmental investigation or other proceeding
shall be pending or threatened in which there is a reasonable possibility,
in the judgment of the Lessor, of an unfavorable judgment, decree, order or
other determination which could prevent or make unlawful, or impose any
material adverse condition upon, the Leased Property or the construction or
operation of the Facility or any transaction contemplated hereby or by any
other Operative Document or the ability of the Lessee to perform its
obligations hereunder or thereunder, and the Lessee shall certify the same
in each Requisition.
(vi) LEGALITY. The making of any Requisition Funding, and
maintenance thereof, by the Lessor shall not be prohibited by any
Applicable Law and shall not subject to any Tax, penalty, liability or
other onerous condition under or pursuant to any Applicable Law.
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(vii) PERMITS. All Permits that are or will become Applicable
Permits shall have been obtained, except Applicable Permits customarily
obtained or which are permitted by Law to be obtained after the date of the
requested Requisition Funding (and the Lessee, having completed all
appropriate diligence in connection therewith, shall have no reason to
believe that such Permits will not be granted in the usual course of
business prior to the date that such Permits are required by Law). All
such obtained Permits shall be in proper form, in full force and effect and
not subject to any appeal, consent or further contest or to any unsatisfied
condition (other than conditions relating to completion in the future) that
may allow modification or revocation.
(viii) NO PROPERTY DAMAGE. None of the Leased Property shall
have suffered an Event of Loss, or any other damage or destruction which
renders the Leased Property unusable in whole or in material part and,
under Applicable Law, the Leased Property may be used for the purposes
contemplated by the Lessee in accordance with this Lease, and the Lessee
shall certify the same in each Requisition.
(ix) TITLE INSURANCE POLICY UPDATE. The Title Insurance
Policy shall have been endorsed and re-dated as required by the Lessor to
cover each Requisition Funding, including, without limitation, a mechanics
lien endorsement, with no title exceptions objectionable to the Lessor.
(x) ADDITIONAL DOCUMENTS. The Lessor shall have received
such other approvals, certificates or documents as the Lessor may
reasonably request to evidence satisfaction of the conditions set forth in
this Section 6(b).
(c) CONDITIONS PRECEDENT TO ANY REQUISITION FUNDING SUBSEQUENT TO
JANUARY 1, 1998. The obligations of the Lessor to make Requisition Fundings
subsequent to January 1, 1998 as set forth in Section 5 hereof shall be subject
to the fulfillment, to the satisfaction of the Lessor, by, on or as of the date
of such requested Requisition Funding, of the following conditions:
(i) OTHER CONDITIONS. The Lessee shall have satisfied the
conditions precedent set forth in Section 6(b) hereof.
(ii) DELIVERY OF FINAL SURVEY AND UPDATED TITLE POLICY. The
Lessor shall have received the Final Survey and the Updated Title Policy.
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SECTION 7. NET LEASE; NON-TERMINABILITY.
(a) This Lease is a net lease and, except as otherwise expressly
provided in this Lease, any present or future Law to the contrary
notwithstanding, shall not terminate, nor shall the Lessee be entitled to any
abatement, reduction, set-off, counterclaim, defense or deduction with respect
to any Rent or other sum payable hereunder. Except as otherwise expressly
provided in this Lease, the obligations of the Lessee shall not be affected by
reason of: (i) any damage to or destruction of the Leased Property or any part
thereof by any cause whatsoever (including, without limitation, by fire, Event
of Loss or act of God or enemy or any other force majeure event); (ii) any
Requisition of Use, including, without limitation, a temporary Requisition of
Use of the Leased Property or any part thereof; (iii) any prohibition,
limitation, restriction or prevention of the Lessee's use, occupancy or
enjoyment of the Leased Property or any part thereof by any Person; (iv) any
matter affecting title to the Leased Property or any part thereof; (v) any
eviction of the Lessee from, or loss of possession by the Lessee of, the Leased
Property or any part thereof, by reason of title paramount or otherwise;
(vi) any default by the Lessor hereunder; (vii) the invalidity or
unenforceability of any provision hereof or in the other Operative Documents or
the impossibility or illegality of performance by the Lessor or the Lessee or
both; (viii) any action of any Governmental Authority; or (ix) any other cause
or occurrence whatsoever, whether similar or dissimilar to the foregoing. The
parties intend that the obligations of the Lessee hereunder shall continue
unaffected unless such obligations shall have been modified or terminated
pursuant to an express provision of this Lease.
(b) The Lessee shall remain obligated under this Lease in accordance
with its terms and shall not take any action to terminate, rescind or avoid this
Lease, notwithstanding any bankruptcy, insolvency, reorganization, liquidation,
dissolution or other proceeding affecting the Lessor or any action with respect
to this Lease which may be taken by any trustee, receiver or liquidator or by
any court. Except as expressly permitted in this Lease, the Lessee waives all
rights to terminate or surrender this Lease, or to any abatement or deferment of
Rent or other sums payable hereunder or under the other Operative Documents.
The Lessee shall remain obligated under this Lease in accordance with its terms,
and the Lessee hereby waives any and all rights now or hereafter conferred by
Law or otherwise to modify or to avoid strict compliance with its obligations
under this Lease. All payments made to or for the benefit of the Lessor
hereunder as required hereby shall be final, and the Lessee shall not seek to
recover any such payment or any part thereof for any reason whatsoever, absent
manifest error.
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SECTION 8. RETURN OF THE LEASED PROPERTY.
(a) RETURN. If upon the expiration or termination of this Lease, the
Lessee or its designee has not purchased the Facility as provided in Section 19
hereof or the Lessee shall not have entered into new leasing arrangements
pursuant to Section 19 hereof, the Lessee shall surrender the Leased Property
and the Facility shall be surrendered in the operating condition, efficiency,
utility and with the useful life the Facility had upon the completion of its
construction, except as repaired, rebuilt, replaced, renovated, altered, added
to or built as permitted or required hereby and except for ordinary wear and
tear. To the extent that the Facility is not in compliance with the above, upon
such expiration or termination (except as a consequence of a Event of Loss, as
to which Section 13 hereof applies), the Lessee shall pay to Lessor (or on
behalf of the Lessor) such additional amounts as are required to place it in
compliance therewith.
(b) NO LIENS. The Lessee shall also surrender the Leased Property to
the Lessor free and clear of all Liens, easements, consents and restrictive
covenants and agreements affecting the Leased Property (other than Lessor's
Liens and Permitted Encumbrances).
(c) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Lessee shall also
surrender the Leased Property in a condition such that they are in compliance
with all applicable Environmental Laws (irrespective of whether the deadline for
such compliance would otherwise expire after the Lease Termination Date).
Nothing contained in this Section 8 shall relieve or discharge or in any way
affect the obligation of the Lessee to cure promptly pursuant to this Lease any
violations of Legal Requirements referred to in this Lease, or to pay and
discharge any Liens against the Leased Property. The Lessee shall cooperate, to
the fullest extent, with the Lessor, its subsequent lessees, operators or
purchasers to effect the transfer of all of Lessee's Applicable Permits for the
Leased Property to such Persons.
(d) REMOVAL AND REPAIR. The Lessee, at its sole cost and expense,
shall remove from the Leased Property on or prior to such expiration or
termination, all property situated thereon which is not owned by the Lessor and
shall repair any damage caused by such removal and shall restore the Facility to
the condition and working order (or reasonable equivalent thereof) in which it
existed immediately prior to the installation of such property, except for
ordinary wear and tear. Lessee shall indemnify and hold harmless the Lessor,
its successors and assigns against any loss, liability, cost, expense, penalty
or claim arising out of the Lessee's removal of such property from the Leased
Property including, without limitation, any environmental liability arising
therefrom. Any such property of the Lessee not so removed shall become the
property of the Lessor,
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and the Lessor may cause such property to be removed from the Leased Property
and disposed of, and the cost of any such removal and disposition of the
Lessee's property and of repairing any damage caused by such removal and of the
restoration of the Leased Property to the condition and working order (or
reasonable equivalent thereof) in which the Leased Property existed immediately
prior to the installation of such property, ordinary wear and tear excepted,
shall be borne by the Lessee.
(e) SURVIVAL. The obligations of the Lessee under this Section 8
shall survive the expiration or any termination of this Lease (whether by
operation of Law or otherwise) for all matters described in this Section 8 which
occur or arise prior to such expiration or termination or arise out of or result
from facts, events, claims, liabilities, actions or conditions occurring,
arising or existing on or before such expiration or termination.
SECTION 9. WARRANTY OF THE LESSOR.
(a) QUIET ENJOYMENT. During the term of this Lease, the Lessor
covenants that, unless a Default or an Event of Default has occurred and is
continuing, it will not, and will not permit any party claiming by or under the
Lessor (subject to the terms, covenants and provisions of the Ground Lease) to,
(i) grant, create or suffer to exist any Lien upon the Leased Property (or any
part thereof or interest therein) other than the Permitted Encumbrances
(excluding therefrom any Lessor's Lien); or (ii) interfere with the peaceful and
quiet possession and enjoyment of the Leased Property by the Lessee.
(b) LIMITED LESSOR WARRANTY. The warranties set forth in paragraph
(a) of this Section are in lieu of all other warranties of the Lessor, other
than as specifically set forth in the other Operative Documents, whether
written, oral or implied, with respect to this Lease or any of the Leased
Property, and the Lessor shall not be deemed to have modified in any respect the
obligations of the Lessee pursuant to Section 7 hereof, which obligations are
absolute and unconditional.
(c) THE LESSEE REPRESENTS, WARRANTS, ACKNOWLEDGES AND AGREES THAT (I)
THE FACILITY IS OF THE SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY THE
LESSEE, (II) THE LESSEE IS SATISFIED THAT THE LEASED PROPERTY IS SUITABLE FOR
ITS PURPOSES, (III) THE LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF
SUCH KIND AND (IV) THE LEASED PROPERTY IS LEASED HEREUNDER SUBJECT TO ALL
APPLICABLE LAWS AND GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED
AND, WITH
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RESPECT TO ANY COMPONENTS CONVEYED TO THE LESSOR ON THE CLOSING DATE, IN THE
SAME STATE AND CONDITION AS WHEN TITLE THERETO WAS FIRST CONVEYED, TRANSFERRED
AND ASSIGNED TO THE LESSOR (NORMAL WEAR AND TEAR EXCEPTED), WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND BY THE LESSOR, EXPRESS OR IMPLIED, AS TO
THE TITLE, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN,
OPERATION, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, ABSENCE OF LATENT
DEFECTS OR FITNESS FOR USE OF THE LEASED PROPERTY (OR ANY PART THEREOF), OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO
THE LEASED PROPERTY (OR ANY PART THEREOF), OTHER THAN AS SPECIFICALLY SET FORTH
IN THE OPERATIVE DOCUMENTS. It is agreed that except as expressly provided
herein all risks incident to the matters discussed in the preceding sentence, as
between the Lessor and Lessee, are to be borne by the Lessee. Except to the
extent otherwise expressly stated, the foregoing provisions are intended to be a
complete exclusion and negation of any representations or warranties by the
Lessor, express or implied, with respect to the Leased Property, or any part
thereof, whether arising pursuant to the Uniform Commercial Code or any similar
law now or hereafter in effect, or otherwise. The Lessor authorizes the Lessee,
at the Lessee's expense, to assert for the Lessor's account, during the Lease
Term, so long as no Event of Default shall have occurred and be continuing, all
of the Lessor's rights under any applicable manufacturer's or contractor's
warranty and the Lessor agrees to cooperate with the Lessee in asserting such
rights; PROVIDED, HOWEVER, that the Lessee shall indemnify and hold the Lessor
harmless from and against any and all claims, and all costs, expenses, damages,
losses and liabilities incurred or suffered by the Lessor in connection with, as
a result of, or incidental to, any action by the Lessee pursuant to the above
authorization. Any amount received by the Lessee as payment under any such
warranty shall be applied to restore the Facility to the condition required by
Section 11 hereof and any excess shall be paid to the Lessee.
SECTION 10. LIENS.
The Lessee will not directly or indirectly create, incur, assume or
suffer to exist any Liens on or with respect to any of the Leased Property or
any part thereof, the Lessor's title thereto or any interest of the Lessor
therein (and the Lessee will promptly, at its own expense, take such action as
may be necessary duly to discharge any such Lien), except (a) the respective
rights of the Lessor and the Lessee as herein and in the other Operative
Documents provided, (b) Lessor's Liens, (c) Liens for taxes either not yet due
or being contested by the Lessee in good faith with due diligence and by
appropriate proceedings (and with respect to which the Lessee shall have secured
a stay of execution
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pending such contest and adequate reserves are maintained with respect thereto,
in accordance with GAAP), provided that counsel for the Lessor shall have
determined that the nonpayment of any such tax or the contest of any such
payment in such proceedings does not, in the opinion of such counsel, adversely
affect the title, property or rights of the Lessor in the Leased Property, (d)
inchoate materialmen's, mechanics', workmen's, repairmen's, employees' or other
like Liens arising in the ordinary course of business of the Lessee for amounts
either not yet due or being contested by the Lessee in good faith with due
diligence and by appropriate proceedings (and with respect to which the Lessee
shall have secured a stay of execution pending such contest and adequate
reserves are maintained with respect thereto, in accordance with GAAP), if
counsel for the Lessor shall have determined that the contest of any such
payment in such proceedings does not, in the opinion of such counsel, adversely
affect the title, property or rights of the Lessor in the Leased Property, (e)
easements, rights-of-way and other similar encumbrances arising in the ordinary
course of the Lessee's business and necessary for the operation or the
construction of the Facility which do not impose material financial obligations
on the Lessee and which do not diminish the current or residual value or
interfere with the ordinary intended use of the Leased Property, and (f)
Permitted Encumbrances.
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE AND USE;
REPLACEMENT PARTS; MODIFICATIONS.
(a) MAINTENANCE AND OPERATION. The Lessee shall operate, maintain,
inspect, service, repair and overhaul the Facility in accordance with prudent
industry practice and such operating standards as shall be applied by the Lessee
or its Affiliates with respect to similar property owned or leased by the Lessee
or its Affiliates and in any event shall keep the Facility in as good operating
condition as when delivered to the Lessee hereunder, ordinary wear and tear
excepted. Throughout the Lease Term, the possession, operation and maintenance
of the Facility shall be at the sole risk and expense of the Lessee.
(b) COMPLIANCE AND USE. The Lessee agrees that the maintenance, use
and operation, as applicable, of the Leased Property will, in all material
respects, be in compliance with all Applicable Laws. Subject to the provisions
of Section 15 hereof, the Leased Property will at all times (i) be used solely
in the conduct of the Lessee's business and (ii) be and remain in the possession
and control of the Lessee.
(c) REPLACEMENT PARTS. Except as otherwise provided in the
succeeding paragraph (d) of this Section, the Lessee, at its own cost and
expense, will promptly replace all Parts which may from time to time become worn
out, lost, stolen,
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destroyed, seized, confiscated, damaged beyond repair or permanently rendered
unfit for use (such replacement parts hereinafter called "Replacement Parts").
In addition, in the ordinary course of maintenance, service, repair,
overhaul or testing, the Lessee may, at its own cost and expense, remove any
Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated,
damaged beyond repair or permanently rendered unfit for use, PROVIDED that the
Lessee shall, at its own cost and expense, replace such Parts as promptly as
practicable. All Replacement Parts shall be free and clear of all Liens and
shall be in as good operating condition as, and shall have a value and utility
at least equal to, the Parts replaced assuming such replaced Parts were in the
condition and repair required to be maintained by the terms hereof. All Parts
at any time removed from the Facility shall remain the property of the Lessor,
no matter where located, until such time as such Parts shall be replaced by
Replacement Parts which have been incorporated or installed in or attached to
and become a part of the Facility and which meet the requirements for
Replacement Parts specified above. Immediately upon any Replacement Part
becoming incorporated or installed in or attached to and becoming a part of any
of the Facility as above provided, without further act, (i) title to the removed
Part shall thereupon vest in the Lessee, free and clear of all rights of the
Lessor, and shall no longer be deemed a Part hereunder, (ii) title to such
Replacement Part shall thereupon vest in the Lessor, and (iii) such Replacement
Part shall become subject to this Lease and be deemed part of the Facility for
all purposes hereof to the same extent as the Parts originally incorporated or
installed in or attached to the Facility. The Lessee agrees to cooperate with
the Lessor in the preparation, execution and filing of such documents as may be
reasonably required to create, perfect and maintain the Lessor's ownership in
any such Replacement Part.
The Lessee shall notify the Lessor of any Replacement Part or any
series of related Replacement Parts (whether related by type or function) for
any Leased Property installed and having a cost per Replacement Part or such
series of related Replacement Parts, as the case may be, of $250,000 or more.
(d) MODIFICATIONS. The Lessee may, without the prior written consent
of the Lessor, but solely at Lessee's expense, either (i) repair the Facility by
the installation of a Replacement Part, or (ii) affix, install or make any
Nonseverable Modification or Severable Modification as the Lessee may deem
desirable in the proper conduct of its business, PROVIDED, that no such
Modification diminishes the current or residual value, utility, useful life or
condition of the Facility below the current or residual value, utility, useful
life or condition thereof immediately prior to the making, affixing or
installing of such Modification, assuming the Facility was then of the value or
utility and in the condition required to be maintained by the terms of this
Lease.
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The Lessee shall, at its expense, make such Modifications to any of
the Facility ("Mandatory Alteration") as may be required from time to time to
meet the requirements of any Applicable Law or of any Governmental Authority
having jurisdiction, or any applicable Permit, deed, conveyance, lease,
agreement, easement or instrument.
Title to each Nonseverable Modification and each Mandatory Alteration
shall, upon installation or affixation to the Facility, vest in the Lessor and
thereupon such Nonseverable Modification or Mandatory Alteration, as the case
may be, shall become a part of the Facility for all purposes hereof and become
subject to this Lease.
Title to any Severable Modification (other than a Mandatory
Alteration) shall remain in, and be acquired at the expense of, the Lessee. So
long as no Event of Default shall have occurred and be continuing, the Lessee
may remove any Severable Modification (other than a Mandatory Alteration) at any
time prior to the expiration or termination of this Lease so long as such
removal shall not materially reduce the current or residual value, utility,
useful life or condition of the Facility below the current or residual value,
utility, useful life or condition the Facility would have had at such time if
such Severable Modification had not been made. Notwithstanding anything in this
Lease to the contrary, upon the occurrence and during the continuance of an
Event of Default, if this Lease shall be declared to be in default pursuant to
Section 20 hereof, any interest of the Lessee in any Severable Modification at
such time shall, without further act, become the property of the Lessor.
The Lessee shall notify the Lessor of any Mandatory Alterations,
Nonseverable Modifications and Severable Modifications or any series of related
Modifications (whether related by type or function) for the Facility installed
and having an estimated cost per Modification or such series of related
Modifications, as the case may be, in excess of $500,000. In the event any
Nonseverable Modification or Mandatory Alteration or such series of related
Modifications (whether related by type or function) shall have a cost per
Modification or such series of related Modifications, as the case may be
(including installation), in excess of $500,000, the Lessee at its sole cost and
expense shall furnish the Lessor with a full warranty bill of sale, in form and
substance satisfactory to the Lessor, conveying title to such Nonseverable
Modification or Mandatory Alteration to the Lessor.
(e) PROTECTION OF INTERESTS. The Lessee agrees to take such action
as shall reasonably be required from time to time by the Lessor to protect the
respective interests of the Lessor in the Leased Property.
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(f) ENCROACHMENTS. Except for Permitted Encumbrances, in the event
that all or any part of the Facility or any Modification shall encroach upon any
property or right-of-way adjoining or adjacent to the Leased Property or any
part thereof, or shall violate any agreements or conditions affecting the Leased
Property or any part thereof, or shall obstruct any easement or right-of-way to
which the Leased Property or any part thereof may be subject, then the Lessee
shall, at its sole cost and expense, either (i) contest such matter, (ii) obtain
valid and effective Permits for or consents to such encroachments and/or
violations (without any liability to the Lessor for which it is not indemnified
by the Lessee) or waivers or settlements of all claims, liabilities and damages
resulting therefrom, or (iii) make such changes, including alteration or
removal, to the Facility or the Modification (as the case may be) and take such
other action as shall be reasonably necessary to rectify such encroachments,
violations, hindrances, obstructions or impairments, subject to the Lessor's
consent if and to the extent required by paragraph (d) of this Section.
SECTION 12. INSPECTION REPORTS.
(a) INSPECTION. The Lessor shall have the right (which may be
delegated to its consultants, representatives and agents), but not the duty, to
inspect the Leased Property or any part thereof and records directly related to
the construction and operation of the Leased Property or any part thereof and to
discuss with the Construction Agent, the general contractor, subcontractors and
officers of the Lessee such of the affairs, finances, construction and accounts
as are relevant to the Operative Documents or as are necessary or advisable for
the Lessor to evaluate the progress, costs and quality of the construction of
the Facility, in all cases, at reasonable times and in compliance with and
subject to Lessee's and the Construction Agent's reasonable security and safety
procedures, in effect from time to time. Any such inspection shall be made
after advance written notice to the Lessee is given; PROVIDED, HOWEVER, that no
advance written notice need be given if the Lessor, in its sole discretion, has
reason to believe that a Default or Event of Default has occurred or other
exigent or emergency conditions exist; and PROVIDED FURTHER, that all such
inspections upon the occurrence and during the continuance of a Default or an
Event of Default (i) shall be at the expense of the Lessee (and shall otherwise
be at the expense of the Lessor) and (ii) shall be broad enough to provide the
Lessor, its consultants, representatives and agents with access to the Leased
Property or any part thereof and to the Lessor's books and records relating to
the management, operation, use, construction, renovation or occupancy of the
Leased Property or any part thereof as they may require for any purpose,
including, without limitation, for marketing, selling, operating or otherwise
disposing of the Leased Property or any part thereof.
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(b) LIABILITY; DAMAGE. The Lessee shall give prompt written notice
to the Lessor of each accident likely to result in damages against the Lessee
or, as the case may be, in excess of $750,000 in any way relating to or arising
out of the alleged or apparent improper manufacture, financing, construction,
purchase, acceptance, rejection, ownership, acquisition, delivery, nondelivery,
lease, sublease, preparation, installation, storage, maintenance, repair,
transportation, transfer of title, abandonment, possession, rental, use,
operation, condition, sale, return, importation, exportation, or other
disposition of the Leased Property or any portion thereof; promptly upon the
Lessee becoming aware of same, and on request shall furnish to the Lessor
information as to the time, place and nature thereof, the names and addresses of
the parties involved, any Persons injured, witnesses and owners of any property
damaged, and such other information as may be known to it and shall promptly
upon request, if such request is deemed reasonable under the circumstances by
the Lessee, furnish the Lessor with copies of all material correspondence,
papers, notices and documents whatsoever received by the Lessee (not otherwise
subject to the attorney-client privilege) in connection therewith. In any case,
the Lessor, at its own expense, may inspect all correspondence, papers, notices
and documents whatsoever received by the Lessee (not otherwise subject to the
attorney-client privilege) in connection therewith. In addition, the Lessee
shall give prompt written notice to the Lessor of any damage, loss of use or
destruction of the Leased Property or any part thereof which, in the aggregate,
exceed $750,000 and which would not otherwise constitute an Event of Loss with
respect thereto.
(c) LIENS. Upon the attachment of an aggregate amount of $250,000 or
more of Liens on all the Leased Property or any part thereof (in either case
excluding any Liens for taxes not yet due and payable), the Lessee shall
promptly (and in no event later than ten (10) Business Days after it shall have
obtained knowledge thereof) notify the Lessor of the attachment of all such
Liens and the full particulars thereof unless the same shall have been removed
or discharged by the Lessee.
(d) NOTICES OF NONCOMPLIANCE WITH APPLICABLE LAWS. The Lessee shall
furnish to the Lessor, within five (5) days after receipt thereof, a copy of any
notice or order of any Governmental Authority asserting that the Lessee is not
in compliance with, or may be liable for contamination originating from or on
the Parcel or the Facility under any Applicable Law, in any case in any respect
material to the value of the Leased Property or any part thereof or the
respective interests of the Lessor therein.
(e) PLANS AND SPECIFICATIONS; OPERATING MANUALS. The Lessee shall
maintain or cause its Affiliates to maintain throughout the Lease Term, and keep
on file at its office, a complete set of plans and specifications, including
"as-built" plans and specifications as and when available, with respect to the
Facility (which shall reflect all
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material Parts incorporated or installed in or attached to the Facility and all
material Modifications made pursuant to Section 11 hereof; PROVIDED, HOWEVER,
that such plans and specifications shall as of any date not be required to
reflect any such Parts so incorporated, installed or attached or any such
Modification made within thirty (30) days prior to such date). Other than any
part of the Leased Property which shall have been transferred to the Lessee
pursuant to the terms hereof, upon the expiration of the Lease Term, the Lessee
shall deliver to the Lessor or to the Lessor's designee a complete set, current
as of the date of such return or retaking, of such plans and specifications and
all work drawings and similar documents with respect to the Leased Property.
SECTION 13. LOSS OR DESTRUCTION; REQUISITION OF USE.
(a) EVENT OF LOSS. Upon the occurrence of an Event of Loss with
respect to Leased Property or any part thereof, the Lessee shall within five (5)
Business Days after the occurrence of such Event of Loss give the Lessor written
notice thereof. If the remaining portion of the Leased Property not suffering
such Event of Loss is not capable of functioning for its intended purpose, the
Lessee shall pay to the Lessor on the next Rent Payment Date occurring after the
occurrence of such Event of Loss as compensation for such Event of Loss an
amount equal to the Total Fundings made by the Lessor from the date hereof
through such Basic Rent Payment Date, together with (i) all Basic Rent due and
owing on or prior to such date and (ii) all Supplemental Rent due and owing
prior to such date and any other Supplemental Rent as to which there is no
dispute and which is agreed to become due and owing within 60 days of such date,
whereupon (1) this Lease and the obligations of the Lessee hereunder shall
terminate and (2) the Lessor shall transfer all right and interest of the Lessor
in and to the Leased Property, as is and where is, to the Lessee, free and clear
of Lessor's Liens but otherwise without representation or warranty, and the
Lessor shall, at the Lessee's expense, execute and deliver to the Lessee a bill
of sale or such other documents as the Lessee may reasonably request to evidence
the valid consummation of such transfer.
If, however, an Event of Loss has occurred with respect to the Leased
Property or any part thereof and the portions thereof not suffering such Event
of Loss are capable of functioning for their intended purpose, then the Lessee
shall as promptly as possible rebuild or cause to be rebuilt (or replace or
cause to be replaced) the portions of the Leased Property suffering such Event
of Loss which such rebuilt Leased Property (or replacement) shall have at least
the same current and residual value, utility and remaining useful life as it had
prior to the Event of Loss (assuming such Leased Property has been maintained in
accordance with the terms of this Lease). Any replacement portions of Leased
Property shall be subject to this Lease and the Lessor shall have title thereto.
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In the case of a Requisition of Use with respect to any portion of the
Leased Property which does not constitute an Event of Loss, such Requisition of
Use shall not terminate this Lease with respect to such portion of the Leased
Property and each and every obligation of the Lessee with respect thereto shall
remain in full force and effect. So long as no Event of Default shall have
occurred and be continuing under this Lease, the Lessee shall be entitled to all
sums attributable to the period the Leased Property or any portion thereof is
subject to this Lease, received by reason of any such Requisition of Use;
PROVIDED that if the Lessor determines that as a result of such partial taking
there is a reduction in the residual value of such Leased Property, the Lessee
will pay to the Lessor that portion of such sums as shall compensate the Lessor
for such reduction.
All condemnation awards and other moneys received by the Lessee or the
Lessor on account of an Event of Loss, other than insurance proceeds, shall be
applied as follows: FIRST, to purchase any Components from the Lessor or rebuild
or replace any Components contemplated by this Section 13(a) if not theretofore
paid by the Lessee, or to reimburse the Lessee for the payment therefor; SECOND,
to the Lessee to compensate it for the loss of the fair value of its leasehold
interest under this Lease, if any; and THIRD, any balance remaining shall be
remitted to the Lessor.
The Lessor authorizes the Lessee, at the Lessee's expense, to assert
for the Lessor's account, during the Lease Term, so long as no Event of Default
shall have occurred hereunder, all of the Lessor's rights and interests in the
course of any condemnation or requisition proceedings and the Lessor agrees to
cooperate with the Lessee in asserting such rights; PROVIDED, HOWEVER, that the
Lessee shall indemnify and hold the Lessor harmless from and against any and all
claims, and all costs, expenses, damages, losses and liabilities incurred or
suffered by the Lessor in connection with, as a result of, or incidental to, any
action by the Lessee pursuant to the above authorization.
(b) RISK OF LOSS; NO RELEASE OF OBLIGATIONS. Except as provided in
this Section, the Lessee shall bear the risk of loss and shall not be released
from its obligations hereunder in the event of any damage to the Leased Property
or any part thereof or any Event of Loss relating thereto.
SECTION 14. INSURANCE.
(a) The Lessee will purchase and maintain, or cause to be purchased
and maintained, insurance with respect to the Leased Property of the following
types and in the following amounts (or in such greater amounts as may become
necessary from time to time to prevent the Lessor and the Lessee from becoming
co-insurers of any loss), and
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in no event in amounts less than those maintained by the Lessee or its
Affiliates for other similar facilities owned and/or operated by them:
(i) PROPERTY INSURANCE: Property damage insurance on an
"all risk" basis, boiler and machinery insurance, including coverage
against damage or loss caused by fire, earthquake, earth movement, flood,
subsidence and collapse and providing (1) coverage equal to one hundred
percent (100%) of the full replacement cost value of the Leased Property
and the Lessee's leasehold interest (with only those deductibles approved
by the Lessor, and, if required by the Lessor, an agreed amount
endorsement), (2) transit coverage during the construction of the Facility
and (3) coverage for foundations and other property below the surface of
the ground;
(ii) GENERAL LIABILITY INSURANCE: Comprehensive general
liability (including contractual, completed operations and product
liability) insurance against claims for bodily injury (including death),
personal injury and property damage occurring on, in or in respect of the
Leased Property or resulting from activities on or related to the Leased
Property, in the minimum combined single limit amount of $15,000,000, for
each occurrence for bodily injury (or death) and/or property damage;
(iii) WORKERS' COMPENSATION INSURANCE: Workers' compensation
insurance at statutory levels and employers' liability insurance or
self-insurance as permitted by Law;
(iv) BUILDER'S RISK INSURANCE: During the construction of
the Facility, builder's "all risks" and "general risks" insurance or
equivalent coverage (with sublimits and deductibles as are acceptable to
Lessor), including fire, earth movement, earthquake, flood, subsidence and
collapse, business interruption/extra expense and testing and commissioning
coverage with respect to the Leased Property and any on-site and off-site
work and materials related thereto protecting the Lessee, the Lessor and
all contractors and subcontractors in an amount not less than the full
replacement cost of such on-site and off-site work;
(v) FLOOD INSURANCE: To the extent that any portion of the
Parcel may lie in a flood zone, flood insurance in the maximum available
amount;
(vi) BUSINESS INTERRUPTION INSURANCE: Business interruption
insurance to cover loss resulting from delay of the completion of the
Facility and, after completion, loss of use, total or partial, of the
Leased Property or any part thereof in an amount sufficient at all times to
pay Basic Rent with respect to the
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Leased Property for a period adequate to cover the period of loss of use of
the Leased Property or any part thereof plus any other amounts payable by
the Lessee to the Lessor during such period in connection with the
transactions contemplated by the Operative Documents. Such policy shall
provide that the amount payable thereunder shall not be less than the Base
Rent and such other amounts during the entire Lease Term.
(vii) OTHER INSURANCE: Such other insurance, including
automobile liability, in such amounts and against such risks, as is either
(x) customarily carried by companies owning, operating or leasing property
or conducting businesses similar and/or similarly situated to the Leased
Property and/or the Lessee, or (y) reasonably requested from time to time
by Lessor to the extent available on commercially reasonable terms.
Such insurance shall be written by companies which have a Best
Insurance Guide rating of "A-XI" or better (or an equivalent rating from another
publication of a similar nature as shall be in current use by the Lessor and the
Lessee) or as otherwise agreed to by the Lessor, selected by the Lessee, and all
policies of property insurance shall name the Lessor as loss payee and all
liability policies (other than the policies referred to in clause (vii) above)
shall name the Lessor as additional insured and shall identify the Lessor as the
owner of the Facility. In addition, all insurance required hereunder shall be
in form and with coverage and deductibles satisfactory to the Lessor.
Notwithstanding the foregoing, in no event will the Lessee be required to
maintain coverage in amounts in excess of those maintained for businesses
similar in size and nature to the Lessee.
(b) The insurance referred to in Sections 14(a)(i) and (iv) for the
Leased Property (as appropriate) may be a blanket policy and shall (i) at all
times be in an amount at least equal to one hundred percent (100%) of the full
replacement cost value of the Leased Property (as appropriate) and the Lessee's
leasehold interest; (ii) provide that the interests of the Lessor shall be
insured regardless of any intentional or willful breach or violation by the
Lessee of any warranties, declarations or conditions contained in such
insurance; (iii) provide that such insurance shall not be invalidated by any
act, omission or negligence of the Lessee or the Lessor, nor by any foreclosure
or other proceedings or notices thereof relating to the Leased Property (as
appropriate) or any part thereof, nor by legal title to, or ownership of the
Leased Property or any part thereof being or becoming vested in or by Lessor or
its agents, nor by occupancy or use of the Leased Property or any part thereof
for purposes more hazardous than permitted by such policy; and (iv) provide that
all partial loss insurance claims in excess of $10,000,000 pertaining to the
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Leased Property (as appropriate) or any part thereof shall be adjusted by the
insurers thereunder with the Lessor.
All policies of insurance required to be maintained pursuant to
Section 14(a)(ii) which cover liability for bodily injury or property damage
shall provide that all provisions of such insurance, except the limits of
liability (which shall be applicable to all insureds as a group) and liability
premiums (which shall be solely a liability of the Lessee), shall operate in the
same manner as if there were a separate policy covering each such insured and/or
additional insured, without right of contribution from any other insurance which
may be carried by an insured and/or additional insured.
Every policy required under Section 14(a) shall (i) expressly provide
that it will not be canceled or terminated except upon thirty (30) days' written
notice to the Lessor and the Lessee; (ii) include a waiver of all rights of
subrogation against the Lessor and any recourse against the Lessor for payment
of any premiums or assessments under any policy; (iii) not contain a provision
relieving the insurer thereunder of liability for any loss by reason of the
existence of other policies of insurance covering the Leased Property or any
part thereof against the peril involved, whether collectible or not; and (iv)
provide that no claims shall be paid thereunder without ten (10) days' advance
written notice to the Lessor. The Lessee shall advise the Lessor promptly of
any policy cancellation or any change adversely affecting the coverage provided
thereby.
(c) The Lessee shall deliver to the Lessor the certificates of
insurance and any other documentation required by the Lessor evidencing the
existence of all insurance which is required to be maintained by the Lessee
hereunder including descriptions of the previously mentioned Insurance
Requirements, such delivery to be made (i) within thirty (30) days after the
issuance of any additional policies or amendments or supplements to any of such
insurance, and (ii) at least thirty (30) days prior to the expiration date of
any such insurance. The Lessee shall notify the Lessor of any nonrenewal of any
policy required hereunder and shall cause each insurer under each policy
required hereunder to give the Lessor notice of any lapse under any such policy.
The Lessee shall not obtain or carry separate insurance concurrent in form, or
contributing in the event of loss, with that required by this Section 14 unless
the Lessor is named as loss payee therein. The Lessee shall immediately notify
the Lessor whenever any such separate insurance is obtained and shall deliver to
the Lessor the certificates of insurance and any other documentation (other than
blanket policies) required by Lessor evidencing the same as is required
hereunder. All insurance policies and endorsements shall be fully prepaid and
nonassessable.
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(d) The requirements of this Section 14 shall not be construed to
negate or modify the Lessee's obligations under Section 23 hereof.
SECTION 15. SUBLETTING; ASSIGNABILITY; AMENDMENT OF CONTRACTS.
(a) The Lessee shall not sublet the Leased Property, or any part
thereof, unless (i) at the time of any such sublease, no Default or Event of
Default or shall have occurred and be continuing; (ii) any such sublease shall
by its terms be expressly made subject and subordinate to the terms of this
Lease (and the Ground Lease) and shall expire on or before the Lease Termination
Date; (iii) the Lessee shall provide the Lessor with notice of such sublease
sixty (60) days prior to the effective date of such sublease; (iv) the Lessee
shall provide the Lessor ten (10) Business Days prior to the effective date of
such sublease with a conformed copy of the instrument creating such sublease;
(v) the Lessor has consented to such sublease, which consent shall not be
unreasonably withheld; and (vi) such sublease shall be made on commercially
reasonable terms.
(b) No sublease pursuant to this Section 15 shall modify or limit any
right or power of the Lessor hereunder or affect or reduce any obligation of the
Lessee hereunder, and all such obligations of the Lessee shall continue in full
force and effect as obligations of a principal and not of a guarantor or surety,
as though no subletting had been made or occupancy permitted.
(c) If the Lessee shall request, in connection with any sublease,
that the Lessor execute an attornment and non-disturbance agreement with respect
to such sublease, the Lessor shall consider each such sublease on a case-by-case
basis and may in its sole discretion consent to its execution and delivery of an
attornment and non-disturbance agreement.
(d) Except as permitted in Section 15(a), the Lessee shall not
mortgage, pledge, assign or otherwise encumber its interest in and to this Lease
or in and to any sublease or the rentals payable thereunder without the prior
written consent of the Lessor, except that the Lessee may assign its right to
purchase the Facility pursuant to Section 19 without the consent of the Lessor
so long as the Lessee remains liable for the performance and payment of the
purchase obligation.
(e) Any sublease made, and any mortgage, pledge or assignment of the
Lessee's interest hereunder or under any such sublease granted, otherwise than
as expressly permitted by this Section 15, shall be null and void and of no
force or effect.
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SECTION 16. REPRESENTATIONS AND WARRANTIES OF LESSOR.
The Lessor represents and warrants to the Lessee that on the Closing
Date:
(a) DUE ORGANIZATION. The Lessor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio and
has the corporate power and authority to enter into and perform its obligations
under this Lease and each other Operative Document to which it is a party.
(b) AUTHORIZATION; EXECUTION; ENFORCEABILITY. The execution,
delivery and performance by the Lessor of this Lease and each other Operative
Document to which it is a party and of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Lessor and do not and will not require the consent or approval of any
shareholder of the Lessor. This Lease and each other Operative Document to
which the Lessor is a party have been duly authorized, executed and delivered by
the Lessor and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are legal, valid and
binding obligations of the Lessor, enforceable against the Lessor in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, liquidation, moratorium or
similar laws affecting creditors' rights generally and by the application of
general equitable principles which may limit the availability of certain
remedies.
(c) NO VIOLATION. The execution and delivery by the Lessor of this
Lease and each other Operative Document to which it is a party do not and will
not, and the performance by the Lessor of its obligations hereunder and
thereunder do not and will not, (i) violate or be inconsistent with or in
violation of its charter documents or by-laws, (ii) contravene any provision of
any Applicable Law or Governmental Action applicable to it or require any
Governmental Action or (iii) contravene any provision of, or constitute any
default or require any consent under, any provision of any material indenture,
mortgage, contract or other instrument to which the Lessor is a party or by
which it or any of its property is bound.
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SECTION 17. REPRESENTATIONS AND WARRANTIES OF LESSEE.
The Lessee represents and warrants to the Lessor that on the Closing
Date:
(a) DUE ORGANIZATION. The Lessee is a limited partnership, duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the power and authority to carry on its business as presently
conducted and as it is contemplated to be conducted in connection with the
Leased Property, to own or hold under lease its property, and to enter into and
perform its obligations under this Lease and each other Operative Document to
which it is a party. The Lessee is qualified to do business in and is in good
standing under the laws of the States of Washington, Idaho and Oregon and has
not failed to qualify to do business in any jurisdiction where failure so to
qualify could reasonably be expected to materially adversely affect its ability
to conduct its business as it is presently conducted and as it is contemplated
to be conducted in connection with the Leased Property, to own or hold under
lease its property or to perform any of its obligations under this Lease or any
other Operative Document to which it is a party.
(b) AUTHORIZATION. The execution, delivery and performance by the
Lessee of this Lease and each other Operative Document to which it is a party
and of the transactions contemplated hereby and thereby have been duly
authorized by all necessary partnership action on the part of the Lessee and do
not and will not require the consent or approval of any trustee or holder of any
indebtedness or other obligation of the Lessee.
(c) EXECUTION; ENFORCEABILITY. This Lease and each other Operative
Document to which the Lessee is a party have been duly executed and delivered by
the Lessee and, assuming the due authorization, execution and delivery hereof
and thereof by the other parties hereto and thereto, are legal, valid and
binding obligations of the Lessee, enforceable against the Lessee in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, liquidation, moratorium or
similar laws affecting creditors' or lessors' rights generally and by the
application of general equitable principles which may limit the availability of
certain remedies.
(d) NO VIOLATION. The execution and delivery by the Lessee of this
Lease and each other Operative Document to which it is a party do not and will
not, and the performance by the Lessee of its obligations hereunder and
thereunder do not and will not, (i) violate or be inconsistent with its
partnership agreement or any other organizational documents, (ii) contravene any
Applicable Law or Governmental Action
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applicable to it; (iii) contravene any provision of, or constitute a default
under, any material indenture, mortgage, contract or other agreement or
instrument to which the Lessee is a party or by which it or any of its property
are bound, and (iv) result in or, require the creation or imposition of any Lien
(other than Permitted Liens) upon any of its property or assets.
(e) CONSENTS AND APPROVALS. All Governmental Actions which are
required to have been taken, given, obtained, filed or recorded, as the case may
be, on or prior to the Closing Date by, from or with any Governmental Authority
and all other consents, filings or approvals which are required to have been
taken, given, obtained, filed or recorded, as the case may be, on or prior to
the Closing Date by, from or with any other Person, in each case, (i) in
connection with the transactions contemplated by the Operative Documents, or to
authorize the execution, delivery and performance by the Lessee of the Operative
Documents to which it is a party, or the legality, validity, binding effect or
enforceability thereof as against the Lessee, or (ii) in order that the Leased
Property may be leased, used and operated for its intended purpose and the
Facility may be construed thereon as contemplated hereby (including, without
limitation, all Environmental Permits and all approvals, certificates, permits,
authorizations, licenses or other actions relating to the construction of the
Facility), shall have been duly taken, given, obtained, filed or recorded, as
the case may be, and are in full force and effect, are not subject to any
pending proceedings or appeals (administrative, judicial or otherwise) and are
adequate to authorize the consummation by the Lessee of the transactions
contemplated by the Operative Documents and the performance by the Lessee of its
obligations thereunder to which it is a party, except (A) such as may be
required to be taken, obtained, given, accomplished or renewed from time to time
after the Closing Date in connection with the maintenance or operation of the
Leased Property or (B) which are otherwise required in connection with the
transactions contemplated by the Operative Documents which have been applied for
but which cannot be obtained, or which are not normally applied for or taken,
given or obtained, prior to the Closing Date, and which in the normal course
would be granted, PROVIDED that the failure to obtain such Governmental Actions,
consents, filings and approvals by the Closing Date could not materially
adversely affect the ability of the Lessee to perform its obligations under this
Lease or any other Operative Document to which it is a party.
(f) LITIGATION. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Lessee, threatened against the
Lessee or affecting Lessee or its property or rights before any Governmental
Authority that questions the validity of any Operative Document or which,
individually or in the aggregate, is reasonably likely (i) materially and
adversely to affect the consummation of the transactions under this Lease or any
other Operative Document to which it is a party or
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(ii) to have a Material Adverse Effect. The Lessee is not in default with
respect to any order of any Governmental Authority, where such default could
reasonably be expected to have a Material Adverse Effect or could result in the
creation or imposition of any Lien (other than a Permitted Lien) upon the Leased
Property.
(g) NO DEFAULT. No Default or Event of Default has occurred and is
continuing. As of the Closing Date, neither the Lessee nor any of its
Subsidiaries is in default under with respect to any Contractual Obligation in
any respect which, individually or together with all such defaults, could
reasonably be expected to have a Material Adverse Effect or could result in the
creation or imposition of a Lien (other than a Permitted Lien) upon the Leased
Property.
(h) EVENT OF LOSS. No Event of Loss has occurred, and the Leased
Property may be used for the purposes contemplated by the Lessee in accordance
with this Lease and the other Operative Documents.
(i) ENVIRONMENTAL COMPLIANCE. (i) The Leased Property complies in
all material respects with all Environmental Laws; all necessary Environmental
Permits have been obtained and are in effect for the Leased Property and to the
best of the Lessee's knowledge, no circumstances exist that could be reasonably
expected to (A) form the basis of an Environmental Action against the Leased
Property that could reasonably be expected to have a Material Adverse Effect or
(B) cause the Leased Property to be subject to any restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(ii) Neither the Leased Property nor any part thereof is
listed or, to the knowledge of the Lessee, proposed for listing on the NPL
or on CERCLIS or any analogous state list of sites requiring investigation
or cleanup.
(iii) No Hazardous Materials that have been generated at or
transported from the Leased Property or any part thereof have been disposed
at any location that is listed or, to the best of the Lessee's knowledge,
proposed for listing on the NPL or on the CERCLIS or any analogous state
list, and all Hazardous Materials generated, used, treated, handled or
stored at or transported to or from the Leased Property or any part thereof
and any property currently or formerly owned or operated by the Lessee have
been disposed of in compliance in all material respects with all
Environmental Laws and applicable Environmental Permits.
(iv) The Lessee has not received any written or other notice,
mandate, order, Lien or request which remains pending under an
Environmental
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Law concerning any of the Leased Property or any part thereof or relating
to an alleged violation of an Environmental Law concerning the Leased
Property or any part thereof or relating to any potential adverse action in
any way involving environmental, health or safety matters affecting the
Leased Property or any part thereof.
(v) There is no proceeding pending or, to the knowledge of
the Lessee, threatened against the Lessee by any Federal, state, or local
court, tribunal, administrative agency, department, commission, board or
other authority or instrumentality with respect to the presence or release
of any Hazardous Material from the Leased Property or any part thereof.
(vi) To the knowledge of the Lessee, no Hazardous Materials
have been Released from or on the Leased Property or any part thereof for
which remedial action could be required under any Environmental Law or may
be necessary to prevent or eliminate a significant risk to human health or
the environment.
(j) ERISA COMPLIANCE. (i) Each Plan is in compliance with the
applicable provisions of ERISA, the Code and other federal or state law, except
for such non-compliance which would not reasonably be expected to have a
Material Adverse Effect. Each Plan is intended to qualify under Section 401(a)
of the Code has received a favorable determination letter from the IRS or an
application for such a determination letter will be submitted no later than the
expiration of the remedial amendment period for effecting amendments required by
reason of Section 1140 of the Tax Reform Act of 1986, as amended, and to the
Lessee's knowledge, nothing has occurred which would cause the loss of such
qualification.
(ii) There are no pending, or to the Lessee's knowledge,
threatened Claims by any Governmental Authority, with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or other
violation of the fiduciary responsibility rule with respect to any Plan
which could reasonably result in a Material Adverse Effect.
(iii) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Pension Plan.
(iv) No Pension Plan (other than the multiemployer plans
within the meaning of Section 3(38) of ERISA) has any Unfunded Pension
Liability.
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(v) Neither the Lessee nor any ERISA Affiliate has incurred,
nor does it reasonably except to incur, any liability under Title IV of
ERISA with respect to any Pension Plan (other than premiums due and no
delinquent under Section 4007 of ERISA).
(vi) Neither the Lessee nor any ERISA Affiliate has
transferred any Unfunded Pension Liability to any Person or otherwise
engaged in a transaction that could be subject to Section 4069 of ERISA.
(k) DESCRIPTION OF COMPONENTS. The descriptions set forth in
Schedule 1 to each of the Lease Supplements are true and accurate descriptions
in all material respects of each Component described therein.
(l) CERTAIN DOCUMENTS. True, correct and complete copies of the
Operative Documents have been delivered to the Lessor. Each of the Operative
Documents is in full force and effect, and no material breach thereof by the
Lessee or, to the Lessee's knowledge, by any other party thereto, has occurred
and is continuing.
(m) PAYMENT OF TAXES, ETC. All Taxes, fees and other charges due and
payable in connection with the execution, delivery and filing of all documents
and instruments, including the Operative Documents, and the performance of the
transactions contemplated by the Operative Documents, have been paid in full.
(n) INVESTMENT COMPANY ACT. The Lessee is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(o) HOLDING COMPANY. The Lessee is not subject to regulation as a
"holding company," an "affiliate" of a "holding company," or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(p) NO MATERIAL ADVERSE CHANGE; ADVERSE CONDITIONS. There has not
occurred a material adverse change in the business, operations or financial
condition of the Lessee since December 31, 1996. No Applicable Law prohibits,
and no litigation, governmental investigation or other proceeding is pending or
overtly threatened in which there is a reasonable possibility of an unfavorable
judgment, decree, order or other determination which could prevent or make
unlawful, or impose any material adverse condition upon, the acquisition,
construction, installation, use, ownership, operation or leasing of, or the
Lessor's ownership of, the Leased Property or any part thereof.
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(q) INSURANCE. The Lessee is in compliance with all Insurance
Requirements, and all insurance policies required by Section 14 hereof are in
full force and effect.
(r) COMPLIANCE. The Leased Property and each part thereof is in
material compliance with all Applicable Laws.
(s) NO MATERIAL MISSTATEMENTS. No information, report, financial
statement, exhibit or schedule furnished by or on behalf of the Lessee to the
Lessor in connection with the negotiation of this Lease or any other Operative
Document or any transaction contemplated hereby or thereby, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, taken as a
whole and taken in the light of the circumstances under which they were, are or
will be made, not misleading.
(t) TITLE AND INTEREST. The Lessor has a good and indefeasible
leasehold interest in the Parcel and good and marketable title to the Facility
(together with any necessary easements or rights-of-way or similar property
rights), free and clear of all Liens and deed restrictions except Permitted
Encumbrances, in the case of the Parcel, and Permitted Liens, in the case of the
Facility.
(u) COMPLIANCE WITH LAW. The Lessee is not in violation of any Law
(including any Environmental Law) with respect to the Leased Property or any
part thereof, with respect to the construction of the Facility or installation
of any of the Components, or with respect to its leasing, ownership or operation
of the Leased Property or any part thereof, or with respect to the conduct of
its business relating to the Leased Property or any part thereof or with respect
to its assets which, individually or in the aggregate, would be reasonably
likely to result in a Material Adverse Effect. The Lessee has not received any
notice of, or citation for, any violation of any Law which has not been
resolved, which notice or citation relates to the ownership, leasing or
operation of the Leased Property or any part thereof or the construction of the
Facility.
(v) RECORDATION AND FILING. The Memorandum of Ground Lease and the
Memorandum of Lease have been duly recorded, published, registered and filed and
are in a form sufficient to publish notice of the interests purported to be
created by the Ground Lease and this Lease, respectively. Upon the recordation
of the Memorandum of Ground Lease in Boundary County, Idaho, the Memorandum of
Ground Lease will have been recorded or filed in such place in which recording
or filing is required to publish notice, under Applicable Law, of the interests
created by the Ground Lease and to protect the validity and effectiveness
thereof, and all Taxes, fees and other public charges
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payable in connection with the filing and recordation of the Ground Lease have
been paid. Upon the recordation of the Memorandum of Lease in Boundary County,
Idaho, the Memorandum of Lease will have been recorded or filed in such place
in which recording or filing is required to publish notice, under Applicable
Law, of the interests created by this Lease and to protect the validity and
effectiveness thereof, and all Taxes, fees and other public charges payable in
connection with the filing and recordation of the Memorandum of Lease have been
paid.
(w) RIGHTS TO PROPERTY, ETC. (i) The Ground Lease grants to the
Ground Lessee all rights-of-way, easements and real property licenses,
environmental allowances, rights in real property (including, without
limitation, fixtures and appurtenances), utilities and other services necessary
for the day-to-day operation of the Facility when constructed or installed on
the Parcel and (A) such rights-of-way, easements, licenses, environmental
allowances, utilities and other services are valid and in full force and effect
and all consents from third parties necessary to enter into the Ground Lease and
the Lease Agreement have been obtained, (B) there is presently no default by the
Ground Lessor or, to the Ground Lessor's knowledge, by any other party thereto
with respect to any such rights-of-way, easements, licenses, utilities and other
services, which would materially and adversely affect such services and (C) all
utility services necessary for the construction of each of the applicable
Components and for the operation of the Facility for its intended purposes are
installed and operational.
(ii) None of the Permitted Encumbrances will interfere in any
material respect with the use or possession of the Leased Property or any
part thereof or any other asset used in connection therewith or the use of
or the exercise by the Lessor of its rights either under any Operative
Document or to the Leased Property.
(iii) The Lessee has given any and all notices required to be
given in connection with the construction of the Facility pursuant to any
easements, right-of-way, licenses or other agreements affecting the Parcel.
(iv) Each of the Components, when constructed or installed,
will be situated wholly within the boundary lines of the Parcel and do not
and will not encroach upon any contiguous or adjoining property; except as
disclosed in writing, neither the Parcel nor any part thereof is considered
part of a larger tax lot; none of the Components when constructed or
installed will violate any rights granted under any easements or rights of
way or any covenants or restrictions affecting the Parcel or any part
thereof, and any future violation will not result in a reversion or
forfeiture of title, right of re-entry or power of termination; and the
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easements, rights-of-way, covenants and restrictions affecting the Parcel
or any part thereof do not and will not interfere in any material respect
with the use or occupancy of the Leased Property or any part thereof, or
any asset owned or used in connection therewith, nor will the exercise of
rights or remedies thereunder result in any damage to the Leased Property
or any part thereof or diminution of value of the Leased Property or any
part thereof.
(x) CONSTRUCTION BUDGET AND RELATED MATTERS. The Construction Budget
has been prepared in good faith on the basis of reasonable assumptions and
accurately includes all Actual Project Costs currently anticipated to be
incurred in connection with achieving completion of the Facility by the Final
Completion Date. The Construction Schedule accurately describes estimated dates
of completion of the stages of construction of the Facility.
(y) TRADE SECRETS AND PATENTS. (i) The leasing of the Parcel by
Lessor, the ownership of the Facility by the Lessor and the leasing and
operation of the Facility by the Lessee, including the construction or
installation and the proposed operation of the Facility, do not and will not
conflict with, infringe on, or otherwise violate any copyright, trademark, trade
name, trade secret or patent rights of any other Person.
(ii) The Lessee has all rights to all patents, patent
applications, trademarks (whether registered or not), trademark
applications, trade names, proprietary computer software, "know-how" and
copyrights used or to be used in the ordinary course of the operation of
the Facility (the "INTELLECTUAL PROPERTY RIGHTS") that are necessary for
the operation thereof, including the right to assign the Intellectual
Property Rights. There is no judicial proceeding pending or, to the
knowledge of the Lessee, threatened, involving any claim of any
infringement, misuse or misappropriation by the Lessee or any Affiliate
thereof of any patent, trademark, trade name, copyright, license or similar
intellectual property right owned by any third party related to the
Intellectual Property Rights.
(z) CREDIT AGREEMENT. Attached hereto as EXHIBIT F is a true,
correct and complete copy of the Credit Agreement as in effect on the Closing
Date.
(aa) FLOOD ZONE. The Parcel is not in a flood hazard zone.
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SECTION 18. ADDITIONAL COVENANTS.
The Lessee covenants and agrees that:
(a) FINANCIAL STATEMENTS. The Lessee shall deliver to the Lessor, in
form and detail satisfactory to the Lessor:
(i) as soon as available, but not later than 90 days after
the end of each fiscal year, a copy of the audited consolidated balance
sheet of the Lessee and its Subsidiaries as at the end of such year and the
related consolidated statements of income or operations, partners' equity
and cash flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, identifying any material
change in accounting policies or financial reporting practices by the
Lessee or any of its consolidated Subsidiaries, and accompanied by the
opinion of Price Waterhouse LLP or another nationally-recognized
independent public accounting firm ("INDEPENDENT AUDITOR") which report
shall state that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Lessee's or any
Subsidiary's records;
(ii) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidated balance sheet of the Lessee and its
Subsidiaries as of the end of such quarter and the related consolidated
statements of income, partners' equity and cash flows for the period
commencing on the first day and ending on the last day of such quarter,
identifying any material change in accounting policies or financial
reporting practices by the Lessee or any of its consolidated Subsidiaries,
and certified by a General Partner as fairly presenting, in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the Lessee and its
Subsidiaries;
(iii) as soon as available, but not later than 90 days after
the end of each fiscal year, a copy of an unaudited consolidating balance
sheet of the Lessee and its Subsidiaries as at the end of such year and the
related consolidating statement of income for such year, certified by a
General Partner as having been developed and used in connection with the
preparation of the financial statements referred to in clause (i), above;
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(iv) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters of each fiscal year, a
copy of the unaudited consolidating balance sheets of the Lessee and its
Subsidiaries, and the related consolidating statements of income for such
quarter, all certified by a General Partner as having been developed and
used in connection with the preparation of the financial statements
referred to in clause (ii), above.
(b) NOTICES. The Lessee shall promptly notify the Lessor:
(i) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(ii) of any matter that has resulted or if adversely
determined would reasonably be expected to result in a Material Adverse
Effect, including (A) breach or non-performance of, or any default under, a
Contractual Obligation of the Lessee, (B) any dispute, litigation,
investigation, proceeding or suspension which may exist at any time between
the Lessee and any Governmental Authority; or (C) the commencement of, or
any material development in, any litigation or proceeding affecting the
Lessee, including pursuant to any applicable Environmental Laws;
(iii) any Material Adverse Effect subsequent to the date of
the most recent audited financial statements of the Lessee delivered to the
Lessor pursuant to Section 18(a)(i);
(iv) of any material labor controversy resulting in or
threatening to result in any strike, work stoppage, boycott, shutdown or
other labor disruption against or involving the Lessee, or any of its
Subsidiaries; or
(v) of any assertion or determination by any Governmental
Authority that the Lessee shall no longer be classified as a partnership
not taxable as a corporation under the Code.
Each notice under this Section shall be accompanied by a written
statement by the General Partner setting forth details of the occurrence
referred to therein, and stating what action the Lessee or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under clause (b)(i) above shall describe with particularity any and all clauses
or provisions of this Lease or other Operative Document that have been (or
foreseeably will be) breached or violated.
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(c) CREDIT AGREEMENT. The Lessee shall comply, and shall cause each
of its Subsidiaries to comply, with all covenants of the Lessee or such
Subsidiary in the Credit Agreement, and all notices, certificates, reports and
other documents required to be delivered by the Lessee thereunder shall be
simultaneously delivered to the Lessor. Such covenants (together will any
applicable defined terms) shall constitute, and are hereby expressly made, a
part of this Lease; PROVIDED that if there is any conflict between the terms of
this Lease and the terms of the Credit Agreement, then the terms of this Lease
shall govern.
(d) FURTHER ASSURANCES. The Lessee shall (i) ensure that all written
information, exhibits and reports prepared by the Lessee, and (ii) use its best
efforts to ensure that all written information, exhibits and reports not
prepared by the Lessee and, in each case, furnished to the Lessor do not and
will not contain any untrue statement of a material fact and do not and will not
omit to state any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Lessor and correct any defect or error that
may be discovered in this Lease or any other Operative Document or in the
execution, acknowledgment or recordation hereof or thereof.
(e) "AS-BUILT" SURVEY. Not less than ten (10) days prior to the end
of the Lease Term, the Lessee shall deliver an "as-built" survey of the Parcel
showing the Facility, together with an updated surveyor's certification in form
and substance satisfactory to the Lessor.
(f) ENVIRONMENTAL EVENT. The Lessee shall promptly, but in any case
within five (5) Business Days, notify the Lessor if (i) any environmental event
has occurred or any environmental condition is discovered in, on, from or
involving the Leased Property or any part thereof (including, but not limited
to, the presence, emission or release of Hazardous Materials or the violation of
any applicable Environmental Law) that could reasonably be anticipated to result
in penalties or other liabilities in excess of $500,000 or (ii) the Lessee has
received notification that it, the Leased Property or any part thereof is the
subject of a proceeding that could reasonably be expected to result in any
ordered remediation or corrective action or other liability related to an
environmental event or condition with respect to the Leased Property or any part
thereof the cost of which liability is reasonably expected to exceed $500,000
(each of (i) and (ii) an "Environmental Event").
Following the receipt of a notice pursuant to the immediately
preceding paragraph, the Lessor, may require the Lessee to conduct, or cause to
be conducted, an environmental study by an environmental consultant reasonably
satisfactory to the Lessor
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(the cost and expenses of such environmental consultant shall be borne by the
Lessee) of the Leased Property or any applicable part thereof on which such
Environmental Event or release shall have occurred, the scope of which study
shall be limited to confirming the magnitude and anticipated cost of the
liability resulting in the Environmental Event and to provide a copy of the
environmental consultant's report on its audit to the Lessor. Notwithstanding
the foregoing, if a pattern, in the opinion of the Lessor, of such Environmental
Events exists, the Lessor may conduct a more comprehensive environmental study
of the Leased Property or the applicable part thereof to determine the scope and
nature of such pattern. If it is the opinion of the Lessor that an
Environmental Event has occurred or exists and a Permitted Remediation (as
defined below) is not available or the Environmental Event cannot be cured
through a Permitted Remediation or the Environmental Event will result in the
cessation of operation of the Facility or the applicable part thereof for 30
days or more such Environmental Event shall constitute an Environmental Trigger
with respect to the Leased Property or the applicable part thereof and shall,
at the option of the Lessor, be deemed an Event of Loss with respect to the
Leased Property or the applicable part thereof (an "Environmental Trigger"). A
"Permitted Remediation" means any remediation of an Environmental Event (a) the
cost of which remediation is not anticipated, in the sole opinion of the Lessor,
to exceed $5,000,000, (b) during and after which such Environmental Event could
not be expected to result in any additional environmental liability incurred by
the Lessor for which the Lessor has not received additional indemnification in
an amount and from a Person satisfactory to the Lessor, in its sole and absolute
discretion and (c) permitted and effected in compliance with all applicable
Environmental Laws.
Irrespective of whether an Environmental Trigger has occurred, the
Lessee shall immediately initiate, at its sole cost and expense, such actions as
may be necessary to comply in all material respects with all applicable
Environmental Laws and to alleviate any significant risk to human health or the
environment if the same arises from a condition on or in respect of the Leased
Property or any part thereof, whether existing prior to, on or after the date of
this Lease. Once the Lessee commences such actions, the Lessee shall thereafter
diligently and expeditiously proceed to comply materially and in a timely manner
with all Environmental Laws and to eliminate any significant risk to human
health or the environment.
SECTION 19. OPTIONS UPON LEASE TERMINATION.
(a) NEW LEASE TRANSACTION. Within 60 days prior to the Lease
Termination Date, the Lessee shall notify (the "New Lease Notification") the
Lessor in writing that it desires to enter into a new lease with respect to the
Facility in the form of either (i) a single investor tax lease on substantially
the terms set forth on EXHIBIT E
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hereto or (ii) a leverage tax lease with financial institutions arranged by Key
Global Finance on terms to be agreed to between the Lessee and such financial
institutions. Upon receipt of such New Lease Notification, the Lessee and the
Lessor or Key Global Finance shall negotiate in good faith with respect to such
new leasing arrangement. The New Lease Notification shall be irrevocable;
PROVIDED that if the Lessee and the lessor, in the case of a single investor tax
lease, or the financial institutions arranged by Key Global Finance, in the case
of a leverage tax lease, are unable to reach agreement on the terms of the new
leasing arrangement, neither party shall have any obligation to enter into such
arrangement.
(b) PURCHASE OF FACILITY.
(i) If the Lessee fails to provide the Lessor with a New Lease
Notification in accordance with paragraph (a) above, or if, after delivery of a
New Lease Notification, the Lessee and the Lessor (in the case of a single
investor tax lease) or the financial institutions arranged by Key Global
Finance, Ltd. (in the case of a leverage tax lease), are unable to reach
agreement on the terms of the new leasing arrangement, the Lessee may, within 30
days prior to the Lease Termination Date, irrevocably notify the Lessor that the
Lessee desires to purchase from the Lessor, and the Lessor shall sell to the
Lessee, the Facility. If the Lessee elects to purchase the Facility from the
Lessor, then on the Lease Termination Date the Lessor shall sell, transfer and
convey all of its right, title and interest in to the Facility and under the
Ground Lease, as is and where is, to the Lessee, free and clear of any Lessor
Liens but otherwise without any representation or warranty, upon payment in
immediately available funds by the Lessee to the Lessor of a purchase price
therefor equal to the Total Fundings made by the Lessor from the date hereof
through the date of purchase, together with (i) all Basic Rent due and owing on
or prior to such date of purchase and (ii) all Supplemental Rent due and owing
prior to such date of purchase and any other Supplemental Rent as to which there
is no dispute and which is agreed to become due and owing within 60 days of such
date. Subject to the foregoing, on the date of such purchase and sale the
Lessor shall, at the expense of the Lessee, execute and deliver to the Lessee a
bill of sale or assignment and such other documents as the Lessee may reasonably
request to evidence the valid consummation of such transfer.
(ii) If after delivery of a New Lease Notification, the Lessee and the
Lessor, in the case of a single investor tax lease, or the financial
institutions arranged by Key Global Finance, in the case of a leverage tax
lease, are unable to reach agreement on the terms of the new leasing
arrangement, the Lessor may, within 10 days prior to the Lease Termination Date,
notify the Lessee that the Lessor desires to sell to the Lessee, and the Lessee
shall purchase from the Lessor, the Facility. If the Lessor elects to sell the
Facility to the Lessee, then on the Lease Termination Date the Lessor shall
sell, transfer
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and convey all of its right, title and interest in to the Facility and under the
Ground Lease, as is and where is, to the Lessee, free and clear of any Lessor
Liens but otherwise without any representation or warranty, upon payment in
immediately available funds to the Lessor of a purchase price therefor equal to
the Total Fundings made by Lessor from the date hereof through the date of
purchase, together with (i) all Basic Rent due and owing on or prior to such
date of purchase and (ii) all Supplemental Rent due and owing prior to such date
of purchase and any other Supplemental Rent as to which there is no dispute and
which is agreed to become due and owing within 60 days of such date. Subject to
the foregoing, on the date of such sale and purchase the Lessor shall, at the
expense of the Lessee, execute and deliver to the Lessee a bill of sale or
assignment and such other documents as the Lessee may reasonably request to
evidence the valid consummation of such transfer.
(c) RETURN OF FACILITY. In the event that the transactions
contemplated in paragraph (a) above are not consummated on or before the Lease
Termination Date, and in the event that the Lessee does not elect to purchase
the Facility from the Lessor or the Lessor does not elect to sell the Facility
to the Lessee pursuant to paragraph (b) above, the Lessee shall return the
Facility to the Lessor according to the terms and conditions set forth in
Section 8 hereof. Upon the return of the Facility to the Lessor in accordance
with Section 8 hereof, the Lessee shall have no obligation to pay any amount to
the Lessor with respect to Total Fundings made by the Lessor hereunder.
SECTION 20. EVENTS OF DEFAULT.
Any of the following shall constitute an "Event of Default":
(a) NON-PAYMENT. The Lessee shall fail to pay (i) when and as
required to be paid herein, any amount of Rent or (ii) within 5 days after the
same becomes due, any amount of Supplemental Rent;
(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
made or deemed made by the Lessee set forth herein or in any other Operative
Document to which the Lessee is a party, or any representation, warranty,
statement or information contained in any written report, certificate, financial
statement or other instrument furnished in connection with or pursuant hereto to
any other Operative Document, shall prove to have been false in any material
respect when so made or furnished;
(c) COVENANT DEFAULTS. The Lessee shall fail to perform or observe
any other term or covenant contained in this Lease or any other Operative
Document or any other document or certificate delivered pursuant hereto or
thereto, and such failure shall continue unremedied for a period of thirty (30)
days after the earlier of (i) the date
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upon which the General Partner knew or reasonably should have known of such
failure or (ii) the date upon which written notice thereof is given to the
Lessee by the Lessor; PROVIDED, HOWEVER, that, if such failure is capable of
being cured and provided the Lessee is diligently pursuing such cure, the time
with which such failure may be cured shall be extended for such period as is
reasonably necessary to complete curing thereof with diligence;
(d) BANKRUPTCY; INSOLVENCY. The Lessee or any of its Subsidiaries
shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be instituted
by or against the Lessee or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 60 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial part of its property)
shall occur; or the Lessee or any of its Subsidiaries shall take any corporate
action to authorize any of the actions set forth above in this paragraph (d);
(e) MONETARY JUDGMENTS. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Lessee or any of its Subsidiaries involving in the aggregate a liability (to the
extent not covered by independent third-party insurance as to which the insurer
does not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $5,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 30
consecutive days after the entry thereof;
(f) NON-MONETARY JUDGMENTS. Any non-monetary judgment, order or
decree is entered against the Lessee or any of its Subsidiaries which does or
could reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect;
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(g) GOVERNMENTAL ACTION. The Lessee shall be prevented or relieved
by any Governmental Authority from performing or observing any monetary payment
or repayment obligation evidenced by this Lease or any other Operative
Documents;
(h) UNENFORCEABILTY OF OPERATIVE DOCUMENTS. Any Operative Document
shall for any reason no longer be in full force and effect in accordance with
its terms;
(i) ABANDONMENT. The Lessee shall have abandoned the Leased Property
or any part thereof;
(j) CREDIT AGREEMENT EVENT OF DEFAULT. An "Event of Default" under
the Credit Agreement shall have occurred and shall not have been waived in
accordance with the terms of the Credit Agreement pursuant to an Approved Credit
Agreement Action;
(k) REPUDIATION OF OPERATIVE DOCUMENTS. Any Operative Document or
any obligation of the Lessee thereunder shall be revoked or repudiated or
attempted to be revoked or repudiated by the Lessee;
(l) UNAUTHORIZED REMOVAL, TRANSFER. The Lessee shall (except as
expressly permitted by the provision of this Lease) attempt to remove, sell,
transfer, encumber, part with possession of, assign or sublet the Leased
Property or any part thereof;
(m) FAILURE TO MAINTAIN INSURANCE. The Lessee shall fail to be in
compliance with the Insurance Requirements, and all other insurance policies
required by Section 14 shall fail to be in full force and effect;
(n) FAILURE TO PURCHASE FACILITY. The Lessee shall fail to purchase
the Facility as and when required pursuant to Section 19(b) hereof;
(o) DELIVERY OF FINAL SURVEY AND UPDATED TITLE POLICY. The Lessee
shall fail to deliver to the Lessor the Final Survey and the Updated Title
Policy on or prior to January 31, 1998.
SECTION 21. REMEDIES.
If any Event of Default shall have occurred and be continuing, then
and in every such case, (A) in the case of an Event of Default set forth in
Sections 20(d), (m) and (n) hereof, this Lease shall be in default without
further act or notice of any kind (all
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of which are hereby waived), which for all purposes hereof and of the other
Operative Documents shall be deemed to be a declaration of default hereunder,
and (B) in the case of any other Event of Default, the Lessor may, at its
option, declare this Lease to be in default by written notice to such effect
given to the Lessee, and in either case at any time thereafter, the Lessor may
exercise one or more of the following remedies, as the Lessor in its sole
discretion shall lawfully elect:
(a) the Lessor may demand that the Lessee, and the Lessee
shall upon receipt of written demand of the Lessor, deliver the Leased Property
promptly to the Lessor in the manner and condition required by, and otherwise in
accordance with all the provisions of, Section 8 hereof as if the Leased
Property was being returned at the end of the Lease Term and the Lessor shall
not be liable for the reimbursement of the Lessee for any costs and expenses
incurred by the Lessee in connection therewith; or the Lessor may enter upon the
premises of the Leased Property and take immediate possession of (to the
exclusion of the Lessee) the Leased Property by summary proceedings or
otherwise, all without liability to the Lessor for or by reason of such entry or
taking of possession, whether for the restoration of damage to property caused
by such taking or otherwise;
(b) the Lessor may sell all or any part of the Facility and
assign all or any part of its rights under the Ground Lease at public or private
sale, as the Lessor may determine, in a commercially reasonable manner, free and
clear of any rights of the Lessee and without any duty to account to the Lessee
with respect to such action or inaction or any proceeds with respect thereto
(except to the extent provided in paragraph (d) of this Section if the Lessor
shall elect to exercise its rights thereunder), in which event the Lessee's
obligation to pay Basic Rent hereunder for periods commencing after the date of
such sale and assignment shall terminate (except to the extent that Basic Rent
is to be included in computations under paragraph (d) of this Section if the
Lessor shall elect to exercise its rights thereunder);
(c) the Lessor may hold, keep idle or lease to others all or
any part of the Facility as the Lessor in its sole discretion may determine,
free and clear of any rights of the Lessee and without any duty to account to
the Lessee with respect to such action or inaction or for any periods with
respect to such action or inaction, except that the Lessee's obligation to pay
Basic Rent hereunder for periods commencing after the Lessee shall have been
deprived of use of the Facility pursuant to this paragraph (c) shall be reduced
by the net proceeds, if any, received by the Lessor from leasing the Facility to
any Person other than the Lessee for the same period or any portion thereof;
(d) the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights under
paragraph (a), (b) or (c) of this
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Section, demand that the Lessee pay to the Lessor, and the Lessee shall pay to
the Lessor, on the Basic Rent Date specified in such demand, (A) any unpaid
Basic Rent due hereunder prior to such Basic Rent Date plus (B) an amount equal
to the Total Fundings made from the date hereof through and including such Basic
Rent Date (together with interest on such amounts at the Overdue Rate from such
Basic Rent Date to the date of actual payment); and upon such payment of all
amounts then due and payable by the Lessee hereunder or under any other
Operative Document, the Lessor shall transfer to the Lessee its title and
interest in and to the Facility without recourse or warranty (except as to
absence of any Lessor's Liens); or
(e) the Lessor may rescind or terminate this Lease or may
exercise any other right or remedy which may be available to it under Applicable
Law or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof; PROVIDED, HOWEVER, that any termination
of the Lease pursuant to the exercise of any such rights and remedies shall not
in any way be deemed to be a release or a waiver by the Lessor of the Lessee's
obligation to pay the sums provided to be paid by the Lessee under this Section.
No termination of this Lease, in whole or in part, or repossession of
all or any part of the Leased Property or exercise of any remedy under this
Section shall, except as specifically provided herein, relieve the Lessee of any
of its liabilities and obligations hereunder, all of which shall survive such
termination, repossession or exercise of remedy. In addition, the Lessee shall
be liable, except as otherwise provided above, for any and all unpaid Rent due
hereunder before, after or during the exercise of any of the foregoing remedies,
including all reasonable legal fees and other costs and expenses incurred by the
Lessor by reason of the occurrence of any Event of Default or the exercise of
the Lessor's remedies with respect thereto, and including all reasonable costs
and expenses of whatsoever kind incurred in connection with the return of the
Facility (including the costs of dismantling and storage) in the manner and
condition required by, and otherwise in accordance with the provisions of,
Section 8 hereof as if the Facility were being returned at the end of the Lease
Term. At any sale of the Facility or any part thereof or the Lessor's interest
in the Ground Lease pursuant to this Section 21, the Lessor may bid for and
purchase the Facility or such interest in the Ground Lease.
To the extent permitted by, and subject to the mandatory requirements
of, Applicable Law, and except as otherwise expressly provided in this Section,
each and every right, power and remedy herein specifically given to the Lessor
or otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at Law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise
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existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Lessor, and the exercise or the beginning of the
exercise of any power or remedy shall not be construed to be a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Lessor in the exercise of any right, remedy
or power or in the pursuit of any remedy shall impair any such right, remedy or
power or be construed to be a waiver of any default on the part of the Lessee or
to be an acquiescence therein. No express or implied waiver by the Lessor of
any Event of Default shall in any way be, or be construed to be, a waiver of any
future or subsequent Event of Default.
SECTION 22. RIGHT TO PERFORM FOR LESSEE.
If the Lessee fails to make any payment of Rent required to be made by
it hereunder or fails to perform or comply with any of its agreements contained
herein, the Lessor may make such payment or perform or comply with such
agreement, without any notice to or demand upon Lessee, in each case without
waiving any default hereunder or releasing the Lessee from any obligation;
PROVIDED, HOWEVER, that any such payment or performance by the Lessor shall not
constitute a cure of such Event of Default for purposes of this Lease. The
amount of such payment and the amount of the reasonable expenses incurred in
connection with such agreement, as the case may be, together with interest
thereon at the Overdue Rate, shall constitute Supplemental Rent hereunder,
payable upon demand to the Lessor.
SECTION 23. INDEMNIFICATION.
(a) INDEMNIFICATION. The Lessee agrees to assume liability for, and
to indemnify, protect, save and keep harmless each Indemnified Person, on an
After-Tax Basis, from and against any and all Claims that may be imposed on,
incurred by or asserted against any Indemnified Person (whether because of an
action or omission by such Indemnified Person or otherwise and whether or not
such Indemnified Person shall also be indemnified as to any such Claim by any
other Person), in any way relating to or arising out of (i) the Leased Property
or any part thereof, (ii) the Operative Documents or the transactions
contemplated thereby, payments made pursuant to any thereof or the enforcement
by any Indemnified Person of any of its rights under the Operative Documents, or
any other transaction contemplated by the Operative Documents, including the
negotiation, execution and delivery of amendments thereto, (iii) the
manufacture, financing, refinancing, design, construction, inspection, purchase,
ownership, acquisition, acceptance, rejection, delivery, nondelivery,
possession, transportation, sublease, sub-sublease, sub-sub-sublease,
mortgaging, granting of a security interest in, preparation, installation,
condition, transfer of title, rental, use,
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operation, storage, maintenance, modification, alteration, repair, assembly,
sale, return, registration, abandonment or other application or disposition of
all or any part of the Leased Property or any interest therein, including,
without limitation, (A) Claims or penalties arising from any violation of Law or
liability in tort (strict or otherwise), (B) loss of or damage to any property
or the environment (including, without limitation, all Claims associated with
remediation, response, removal, corrective action, clean-up, Remedial Action,
treatment, compliance, restoration, abatement, encapsulation, containment,
revegetation, monitoring, sampling, investigation, assessment, financial
assurance, natural resource damages, the protection of wildlife and aquatic and
vegetation, the interference with or contamination of any wetland or body of
water (whether surface or subsurface) or aquifer, and any relevant mitigative
action under any Environmental Law and any Claims resulting from or relating to
the existence or presence of any Hazardous Material at, in, or under the Leased
Property, or any parts thereof, or the Release, emission or discharge of any
Hazardous Material into the environment (including air, water vapor, surface
water, ground water, and land (whether surface or subsurface)) or death or
injury to any Person, (C) latent or other defects, whether or not discoverable,
and (D) any claim for patent, trademark or copyright infringement, (iv) any
breach of or failure to perform or observe, or any other breach of or failure to
perform or observe, or any other non-compliance with, any covenant, condition or
agreement or other obligation to be performed by the Lessee under any Operative
Document, or the falsity of any representation or warranty of the Lessee in any
of the Operative Documents or in any certificate delivered by the Lessee, (v)
the imposition of any Lien (other than Permitted Liens) on the Leased Property,
or (vi) any violation of any Applicable Law with respect to the Lessee or the
Leased Property; PROVIDED, HOWEVER, that the Lessee shall not be required to
indemnify any Indemnified Person under this Section 23 for any Claim to the
extent resulting from the willful misconduct or gross negligence of such
Indemnified Person (other than willful misconduct or gross negligence imputed to
such Indemnified Person solely by reason of its interest in the Leased
Property). The obligation to provide indemnities in accordance with the terms
of this Section 23 shall survive the termination of this Lease.
(b) NOTICES. If the Lessee shall obtain knowledge of any action,
suit, proceeding or written notice of any Claim indemnified against under this
Section 23, the Lessee shall give prompt notice thereof to the appropriate
Indemnified Person or Indemnified Persons, as the case may be, and if any
Indemnified Person shall obtain any such knowledge, such Indemnified Person
shall give prompt notice thereof to the Lessee, PROVIDED that the failure of
such Indemnified Person to so notify the Lessee shall not affect the Lessee's
indemnification obligations under this Section 23 to such Indemnified Person,
except to the extent, if any, that the Lessee demonstrates that defense of the
Claim is prejudiced by the Indemnified Person's failure to give such notice.
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(c) CONTESTS. Subject to the rights of insurers under policies of
insurance maintained pursuant to Section 14, the Lessee shall have the right, at
its sole cost and expense, to investigate, and the right in its sole discretion
to defend or contest by appropriate proceedings or compromise, any Claim for
which indemnification is sought under this Section 23, and the Indemnified
Person shall cooperate, at the Lessee's expense, with all reasonable requests of
the Lessee in connection therewith, PROVIDED that the Lessee shall not have the
right without the consent of the Indemnified Person to defend, contest or
compromise any Claim with respect to such Indemnified Person (i) if an Event of
Default shall have occurred and be continuing, (ii) if such proceeding involves
any material danger of the sale, forfeiture or loss of the Leased Property or
any part thereof, or (iii) if such Claim involves a realistic possibility of
criminal sanctions or allegations by a Governmental Authority of criminal
liability to such Indemnified Person, in which event the Indemnified Person
shall be entitled to control and assume responsibility for the defense of such
Claim at the expense of the Lessee. The Lessee shall keep the Indemnified
Person which is the subject of such proceeding fully apprised of the status of
such proceeding and shall provide such Indemnified Person with all information
with respect to such proceeding as such Indemnified Person shall reasonably
request. In the event an Indemnified Person has assumed control of any such
proceeding, it shall keep the Lessee fully apprised of the status of such
proceeding and shall provide the Lessee with all information, including the
receipt of all settlement offers, with respect to such proceeding as such
Indemnified Person shall reasonably request. Where the Lessee or the insurers
under a policy of insurance maintained by the Lessee undertake the defense of an
Indemnified Person with respect to a Claim, no additional legal fees or expenses
of such Indemnified Person in connection with the defense of such Claim shall be
indemnified hereunder unless such fees or expenses were incurred at the request
of the Lessee or such insurers; PROVIDED that, if (i) in the written opinion of
counsel to such Indemnified Person an actual or potential conflict of interest
exists where it is advisable for such Indemnified Person to be represented by
separate counsel or (ii) such Indemnified Person has been indicted or otherwise
charged in a criminal complaint in connection with an indemnifiable Claim and
such Indemnified Person informs the Lessee that such Indemnified Person desires
to be represented by separate counsel, the reasonable fees and expenses of such
separate counsel shall be borne by the Lessee. Subject to the requirements of
any policy of insurance, an Indemnified Person may participate at its own
expense in any judicial proceeding controlled by the Lessee pursuant to the
preceding provisions and such participation shall not constitute a waiver of the
right to receive the indemnification provided in this Section 23.
Notwithstanding anything to the contrary contained herein, during the
continuance of an Event of Default, the Lessee shall not compromise any Claim
without the consent of the applicable Indemnified Person unless such Claim is
simultaneously discharged fully and
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unconditionally as to such Indemnified Person, such consent not to be
unreasonably withheld.
(d) SUBROGATION. Upon payment in full of any Claim by the Lessee
pursuant to this Section 23 to or on behalf of an Indemnified Person, the
Lessee, without any further action, shall be subrogated to any and all claims
that such Indemnified Person may have in respect of the matters against which
such indemnity was given (other than claims under any insurance policies
maintained by such Indemnified Person). Such Indemnified Person agrees to
cooperate with the Lessee and to execute such further instruments to permit the
Lessee, at the Lessee's expense, to pursue such claims, to the extent reasonably
requested by the Lessee.
(e) PAYMENTS. Any amount payable to any Indemnified Person pursuant
to this Section 23 shall be paid to such Indemnified Person promptly upon
receipt of a written demand therefor from such Indemnified Person, accompanied
by a written statement describing the basis for such indemnity and the amount so
payable.
SECTION 24. NOTICES.
All communications, demands, consents and notices provided for herein
shall be in writing, by fax (receipt confirmed), by tested telex or by personal
delivery and shall become effective if given by fax, telex or personal delivery,
when received, and if given by mail five (5) days after deposit in the United
States mail with proper postage for first-class mail prepaid, addressed (a) if
to the Lessor, at c/o KeyCorp Leasing, 54 State Street, Albany, New York 12207,
Attention: Sandra Mariano, telephone (518) 486-8186, fax (518) 486-8172, with a
copy to Key Global Finance, 30 Federal Street, Boston, Massachusetts 02110,
Attention: Chief Credit Officer, telephone (617) 654-2700, fax (617) 654-2727,
and (b) if to the Lessee, at 121 S.W. Morrison Street, Suite 1500, Portland,
Oregon 97204, Attention: Roger L. Krage, telephone ((503) 274-2300), fax ((503)
228-4875), or, in each case, at such other address as any of the foregoing
Persons may from time to time designate by notice duly given in accordance with
the provisions of this Section to such other Person.
SECTION 25. SUCCESSORS AND ASSIGNS.
This Lease, including all agreements, covenants, representations and
warranties, shall be binding upon and inure to the benefit of, and may be
enforced by, (a) the Lessor and its successors, assigns and agents, and, where
the context so requires, (i) each Indemnified Person, and (ii) the successors,
assigns and agents of such Indemnified Person, and (b) the Lessee and its
successors and, to the extent permitted hereby, assigns.
65
<PAGE>
SECTION 26. AMENDMENTS AND MISCELLANEOUS.
(a) AMENDMENTS. The terms of this Lease shall not be waived,
altered, modified, amended, supplemented or terminated in any manner whatsoever
except by written agreement signed by the Lessor and the Lessee.
(b) SURVIVAL OF AGREEMENTS. All agreements, indemnities,
representations and warranties contained in this Lease or any agreement,
document or certificate delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Lease and the expiration or
other termination of this Lease.
(c) ENFORCEMENT. Any provision of this Lease which may be determined
by competent authority to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the extent permitted by Applicable Law, the Lessee hereby waives any provision
of law which renders any provision hereof prohibited or unenforceable in any
respect.
(d) ENTIRE AGREEMENT. This Lease represents the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes any
and all prior understandings. This Lease shall constitute an agreement of lease
and nothing herein shall be construed as conveying to the Lessee any right,
title or interest in or to the Improvements, except as lessee only.
(e) BINDING EFFECT. All provisions contained in this Lease shall be
binding upon, inure to the benefit of and be enforceable by, the respective
permitted successors and assigns of the Lessor and the Lessee to the same extent
as if each successor and assignee were named as a party hereto.
(f) COUNTERPARTS. The parties may sign this Lease in any number of
counterparts and on separate counterparts, each of which shall be an original
but all of which when taken together shall constitute one and the same
instrument, except that, if this Lease constitutes "chattel paper" within the
meaning of the Uniform Commercial Code only one counterpart stamped or marked
"COUNTERPART NUMBER ONE" or "COUNTERPART NUMBER 1" shall constitute, to the
extent applicable, "chattel paper" or other "collateral" within the meaning of
the Uniform Commercial Code in effect in any jurisdiction.
66
<PAGE>
(g) GOVERNING LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Idaho.
(h) SECTIONS, HEADINGS. The division of this Lease into sections,
the provision of a table of contents and the insertion of headings are for the
convenience of reference only and shall not affect the construction or
interpretation of this Lease.
(i) NO MERGER OF TITLE. There shall be no merger of this Lease nor
of the leasehold estate created by this Lease with the fee ownership of the
Parcel, the Facility or the Modifications by reason of the fact that the same
Person may acquire, own or hold, directly or indirectly, this Lease or the
leasehold estate created by this Lease or any interest in this Lease or interest
in the fee or leasehold ownership of the Parcel, the Facility or the
Modifications and no such merger shall occur unless and until all Persons having
any interest in (x) the leasehold estate created by this Lease and (y) the
ownership of the Parcels, the Facility or the Modifications, or any part thereof
shall join in a written instrument effecting such merger and shall duly record
the same.
(j) WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING UNDER OR
RELATED TO THIS AGREEMENT, THE OPERATIVE DOCUMENTS OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, THE LESSOR AND THE LESSEE HEREBY AGREE THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY,
IRRESPECTIVE OF WHICH PARTY COMMENCES SUCH ACTION OR PROCEEDING.
(k) TRUE LEASE. The Lessee intends to treat this Lease, for
accounting purposes, as an operating lease. If a court of competent
jurisdiction determines that the transaction represented by this Lease and the
other Operative Documents will be treated as a financing transaction, then in
such event it is the intention of the parties hereto (i) that this Lease be
treated as a mortgage and security agreement and fixture filing, or other
similar instrument with a power of sale (the "LESSEE MORTGAGE") from Lessee, as
mortgagor, encumbering the Leased Property, and that the Lessee, as mortgagor,
shall be deemed to have hereby granted a security interest and mortgage to the
Lessor in the Leased Property now owned or hereafter acquired for the purpose of
securing the Lessee's payment and performance obligations under this Lease and
the other Operative Documents, (ii) that the Lessor shall have, as a result of
such determination, all of the rights, powers and remedies of a secured party
and mortgage available under Applicable Law to take possession of and sell
(whether by foreclosure, power of sale or otherwise) the Leased Property,
(iii) that the effective date of the Lessee Mortgage shall be the
67
<PAGE>
effective date of this Lease, (iv) that the recording of an instrument
referencing this provision shall be deemed to be the recording of the Lessee
Mortgage and (v) that the Lessee Mortgage shall secure the obligations of the
Lessee under this Lease.
(l) NO CLAIMS AGAINST LESSOR, ETC. Nothing contained in this Lease
shall constitute any consent or request by the Lessor, express or implied, for
the performance of any labor or services or the furnishing of any materials or
other property in respect of the Leased Property or any part thereof, nor as
giving the Lessee any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against the
Lessor in respect thereof. Notice is hereby given that the Lessor shall not be
liable for any labor or services performed or any materials or other property
furnished in respect of the Leased Property or any part thereof and that no
mechanic's or other lien for any such labor, services, materials or other
property shall attach to or affect the interest of the Lessor in the Leased
Property.
(m) LIMITED RECOURSE. Except as otherwise provided in the proviso to
this Section, nothing contained in this Lease or in the other Operative
Documents shall be construed as creating any liability on the part of any past
or present shareholder, limited partner or general partner of the Lessee, the
General Partner, or the MGP General Partners to pay any amount on account of the
Lessee's obligations hereunder or under any other Operative Document to which it
is a party or to perform any covenant of the Lessee contained herein or therein;
PROVIDED, HOWEVER, that nothing in this Section 26(m) shall be construed (i) to
relieve any Person from liability for fraud, concealment, or other intentional
wrongdoing for which such Person would otherwise be liable under any Applicable
Law, either directly or on behalf of the Lessee, (ii) to restrict the joinder in
any action of any necessary party in order to seek enforcement of rights against
the Lessee or any other party to any Operative Document or to restrict
injunctive relief against any Person to the extent necessary to obtain
performance by the Lessee of any of its obligations under any Operative
Document, or (iii) to relieve any Person from liability for distributions,
payments, or other transfers made to such Person in violation of the Operative
Documents or in violation of or otherwise recoverable under any Applicable Law.
68
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Lease to
be duly executed by their respective officers thereunto duly authorized on the
date first written above.
SELCO SERVICE CORPORATION, as Lessor
By
-----------------------------------------
Name: Andrew G. Mesches
Title: Vice President
CROWN PACIFIC LIMITED PARTNERSHIP, as
Lessee and as Construction Agent
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its General Partner
By
-----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO THE
LEASE AGREEMENT
FORM OF LEASE SUPPLEMENT
This LEASE SUPPLEMENT dated [ ], 199__, is made by and between SELCO
SERVICE CORPORATION, an Ohio corporation, as lessor (the "Lessor"), and CROWN
PACIFIC L.P., a Delaware limited partnership, as lessee (the "Lessee").
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into the
Lease Agreement dated as of December 19, 1997 (hereinafter the "Lease"; unless
otherwise defined herein, the terms defined therein being used herein with the
same meaning) and to which this Lease Supplement is a supplement;
WHEREAS, the Lease provides for the execution and delivery of a Lease
Supplement for the purposes and otherwise as set forth in Section 2 thereof.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements confirmed in the Lease and other good and valuable consideration,
receipt of which is hereby acknowledged, the Lessor and the Lessee hereby agree
as follows:
(1) The Lessor does hereby lease to the Lessee, and the Lessee does
hereby lease from the Lessor, the Components described in the Description of
Components attached hereto on Schedule 1.
(2) The Lessee hereby confirms to the Lessor that the Lessee has
unconditionally accepted the Components for all purposes hereof and of the
Lease.
(3) The Lessee hereby confirms that the Components conform to
specifications, are in good working order and repair and without defect in
title, condition, design, operation or fitness for purpose, and are free and
clear of all Liens except Liens permitted by Section 10 of the Lease Agreement;
PROVIDED, HOWEVER, that nothing contained herein or in the Lease shall in any
way diminish or otherwise affect any right which the Lessee or the Lessor may
have with respect to the Components or any portion thereof against any seller,
contractor, subcontractor, manufacturer or installer thereof or others.
(4) This Lease Supplement may be executed in any number of
counterparts and on separate counterparts, each of which shall be an original
but all of which when taken together shall constitute one and the same
instrument, except that, if this Lease Supplement constitutes "chattel paper"
within the meaning of the Uniform
<PAGE>
Commercial Code, only one counterpart stamped or marked "COUNTERPART ONE" or
"COUNTERPART NUMBER 1" shall constitute, to the extent applicable, "chattel
paper" or other "collateral" within the meaning of the Uniform Commercial Code
in effect in any jurisdiction.
(5) All the terms and provisions of the Lease are hereby incorporated
by reference in this Lease Supplement to the same extent as if fully set forth
herein. Without limiting the generality of the foregoing, the representations
and warranties of the Lessee that are set forth in the Lease shall be deemed
incorporated by reference herein with the same effect as though such
representations and warranties are made on and as of the date hereof.
(6) The Lessee hereby represents and warrants as of the date hereof
that no Default or Event of Default has occurred and is continuing under the
Lease.
IN WITNESS WHEREOF, the Lessor and the Lessee have each caused this
Lease Supplement to be duly executed as of the date first written above.
SELCO SERVICE CORPORATION, as Lessor
By
----------------------------------------
Name: Andrew G. Mesches
Title: Vice President
CROWN PACIFIC LIMITED PARTNERSHIP, as Lessee
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
its General Partner
By
----------------------------------------
Name:
Title:
A-2
<PAGE>
SCHEDULE 1
to Lease Supplement
DESCRIPTION OF COMPONENTS
The Components shall consist of the following:
<PAGE>
FORM OF REQUISITION
To: Selco Service Corporation
CROWN PACIFIC LIMITED PARTNERSHIP
CERTIFIED CONSTRUCTION REQUISITION NO.___
DATED____________ , 199____
The undersigned, [Name], [Title*] of Crown Pacific Limited
Partnership, acting as construction agent (the "CONSTRUCTION AGENT") for SELCO
Service Corporation, the lessor (the "LESSOR") pursuant to the Lease Agreement
dated as of December [ ], 1997 (the "LEASE AGREEMENT"), and acting as lessee
(the "LESSEE") thereunder, submits this irrevocable Requisition and certifies,
on behalf of the Lessee the following:
1. The total amount of the Actual Project Costs for which a
Requisition Funding is hereby requested is _________ Dollars ($______).
The Lessor is hereby requested to make available the proceeds of a
Requisition Funding on [at least 5 Business Days after the submission date]
____________, 199_, [must be a Requisition Funding Date] subject to the
satisfaction or waiver (as specified in Item 8 below) of all Requisition
Funding Conditions. The Requisition Funding shall be made at [bank],
account number [ ].
2. The proceeds of the Requisition Funding requested herein shall be
used solely to pay Actual Project Costs.
3. No part of the Actual Project Costs paid with the funds advanced
under any previous Requisition is a basis for this Requisition, and none of
the Actual Project Costs which are the subject of this Requisition was
included in any prior Requisition.
4. Attached to this Requisition is a copy of each invoice, purchase
order, receipt or other such document (not previously delivered with a
prior Requisition) (the "INVOICES") for Actual Project Costs, which
Invoices will be, or
- --------------------------------------
* To be an "Officer", as defined in the Lease Agreement.
<PAGE>
have been, paid with the proceeds of this Requisition Funding, or, as
applicable, the previous Requisition Fundings.
5. There has been no material change in the estimated time of
completion of the construction of the Facility and the Construction Agent
has no reason to believe that (i) the Final Completion Date cannot be
achieved by September 30, 1998 or (ii) the Actual Project Costs of the
construction of the Facility will exceed the Maximum Requisition Funding
Amount.
6. No Applicable Law prohibits, and no litigation, governmental
investigation or other proceeding is pending or threatened in which there
is a reasonable possibility of an unfavorable judgment, decree, order or
other determination which could prevent or make unlawful, or impose any
material adverse condition upon, the Leased Property or the construction or
operation thereof or any transaction contemplated hereby or by any other
Operative Document or the ability of the Lessee to perform its obligations
hereunder or thereunder.
7. [NOT APPLICABLE TO INITIAL REQUISITION] All amounts previously
advanced pursuant to previous Requisitions were or will be paid to the
parties entitled thereto as specified in such Requisitions.
8. [Except as set forth in this item 8,] all Requisition Funding
Conditions required to be satisfied prior to the Requisition Funding
requested herein have been satisfied. [Identify unfulfilled conditions,
the actions being taken by the Construction Agent and the Lessee to satisfy
such conditions and the date(s) by which the Construction Agent plans to
satisfy such conditions].
9. All of the representations and warranties of the Lessee set forth
in the Operative Documents are true and correct on and as of the date
hereof. The Lessee is in compliance with all of its obligations under the
Operative Documents and there exists no Default or Event of Default under
the Operative Documents.
B-2
<PAGE>
All terms used herein but not defined herein shall have the meanings
assigned to such terms in the Lease.
Dated this ____ day of _________, 199_.
CROWN PACIFIC LIMITED PARTNERSHIP,
as Lessee and Construction Agent
By CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, its General Partner
By:
-----------------------------
Name:
Title:
B-3
<PAGE>
EXHIBIT C TO THE
LEASE AGREEMENT
APPROVED CONSTRUCTION BUDGET
[Crown to Provide]
<PAGE>
[FORM OF FINAL COMPLETION CERTIFICATE]
OFFICER'S CERTIFICATE
This Officer's Certificate is being furnished pursuant to the
requirements of the Lease Agreement, dated as of December 19, 1997, among SELCO
Service Corporation, an Ohio corporation (the "Lessor"), and Crown Pacific
Limited Partnership, a Delaware limited partnership (the "LESSEE" and the
"CONSTRUCTION AGENT") (as the same may be amended, modified or supplemented from
time to time, the "LEASE"). Capitalized terms used but not otherwise defined
herein shall have the meanings set forth in the Lease.
The undersigned, on behalf of the Lessee, hereby certifies that:
1. Completion of the Components as contemplated by the Lease as a
whole has taken place in all respects and the Facility has been constructed. A
permanent certificate of occupancy (the "PCO") for the Facility has been issued
by the applicable Governmental Authority having responsibility for such issuance
and the same is in proper form and not subject to any appeal or contest or to
any unsatisfied conditions (other than conditions relating to completion in the
future) that may allow modification or revocation.
2. All Permits that are or will become Applicable Permits have been
obtained, except Applicable Permits required by Law to be obtained after the
Final Completion Date (as to which the Construction Agent, having completed all
appropriate diligence, has no reason to believe that such Permits will not be
granted in the usual course of business prior to the date that such Permits are
required by Law, and the Lessee has applied for such Permits and satisfied all
legal requirements necessary to authorize continued operation while the Permit
application is pending). All such obtained Permits are in proper form, in full
force and effect and not subject to any appeal or contest or to any unsatisfied
conditions (other than conditions relating to completion in the future) that may
allow modification or revocation.
3. The Leased Property is in compliance in all material respects
with all Applicable Laws. The construction and operation of the Facility is in
accordance in all material respects with all Applicable Laws and all
representations set forth in, or made in connection with, all Permits, as
required for occupancy and operation thereof.
4. The Lessee is in compliance with all Insurance Requirements and
all insurance policies required under Section 14 of the Lease are in force and
effect.
5. The representations and warranties of the Lessee as set forth in
the Operative Documents are true and correct in all material respects as if made
on and as of the date hereof.
<PAGE>
6. The Facility is complete and is ready and available for its
intended use by Lessee.
7. Attached hereto as SCHEDULE A is a true and correct list, as of
the date hereof, of all furniture, fixtures and equipment located on the Parcel.
Dated this day of , 199 .
CROWN PACIFIC LIMITED PARTNERSHIP,
as Construction Agent
By CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP, its General Partner
By:
------------------------------
Name:
Title:
D-2
<PAGE>
EXHIBIT E TO THE
LEASE AGREEMENT
TERMS OF SINGLE INVESTOR TAX LEASE
[To Follow]
<PAGE>
EXHIBIT F TO THE
LEASE AGREEMENT
CREDIT AGREEMENT
<PAGE>
SCHEDULE 1
TO LEASE AGREEMENT
DESCRIPTION OF PARCEL
<PAGE>
SCHEDULE 6(a)(viii)
TO LEASE AGREEMENT
PERMITS
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 10.18
CROWN PACIFIC LIMITED PARTNERSHIP
------------------------------
NOTE PURCHASE AGREEMENT
Dated as of December 15, 1997
------------------------------
Re: $95,000,000 Senior Notes, Series A, B and C
Due 2010 - 2018
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. . . . . . . . . . . . . 1
Section 1.1. Description of the Transaction; Notes. . . . . . . . . . 1
Section 1.2. Commitment, Closing Date . . . . . . . . . . . . . . . . 2
Section 1.3. Failure to Deliver . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Several Commitments. . . . . . . . . . . . . . . . . . . 3
Section 1.6. Pre-funding of Commitment. . . . . . . . . . . . . . . . 3
SECTION 2. REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1. Representations of the Company . . . . . . . . . . . . . 4
Section 2.2. Representations of the Managing General Partner. . . . . 4
Section 2.3. Representations of the Purchasers. . . . . . . . . . . . 4
SECTION 3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . 6
Section 3.1. Execution of Agreement and Notes . . . . . . . . . . . . 6
Section 3.2. Closing Certificates . . . . . . . . . . . . . . . . . . 6
Section 3.3. Opinions of Counsel. . . . . . . . . . . . . . . . . . . 6
Section 3.4. Legal Existence and Authority. . . . . . . . . . . . . . 6
Section 3.5. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.6. Environmental Audit. . . . . . . . . . . . . . . . . . . 7
Section 3.7. Appraisals . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.8. Related Transactions . . . . . . . . . . . . . . . . . . 7
Section 3.9. Acquisition Facility; Working Capital Facility . . . . . 7
Section 3.10. Legality . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11. Payment of Special Counsel Fees. . . . . . . . . . . . . 8
Section 3.12. Private Placement Number . . . . . . . . . . . . . . . . 8
Section 3.13. [Intentionally Reserved] . . . . . . . . . . . . . . . . 8
Section 3.14. Satisfactory Proceedings . . . . . . . . . . . . . . . . 8
SECTION 4. COMPANY COVENANTS. . . . . . . . . . . . . . . . . . . . . . 8
<PAGE>
Section 4.1. Legal Existence, Etc . . . . . . . . . . . . . . . . . . 8
Section 4.2. Insurance. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.3. Taxes, Claims for Labor and Materials, Compliance
with Laws; Environmental and Natural Resource Matters. . 9
Section 4.4. Maintenance, Etc . . . . . . . . . . . . . . . . . . . .12
Section 4.5. Nature of Business . . . . . . . . . . . . . . . . . . .12
Section 4.6. Limitations on Current Debt and Funded Debt. . . . . . .12
Section 4.7. Distributions. . . . . . . . . . . . . . . . . . . . . .13
Section 4.8. Investments. . . . . . . . . . . . . . . . . . . . . . .13
Section 4.9. Mergers and Consolidations . . . . . . . . . . . . . . .15
Section 4.10. Sales of Assets. . . . . . . . . . . . . . . . . . . . .16
Section 4.11. Sale of Equity Interests in Restricted Subsidiaries. . .18
Section 4.12. Limitation on Harvesting . . . . . . . . . . . . . . . .19
Section 4.13. Payment of Dividends by Restricted Subsidiaries. . . . .20
Section 4.14. Guaranties . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.15. Transactions with Affiliates . . . . . . . . . . . . . .20
Section 4.16. Multiemployer Plan Liability and Termination of
Pension Plans. . . . . . . . . . . . . . . . . . . . . .20
Section 4.17. Reports and Rights of Inspection.. . . . . . . . . . . .21
Section 4.18. Changes in Status of Subsidiaries. . . . . . . . . . . .23
Section 4.19. Repurchase of Notes. . . . . . . . . . . . . . . . . . .24
Section 4.20. Liens. . . . . . . . . . . . . . . . . . . . . . . . . .24
Section 4.21. Ratings. . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 5. PREPAYMENT OF NOTES. . . . . . . . . . . . . . . . . . . . .26
Section 5.1. Required Prepayments . . . . . . . . . . . . . . . . . .26
Section 5.2. Optional Prepayment With Premium . . . . . . . . . . . .27
Section 5.3. Notice of Optional Prepayments . . . . . . . . . . . . .27
Section 5.4. Application of Prepayments . . . . . . . . . . . . . . .28
Section 5.5. Direct Payment . . . . . . . . . . . . . . . . . . . . .28
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. . . . . . . . . . .28
Section 6.1. Events of Default. . . . . . . . . . . . . . . . . . . .28
Section 6.2. Notice to Holders. . . . . . . . . . . . . . . . . . . .30
Section 6.3. Acceleration of Maturities . . . . . . . . . . . . . . .30
-3-
<PAGE>
Section 6.4. Rescission of Acceleration . . . . . . . . . . . . . . .31
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . . .31
Section 7.1. Consent Required . . . . . . . . . . . . . . . . . . . .31
Section 7.2. Solicitation of Holders. . . . . . . . . . . . . . . . .32
Section 7.3. Effect of Amendment or Waiver. . . . . . . . . . . . . .32
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS . . . . . . . . . .32
Section 8.1. Definitions. . . . . . . . . . . . . . . . . . . . . . .32
Section 8.2. Accounting Principles. . . . . . . . . . . . . . . . . .50
Section 8.3. Directly or Indirectly . . . . . . . . . . . . . . . . .50
SECTION 9. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . .50
Section 9.1. Registered Notes . . . . . . . . . . . . . . . . . . . .50
Section 9.2. Exchange of Notes. . . . . . . . . . . . . . . . . . . .51
Section 9.3. Loss, Theft, Etc. of Notes . . . . . . . . . . . . . . .51
Section 9.4. Powers and Rights Not Waived; Remedies Cumulative. . . .51
Section 9.5. Notices. . . . . . . . . . . . . . . . . . . . . . . . .51
Section 9.6. Reproduction of Documents. . . . . . . . . . . . . . . .52
Section 9.7. Survival . . . . . . . . . . . . . . . . . . . . . . . .52
Section 9.8. Successors and Assigns . . . . . . . . . . . . . . . . .52
Section 9.9. Governing Law. . . . . . . . . . . . . . . . . . . . . .52
Section 9.10. Submission to Jurisdiction . . . . . . . . . . . . . . .52
Section 9.11. Limitations of Liability . . . . . . . . . . . . . . . .53
Section 9.12. Severability . . . . . . . . . . . . . . . . . . . . . .53
Section 9.13. Captions . . . . . . . . . . . . . . . . . . . . . . . .53
Section 9.14. Duplicate Originals. . . . . . . . . . . . . . . . . . .53
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
ATTACHMENTS TO NOTE PURCHASE AGREEMENT:
SCHEDULE I -- Names and Commitments of Purchasers
SCHEDULE II -- Investments
EXHIBIT A-1 -- Form of 7.76% Senior Notes, Series A
EXHIBIT A-2 -- Form of 7.76% Senior Notes, Series B
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EXHIBIT A-3 -- Form of 7.93% Senior Notes, Series C
EXHIBIT B-1 -- Closing Certificate of the Company
EXHIBIT B-2 -- Closing Certificate of the Managing General Partner
EXHIBIT C -- Description of Closing Opinion of Counsel to the
Company
EXHIBIT D -- Description of Closing Opinion of Special Counsel to
the Company
EXHIBIT E -- [Intentionally Reserved]
EXHIBIT F -- Description of Closing Opinion of Special Counsel to
the Purchasers
EXHIBIT G -- Subordination Provisions
EXHIBIT H -- Pre-Funding Agreement
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<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
121 S.W. Morrison Street
Portland, Oregon 97204
NOTE PURCHASE AGREEMENT
Re: $95,000,000 Senior Notes, Series A, B and C
Due 2010 - 2018
----------------------------------------
Dated as of
December 15, 1997
To the Purchasers named in Schedule I
to this Agreement
Gentlemen:
CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership (together
with any Person who succeeds to all or substantially all Crown Pacific Limited
Partnership's assets and business, the "COMPANY"), agrees with the Purchasers
named on Schedule I to this Agreement (the "PURCHASERS") as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
SECTION 1.1. DESCRIPTION OF THE TRANSACTION; NOTES. The Company has duly
authorized the issuance and sale of its Senior Notes due 2010 - 2018 in an
aggregate principal amount not to exceed $95,000,000, to be comprised of
Series A Notes in an aggregate principal amount of $15,000,000, Series B Notes
in an aggregate principal amount of $55,000,000 and Series C Notes in an
aggregate principal amount of $25,000,000. The Notes (such term and all other
capitalized terms not otherwise defined herein shall have the respective
meanings assigned thereto in Section 8) Are to be dated the date of issue, to
bear interest at the rate of
<PAGE>
7.76%, in the case of the Series A Notes, 7.76%, in the case of the Series B
Notes and 7.93%, in the case of the Series C Notes, per annum prior to maturity
payable semiannually in arrears on February 1 and August 1 in each year
(commencing February 1, 1998) until the principal amount thereof shall be due
and payable, to bear interest on overdue principal (including any overdue
prepayment of principal) and premium, if any, and (to the extent permitted by
law) on any overdue installment of interest at the Overdue Rate, to be expressed
to mature on February 1, 2012, in the case of the Series A Notes, February 1,
2013, in the case of the Series B Notes and February 1, 2018, in the case of the
Series C Notes, and to be substantially in the respective forms attached hereto
as Exhibits A-1, A-2 and A-3. Interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Company prior to their expressed
maturity dates except on the terms and conditions and in the amounts and with
the premium, if any, set forth in Section 5.
SECTION 1.2. COMMITMENT, CLOSING DATE. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to each Purchaser,
and such Purchaser agrees to purchase from the Company, on the closing date
specified below such Purchaser's name in Schedule I, or in the event that the
Company cannot perform all of the conditions set forth in Section 3 by such
date, then such other Business Day not later than the commitment expiration date
specified below such Purchaser's name in Schedule I as such conditions can be
satisfied or such other Business Day as the Company and the Purchasers shall
specifically agree upon (the "CLOSING DATES"), the Notes specified opposite such
Purchaser's name in Schedule I at a price of 100% of the principal amount
thereof.
Delivery of the Notes to be purchased on each Closing Date will be made at
the offices of Chapman and Cutler, 111 W. Monroe Street, Chicago, Illinois 60603
at or about 12:00, noon, Chicago, Illinois time, on such Closing Date against
payment therefor in Federal funds or other immediately available funds at the
principal office of Bank of America National Trust and Savings
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<PAGE>
Association, San Francisco, ABA# 121000358, Account Name, Crown Pacific Limited
Partnership, Account No. 12330-26768, in the amount of the purchase price. The
Note to be delivered to each Purchaser on such Closing Date will be delivered to
such Purchaser in the form of a single registered Note of each series to be
purchased by such Purchaser on such Closing Date in the form attached hereto as
Exhibit A-1, A-2 and/or A-3, as the case may be, for the full amount of such
Purchaser's purchase of such series (unless different denominations are
specified by such Purchaser), registered in such Purchaser's name or in the name
of such Purchaser's nominee specified in Schedule I.
SECTION 1.3. FAILURE TO DELIVER. If, on any Closing Date, the Company
fails to tender to any Purchaser the Notes to be issued to such Purchaser on
such Closing Date or if the conditions specified in Section 3 hereof have not
been fulfilled, such Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement; PROVIDED that such election shall not relieve
the Company from any of its obligations hereunder or waive any of such
Purchaser's rights against the Company. Without limiting the foregoing, if the
conditions specified in Section 3 hereof for any Closing Date have not been
fulfilled, each Purchaser purchasing Notes on such Closing Date may waive
compliance by the Company with any such condition to such extent as such
Purchaser in its sole discretion may determine.
SECTION 1.4. EXPENSES. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay all expenses
relating to the transactions contemplated by this Agreement, including but not
limited to:
(a) the cost of reproducing this Agreement, the Notes and all other
documents required or contemplated hereunder;
(b) the reasonable fees and expenses of Chapman and Cutler, special
counsel to the Purchasers;
(c) reasonable out-of-pocket expenses of the Purchasers;
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<PAGE>
(d) the cost of delivering to each Purchaser at its home office,
insured to its satisfaction, the Notes purchased thereby on the Closing
Dates;
(e) all reasonable fees and expenses (including, without limitation,
reasonable attorney's fees) incurred by any Holder in connection with the
enforcement of the obligations of the Company under this Agreement or the
Notes; and
(f) all expenses (including reasonable attorney's fees) in connection
with any amendments, waivers or consents requested or agreed to by the
Company in connection with this Agreement or the Notes (whether or not the
same are actually executed and delivered), including, without limitation,
any amendments, waivers, or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the Company
of its obligations under this Agreement and the Notes;
PROVIDED that each Person that has incurred or incurs expenses related to the
subject matter of this Agreement shall use its best efforts to submit promptly
to the Company invoices with respect to such expenses. The Company also agrees
that it will pay and save the Purchasers harmless against any and all liability
with respect to stamp and other taxes (except for taxes on any Purchaser's gross
or net income), if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement or the
Notes, whether or not any Notes are then outstanding. The Company agrees to
protect and indemnify the Purchasers against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person in
connection with the transactions contemplated by this Agreement. Each Purchaser
hereby represents and warrants that it has not engaged any investment banker or
broker in connection with its purchase of the Notes, it being understood that
BancAmerica Robertson Stephens has acted as placement agent of the Company.
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<PAGE>
The obligations of the Company under this Section 1.4 shall survive the
payment or prepayment of the Notes and the termination of this Agreement.
SECTION 1.5. SEVERAL COMMITMENTS. The obligations of each Purchaser
shall be several and not joint and no Purchaser shall be liable or responsible
for the acts or defaults of any other Purchaser. The obligation of the Company
to consummate the sale of the Notes on each Closing Date is contingent upon the
purchase by the Purchasers of 100% of the aggregate principal amount of the
Notes scheduled to be purchased on such Closing Date pursuant to this Agreement.
SECTION 1.6. PRE-FUNDING OF COMMITMENT. In order to facilitate an
orderly closing on each Closing Date, each Purchaser purchasing Notes on such
Closing Date agrees that upon the request of the Company made at least 5 days
prior to such Closing Date, such Purchaser shall make its funds required to
purchase the Notes to be purchased by it on such Closing Date available to Bank
of America National Trust and Savings Association, as funding agent (the
"FUNDING AGENT"), at or prior to 12:00, noon, Chicago, Illinois time, on the
Business Day prior to such Closing Date, in Federal funds or other immediately
available funds. The foregoing obligation of each Purchaser to so make its
funds available shall be subject to the condition precedent that it shall have
received a Pre-Funding Agreement executed by the Company and the Funding Agent
in substantially the form attached hereto as Exhibit H. Each Purchaser agrees
by its execution hereof that funds so made available by it may be invested by
the Funding Agent as provided in said Pre-Funding Agreement.
SECTION 2. REPRESENTATIONS.
SECTION 2.1. REPRESENTATIONS OF THE COMPANY. The Company represents and
warrants that all representations set forth in the form of Closing Certificate
attached hereto as Exhibit B-1 are true and correct as of the date hereof and
are incorporated herein by reference with the same force and effect as though
herein set forth in full.
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<PAGE>
SECTION 2.2. REPRESENTATIONS OF THE MANAGING GENERAL PARTNER. Crown
Pacific Management Limited Partnership, a Delaware limited partnership (together
with any Person who succeeds to all or substantially all of Crown Pacific
Management Limited Partnership's assets and business, the "MANAGING GENERAL
PARTNER"), represents and warrants that all representations set forth in the
form of Closing Certificate attached hereto as Exhibit B-2 are true and correct
as of the date hereof and are incorporated herein by reference with the same
force and effect as though herein set forth in full.
SECTION 2.3. REPRESENTATIONS OF THE PURCHASERS. Each Purchaser
represents and warrants to the Company that such Purchaser is acquiring the
Notes for the purpose of investment and not with a view to the distribution
thereof, and that such Purchaser has no present intention of selling,
negotiating or otherwise disposing of the Notes; it being understood, however,
that the disposition of such Purchaser's Property shall at all times be and
remain within its control. Each Purchaser further represents and warrants to
the Company that such Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
investing in the Notes and is aware that the Notes have not been registered
under the Securities Act or the securities laws of any state, and that the sale
of each Note is predicated upon such sale being exempt from registration as an
exempt transaction under applicable federal and state securities laws, and that
no state or federal governmental authorities have made any finding or
determination relating to the Notes, and that no state or federal governmental
authority has or will recommend or endorse the Notes. Each Purchaser further
represents and warrants to the Company that at least one of the following
statements is an accurate representation as to the source of funds to be used by
such Purchaser to pay the purchase price of the Notes purchased by it hereunder
(respectively, the "SOURCE"):
(a) The Source is an "insurance company general account" within the
meaning of Department of Labor Prohibited Transaction Exemption ("PTE")
95-60 (issued July 12, 1995), and there is no employee benefit plan
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<PAGE>
(treating as a single plan, all employee benefit plans maintained by the
same employer or employee organization) with respect to which the amount of
the general account reserves and liabilities for all contracts held by or
on behalf of such employee benefit plan exceed ten percent (10%) of the
total reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the NAIC Annual
Statement filed with such Purchaser's state of domicile;
(b) The Source is one or more separate accounts, trusts or a
commingled pension trust maintained by the Purchaser within the meaning of
PTE 90-1 (issued January 29, 1990) and the Purchaser has disclosed to the
Company the names of such employee benefit plans whose assets in such
separate account or accounts or pension trusts exceed 10% of the total
assets or are expected to exceed 10% of the total assets of such account or
accounts or trusts as of the date of such purchase (for the purpose of this
clause (b), all employee benefit plans maintained by the same employer or
employee organization are deemed to be a single plan);
(c) The Source is a bank collective investment fund maintained by the
Purchaser within the meaning of PTE 91-38 (issued July 12, 1991) and the
Purchaser has disclosed to the Company the names of such employee benefit
plans whose assets in such collective investment fund exceed 10% of the
total assets or are expected to exceed 10% of the total assets of such fund
as of the date of such purchase (for the purpose of this clause (c), all
employee benefit plans maintained by the same employer or employee
organization are deemed to be a single plan);
(d) The Source is one or more employee benefit plans, each of which
has been identified to the Company in writing;
(e) The Source is one or more pension funds, trust funds or agency
accounts, each of which is a "governmental plan" as defined in Section
3(32) of ERISA;
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<PAGE>
(f) The Source is an "investment fund" managed by a "qualified
professional asset manager" or "QPAM" (as defined in Part V of PTE 84-14,
issued March 13, 1984), provided that no other party to the transactions
described in this Agreement and no "affiliate" of such other party (as
defined in Section V(c) of PTE 84-14) has at this time, and during the
immediately preceding one year has exercised the authority to appoint or
terminate said QPAM as manager of the assets of any plan identified in
writing pursuant to this clause (f) or to negotiate the terms of said
QPAM's management agreement on behalf of any such identified plans; or
(g) The Source consists of funds which do not constitute "plan
assets".
The Company shall deliver a certificate on each Closing Date which
certificate shall either state that (i) it is neither a "party in interest" (as
defined in Title I, Section 3(14) of ERISA) nor a "disqualified person" (as
defined in Section 4975(e)(2) of the Internal Revenue Code of 1986, as amended),
with respect to any plan identified pursuant to clauses (b), (c) or (d) above,
or (ii) with respect to any plan identified pursuant to clause (f) above,
neither it nor any "affiliate" (as defined in Section V(c) of PTE 84-14) is
described in the proviso to said clause (f). As used in this Section 2.3, the
term "SEPARATE ACCOUNT" shall have the meaning assigned thereto in ERISA, the
term "PLAN ASSETS" shall have the meaning assigned thereto in Department of
Labor Regulation 29 C.F.R. Section 2510.3-101 and the term "EMPLOYEE BENEFIT
PLAN" shall have the meaning assigned thereto in ERISA and shall also include a
plan as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended. The representations contained in such certificate shall be made in
reliance upon and subject to the accuracy of the representation of the
Purchasers in this Section 2.3 as to the source of funds to be used by the
Purchasers to pay the purchase price of the Notes to be purchased by the
Purchasers.
SECTION 3. CLOSING CONDITIONS.
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<PAGE>
The obligation of each Purchaser to purchase the Notes to be purchased by
such Purchaser on each Closing Date shall be subject to the performance by the
Company of its agreements hereunder which, by the terms hereof, are to be
performed at or prior to the time of delivery of the Notes and of the following
further conditions precedent:
SECTION 3.1. EXECUTION OF AGREEMENT AND NOTES. On or prior to such
Closing Date this Agreement and the Notes shall have been duly authorized,
executed and delivered by the Company and shall be in full force and effect and
no Default or Event of Default shall exist in the performance by the Company of
any of its obligations thereunder.
SECTION 3.2. CLOSING CERTIFICATES. On such Closing Date, each Purchaser
purchasing Notes on such Closing Date shall have received (i) from the Company a
certificate dated the Closing Date, substantially in the form attached hereto as
Exhibit B-1, and (ii) from the Managing General Partner a certificate dated such
Closing Date, substantially in the form attached hereto as Exhibit B-2, the
truth and accuracy of each of which shall be a condition to such Purchaser's
obligation to purchase the Notes proposed to be sold to such Purchaser.
SECTION 3.3. OPINIONS OF COUNSEL. On such Closing Date, each Purchaser
purchasing Notes on such Closing Date shall have received the written opinions,
dated in each case as of such Closing Date, from Ball Janik LLP, counsel to the
Company and the Managing General Partner, from Andrews & Kurth L.L.P., special
counsel to the Company, and from Chapman and Cutler, special counsel to the
Purchasers, their respective opinions substantially described in Exhibits C, D
and F hereto, reasonably satisfactory in form and substance to such Purchaser.
SECTION 3.4. LEGAL EXISTENCE AND AUTHORITY. On such Closing Date, each
Purchaser purchasing Notes on such Closing Date shall have received, in form and
substance reasonably satisfactory to such Purchaser and such Purchaser's special
counsel, such documents and evidence with respect to the Company and the
Managing General Partner as such Purchaser or such Purchaser's
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<PAGE>
special counsel may reasonably request in order to establish the existence and
good standing of the Company and the Managing General Partner, the authorization
of the transactions contemplated by this Agreement, the taking of all
appropriate proceedings in connection therewith and compliance with the
conditions set forth in this Section 3.
SECTION 3.5. INSURANCE. Prior to such Closing Date, each Purchaser
purchasing Notes on such Closing Date shall have received from the Company a
certificate of the Company evidencing compliance with the provisions of
Section 4.2.
SECTION 3.6. ENVIRONMENTAL AUDIT. Prior to such Closing Date, each
Purchaser purchasing Notes on such Closing Date shall have received from the
Company reasonably requested environmental information with respect to the
Properties owned by the Company or to be owned by the Company after giving
effect to the issuance of the Notes and the consummation of the transactions
described in Section 3.8 (including environmental information with respect to
the conversion facilities and endangered species).
SECTION 3.7. APPRAISALS. Prior to such Closing Date, each Purchaser
purchasing Notes on such Closing Date shall have received existing appraisal
reports reasonably requested by the Purchasers with respect to the timberlands
owned by the Company or to be owned by the Company after giving effect to the
issuance of the Notes.
SECTION 3.8. RELATED TRANSACTIONS. Concurrently with the issuance and
sale of the Notes to the Purchasers on such Closing Date:
(i) the Company shall consummate the sale of the entire aggregate
principal amount of the Notes scheduled to be sold on such Closing Date
(and in the case of the second Closing Date, the sale of the Notes
scheduled to be sold on the first Closing Date shall also have been
consummated) pursuant to this Agreement; and
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<PAGE>
(ii) The net proceeds of the sale of the Notes pursuant to this
Agreement shall be applied by the Company to repay indebtedness in
connection with the acquisitions of timberlands and other Property and to
the payment, or provision for payment, of expenses in consummating the
transactions contemplated by this Agreement.
SECTION 3.9. ACQUISITION FACILITY; WORKING CAPITAL FACILITY. On or prior
to such Closing Date, the Company shall have executed and delivered and there
shall be in full force and effect an Amended and Restated Credit Agreement dated
as of July 31, 1996, as amended (the "ACQUISITION CREDIT AGREEMENT"), with Bank
of America National Trust and Savings Association and the other banks named
therein, pursuant to which there shall from time to time be available to the
Company (subject to certain conditions precedent set forth therein) not less
than $150,000,000 to fund future acquisitions by the Company of timberlands and
related assets (the "ACQUISITION FACILITY"), and the Company shall have executed
and delivered and there shall be in full force and effect an Amended and
Restated Facility B Credit Agreement dated as of July 31, 1996, as amended (the
"WORKING CAPITAL CREDIT AGREEMENT"), with Bank of America National Trust and
Savings Association and the other banks named therein, pursuant to which there
shall from time to time be available to the Company (subject to certain
conditions precedent set forth therein) not less than $40,000,000 for working
capital and general partnership purposes of the Company.
SECTION 3.10. LEGALITY. On such Closing Date, the purchase by each
Purchaser of the Notes proposed to be sold to such Purchaser on such Closing
Date shall not be prohibited by any applicable law or governmental regulation,
shall not be subject to any penalty or other onerous condition under or pursuant
to any applicable law or governmental regulation, and such Purchaser shall have
received from the Company such certificates or other evidence as to matters of
fact as such Purchaser may reasonably request to establish compliance with this
condition.
SECTION 3.11. PAYMENT OF SPECIAL COUNSEL FEES. On such Closing Date, the
Company shall have paid the reasonable fees and
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expenses of Chapman and Cutler, special counsel to the Purchasers, in connection
with the purchase of the Notes by the Purchasers on such Closing Date.
SECTION 3.12. PRIVATE PLACEMENT NUMBER. Prior to such Closing Date, the
appropriate filings shall have been duly made with Standard & Poor's CUSIP
Service Bureau, as agent for the National Association of Insurance
Commissioners, in order to obtain a private placement number for each series of
the Notes.
SECTION 3.13. [INTENTIONALLY RESERVED].
SECTION 3.14. SATISFACTORY PROCEEDINGS. All proceedings taken in
connection with the transactions contemplated by this Agreement and all
documents necessary to the consummation thereof, shall have been taken or
delivered, as the case may be, shall be satisfactory in form and substance to
special counsel to the Purchasers, and each Purchaser shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
SECTION 4. COMPANY COVENANTS.
From and after the first Closing Date and continuing so long as any amount
remains unpaid on any Note:
SECTION 4.1. LEGAL EXISTENCE, ETC. The Company will preserve and keep in
force and effect its legal existence as a limited partnership not taxable as a
corporation, and will cause each Restricted Subsidiary to preserve and keep in
force and effect, its legal existence as a limited partnership, general
partnership or corporation, as the case may be, and all material licenses,
franchises and permits necessary to the proper conduct of its business, PROVIDED
that the foregoing shall not prevent any transaction permitted by Section 4.9;
and PROVIDED FURTHER that the Company shall not be obligated to preserve its
status as a partnership not taxable as a corporation if (i) the Company's
failure to preserve such status shall be the result of an amendment to the tax
laws enacted by the Congress of the United
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States and (ii) after giving effect to the loss of such status the ratio of
Consolidated Cash Flow for the immediately preceding Four Quarter Period to Pro
Forma Maximum Debt Service, determined as of the date of the loss of such
status, would be greater than 1.1 to 1.0, assuming, for the purposes of the
computation of Consolidated Cash Flow, that Consolidated Cash Flow would be
reduced by taxes at the applicable tax rate of the Company for such period had
the Company been taxable as a corporation.
SECTION 4.2. INSURANCE. The Company will maintain, and will cause each
Restricted Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts (including such deductibles and
self insurance) and against such risks as are customary for companies of
established reputation engaged in the same or similar business activities and
owning and operating similar Properties.
SECTION 4.3. TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS;
ENVIRONMENTAL AND NATURAL RESOURCE MATTERS. (a) The Company will promptly pay
and discharge, and will cause each Restricted Subsidiary promptly to pay and
discharge, all lawful taxes, assessments and governmental charges or levies
imposed upon the Company or such Restricted Subsidiary, respectively, or upon or
in respect of all or any part of the Property or business of the Company or such
Restricted Subsidiary, all trade accounts payable in accordance with usual and
customary business terms, and all claims for work, labor or materials, which if
unpaid would become a Lien or charge upon any Property of the Company or such
Restricted Subsidiary, PROVIDED that the Company or such Restricted Subsidiary
shall not be required to pay any such tax, assessment, charge, levy, account
payable or claim if (i) the validity, applicability or amount thereof is being
contested in good faith by appropriate actions or proceedings which will prevent
the forfeiture or sale of any Property of the Company or such Restricted
Subsidiary or any material interference with the use thereof by the Company or
such Restricted Subsidiary, and (ii) the Company or such Restricted Subsidiary
shall set aside on its books, reserves deemed by it to be adequate with respect
thereto. The Company will promptly comply, and will cause each Subsidiary to
comply, with all laws,
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ordinances or governmental rules and regulations to which it is subject,
including without limitation, ERISA, the violation of which would materially and
adversely affect the Properties, business, profits or condition of the Company
and its Restricted Subsidiaries, taken as a whole, or would result in any Lien
not permitted under Section 4.20.
(b) (1) The Company and its Subsidiaries and their Properties shall
comply in all material respects with any applicable Environmental and
Natural Resource Law;
(2) The Company and its Subsidiaries shall obtain and maintain in
good standing all material Governmental Approvals required for their
operations and their Properties by any applicable Environmental and Natural
Resource Law;
(3) The Company and its Subsidiaries shall not, and shall not permit
any Person to, own or operate on any of its Properties any (i) landfill or
dump or (ii) hazardous waste treatment, storage or disposal facility as
defined pursuant to RCRA or any comparable state law; the Company and its
Subsidiaries shall not use, generate, treat, store, release or dispose of
Hazardous Materials at or on any of its Properties in quantities materially
greater than that which is customary for operations similar to those of the
Company and its Subsidiaries;
(4) The Company and its Subsidiaries shall within ten Business Days
notify the Holders in writing of, and specify the action the Company is
taking and proposes to take with respect thereto and provide any reasonably
requested documents upon learning of, any of the following:
(A) any material liability for response or corrective action,
natural resource damage or other harm pursuant to CERCLA, RCRA or any
comparable state law;
(B) any material Environmental and Natural Resource Claim
arising from the Company and its
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Subsidiaries, their operations, their Properties or any other Property
previously owned or operated by the Company or its Subsidiaries or
their predecessors;
(C) any conditions or occurrences at the Properties of the
Company and its Subsidiaries which could reasonably form the basis for
a material Environmental and Natural Resource Claim against the
Company or its Subsidiaries or their Properties;
(D) any material and actual or imminent restriction on the
ownership, occupancy, use, productivity or transferability of the
Properties of the Company or its Subsidiaries (i) arising in
connection with any Release, threatened Release or disposal of a
Hazardous Material, or any Environmental and Natural Resource Law or
(ii) as a consequence of any Harvest/Yield Restriction; or
(E) any other environmental, natural resource, health or safety
condition, which could materially and adversely affect the ability of
the Company to perform its obligations under this Agreement or the
Notes;
(5) At its sole expense (but without thereby waiving any claims it
may have against third parties), the Company and its Subsidiaries will
conduct any investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other response action necessary to remove,
clean up or abate any material quantity of Hazardous Material which is
Released or disposed of at or on the Properties in accordance with any
applicable Environmental and Natural Resource Law and any order or
directive from a Governmental Authority having jurisdiction, except to the
extent the Company or its Subsidiaries are diligently contesting any
applicable Environmental and Natural Resource Law or any order or directive
from a Governmental Authority, so long as such contest is in good faith and
by appropriate proceedings and as to which reserves deemed by the Company
to be adequate are maintained and no forfeiture or material
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interference with the use of the Properties of the Company and its
Restricted Subsidiaries will result from a failure to comply with the
contested requirement;
(6) (A) The Company agrees, at its sole cost and expense, to defend
(with attorneys reasonably satisfactory to the Holders holding at least a
majority in aggregate principal amount of outstanding Notes), protect,
indemnify and hold harmless the Purchasers, and any Holder, and their
respective officers, directors, trustees, employees and agents (the
"INDEMNITEES") from and against any and all liabilities, obligations
(including removal and remedial actions), losses, damages (including
foreseeable and unforeseeable consequential damages and punitive damages,
which consequential or punitive damages do not result from an Indemnitee's
gross negligence or willful misconduct), penalties, actions, judgments,
suits, orders (whether administrative or judicial), consent decrees,
claims, costs, expenses and disbursements (including reasonable
consultants' fees and disbursements and including all reasonable attorneys'
fees whether incurred in a suit or action or any appeals from a judgment or
decree therein or in connection with non-judicial action) of any kind or
nature whatsoever that may at any time be incurred by, imposed on or
asserted against the Indemnitees, the Company or its Subsidiaries directly
or indirectly based on, or arising or resulting from (i) the actual or
alleged presence or Release of any Hazardous Material on the Properties of
the Company or its Subsidiaries or the removal, handling, transportation,
disposal or storage of such Hazardous Material, (ii) any Environmental and
Natural Resource Claim with respect to the Properties of the Company or its
Subsidiaries, or (iii) any failure to comply, and the resulting cost to
come into compliance, with any applicable Environmental and Natural
Resource Laws with respect to the Properties of the Company or its
Subsidiaries and the requirements of any permits issued under such
Environmental and Natural Resource Laws (collectively, the "INDEMNIFIED
MATTERS"), regardless of when such Indemnified Matters arise, but excluding
as to any Indemnitee any Indemnified
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Matter resulting directly from gross negligence or willful misconduct by
such Indemnitee or its representative. To the extent that this indemnity
is unenforceable because it violates any law or public policy, the Company
agrees to contribute the maximum portion that it is permitted to contribute
under applicable law to the payment and satisfaction of all Indemnified
Matters;
(B) The Company hereby waives, releases and covenants not to bring
any demand, claim, cost recovery action or lawsuit it may now or hereafter
have or accrue against any Indemnitee arising from the subject matter of an
Indemnified Matter, except as a direct result of the gross negligence or
willful misconduct of such Indemnitee;
(C) The Company agrees to reimburse each Indemnitee for all sums paid
and costs incurred by each Indemnitee with respect to any Indemnified
Matter, within ten (10) Business Days following written demand therefor,
with interest thereon at the Overdue Rate from the initial date of such
written demand, if not paid within such ten (10) Business Day period; and
(D) Should any Indemnitee institute any action or proceeding at law
or in equity, or in arbitration, to enforce any provision of the above
indemnification (including an action for declaratory relief or for damages
by reason of an alleged breach of any provision of the above
indemnification) or otherwise in connection with the above indemnification,
it shall be entitled to recover from the Company its reasonable fees and
disbursements incurred in connection therewith if it is the prevailing
party in such action or proceeding.
SECTION 4.4. MAINTENANCE, ETC. The Company will maintain, preserve and
keep, and will cause each Restricted Subsidiary to maintain, preserve and keep,
its Properties (other than timber) which are used or useful in the conduct of
its business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time will make all necessary repairs,
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replacements, renewals and additions so that at all times such Properties shall
remain usable in the Company's business. The Company will follow, and will
cause each Restricted Subsidiary to follow, prudent industry management
standards with respect to its timber and timber Properties, including the
growing and harvesting of its timber. Nothing in this Section 4.4 shall be
construed to (i) limit the Company's ability to sell or otherwise dispose of
assets in accordance with Section 4.10, or (ii) prevent the Company from ceasing
to operate any sawmill or other conversion facility if the Board of Control
determines in good faith that such cessation is in the best interest of the
Company. The Company shall engage in prudent management practices with respect
to any acquisition of assets, including conducting any environmental
investigation as is prudent under the circumstances. The Company shall deliver
to each Holder a copy of any environmental report obtained by the Company in
connection with any such acquisition.
SECTION 4.5. NATURE OF BUSINESS. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Restricted Subsidiaries would be substantially changed from
the growing and harvesting of timber and manufacture and sale of lumber, plywood
and wood products and related businesses engaged in by the Company and its
Restricted Subsidiaries on the date of this Agreement and described in the
Private Placement Memorandum and other businesses incidental or reasonably
related thereto.
Section 4.6. Limitations on Current Debt and Funded Debt. (a) The
Company will not, and will not permit any Restricted Subsidiary to, create,
assume, incur, guarantee or in any manner be or become liable in respect of any
Current Debt or Funded Debt, except:
(1) Funded Debt evidenced by the Notes;
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(2) Funded Debt of the Company outstanding on the first Closing Date
and described in Part II of Annex C to Exhibit B-1;
(3) Current Debt and Funded Debt of the Company incurred under the
Working Capital Facility, PROVIDED that the aggregate principal amount of
such Current Debt and Funded Debt outstanding at any one time shall not
exceed $40,000,000;
(4) Additional Current Debt and Funded Debt of the Company and Funded
Debt of a Restricted Subsidiary secured by Liens permitted by Section
4.20(g), PROVIDED that on the date that any such Current Debt or Funded
Debt is incurred and after giving effect to the application of the proceeds
thereof:
(i) the ratio of Consolidated Cash Flow for the immediately
preceding Four Quarter Period to Pro Forma Interest Expense for such
period is greater than 2.5 to 1.0; and
(ii) the ratio of Consolidated Cash Flow for the immediately
preceding Four Quarter Period to Pro Forma Maximum Debt Service is
greater than 1.25 to 1.0;
(5) unsecured Subordinated Funded Debt of the Company to the Managing
General Partner or any Affiliate of the Managing General Partner, PROVIDED
that the aggregate principal amount of such Subordinated Funded Debt
outstanding at any one time shall not exceed $10,000,000; and
(6) Current Debt or Funded Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary.
(b) The renewal, extension or refunding of any Current Debt or Funded Debt
issued, incurred or outstanding pursuant to Section 4.6(a) shall constitute the
issuance of additional Current Debt
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or Funded Debt which is, in turn, subject to the limitations of the applicable
provisions of this Section 4.6, PROVIDED that, except to the extent of any
increase in the outstanding principal amount thereof, the commencement of a new
interest period for any Current Debt or Funded Debt as to which interest is
computed with reference to the London Interbank Offered Rate or any other base
rate or the conversion of the base rate used for any such interest computation
shall not be considered a renewal, extension, or refunding of such Current Debt
or Funded Debt for purposes of this Section 4.6.
(c) Any business entity which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of this Section 4.6 be deemed to have
created, assumed or incurred at the time it becomes a Restricted Subsidiary all
Current Debt and Funded Debt of such business entity existing immediately after
it becomes a Restricted Subsidiary.
SECTION 4.7. DISTRIBUTIONS. The Company will not make any Distribution
if at the time of such Distribution and after giving effect thereto a Default or
Event of Default shall have occurred and be continuing. In addition, the
Company will not authorize or make any Distribution (i) on any date other than a
Business Day, (ii) in Property other than cash, (iii) which is payable more than
60 days after the date of authorization or declaration, or (iv) in an amount
which, together with all previous Distributions made by the Company for the
quarterly fiscal period most recently ended prior to the date of such
Distribution, exceeds the amount of Available Cash for such quarterly fiscal
period.
SECTION 4.8. INVESTMENTS. The Company will not, and will not permit any
Restricted Subsidiary to, make any Investments in any Person, except:
(a) Investments by the Company and its Restricted Subsidiaries in and
to Restricted Subsidiaries, including any Investment in a business entity
which, after giving effect to such Investment, becomes a Restricted
Subsidiary;
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(b) Investments in commercial paper maturing in 270 days or less from
the date of issuance which, at the time of acquisition by the Company or
any Restricted Subsidiary, is rated at least A-1 by Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., or P-1 by Moody's Investors
Service, Inc. or, if such commercial paper is not rated by either Standard
& Poor's Ratings Group, a division of McGraw-Hill, Inc., or Moody's
Investors Service, Inc., the highest rating of another nationally
recognized credit rating agency of similar standing approved in writing by
the Holders holding at least 66-2/3% in aggregate principal amount of
outstanding Notes;
(c) Investments in direct obligations of the United States of America
or any agency or instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith and credit
obligation of the United States of America, in either case, maturing in
twelve months or less from the date of acquisition thereof;
(d) Investments in certificates of deposit maturing within one year
from the date of origin, issued by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus
and undivided profits aggregating at least $250,000,000 and having
unsecured Funded Debt outstanding and rated at least AA by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc., or Aa by Moody's
Investors Service, Inc. or, if such unsecured Funded Debt is not rated by
either Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or
Moody's Investors Service, Inc., a comparable rating by another nationally
recognized credit rating agency of similar standing approved in writing by
the Holders holding at least 66-2/3% in aggregate principal amount of
outstanding Notes;
(e) receivables arising from the sale of goods and services in the
ordinary course of business of the Company and its Restricted Subsidiaries,
and prepayments, advances or deposits made by the Company or any Restricted
Subsidiary
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to any Person in the ordinary course of business in connection with
contracts for timber harvesting or the acquisition of stumpage entered into
in the ordinary course of business;
(f) loans or advances in the usual and ordinary course of business to
officers, directors and employees of the Managing General Partner or the
Company for expenses (including moving expenses related to a transfer)
incidental to carrying on the business of the Company or any Restricted
Subsidiary;
(g) Investments in bankers acceptances maturing within 180 days from
the issuance thereof, accepted by a bank or trust company organized under
the laws of the United States or any state thereof, having capital, surplus
and undivided profits aggregating at least $500,000,000 and having
unsecured Funded Debt outstanding and rated at least AA by Standard &
Poor's Ratings Group, a division of McGraw-Hill, Inc., or Aa by Moody's
Investors Service, Inc. or, if such unsecured Funded Debt is not rated by
either Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or
Moody's Investors Service, Inc., a comparable rating by another nationally
recognized credit rating agency of similar standing approved in writing by
the Holders holding at least 66-2/3% in aggregate principal amount of
outstanding Notes;
(h) Investments by the Company and its Restricted Subsidiaries
existing on the date of this Agreement and described in Schedule II hereto;
(i) Investments in any Subsidiary or any other Person organized under
the laws of the United States or Canada or any state or province thereof
which conducts substantially all of its business and has substantially all
of its assets within the United States or Canada and which is engaged in
substantially the same business as the Company, PROVIDED that the aggregate
amount of all such Investments made pursuant to this clause (i) shall not
exceed $10,000,000 in
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any twelve-month period ending on the date of such Investment or
$52,900,000 from and after the first Closing Date (adjusting each such
amount annually for the percentage increase or decrease from the prior
calendar year in the Consumer Price Index); and
(j) Guaranties issued in compliance with Section 4.14 constituting an
obligation, warranty or indemnity of the Company, not guaranteeing
Indebtedness of any Person, which is undertaken or made in the ordinary
course of business.
SECTION 4.9. MERGERS AND CONSOLIDATIONS. The Company will not, and will
not permit any Restricted Subsidiary to, consolidate with, or be a party to a
merger with, or sell, lease or otherwise dispose of all or substantially all of
its assets to, any other Person; PROVIDED, HOWEVER, that:
(1) any Restricted Subsidiary may merge or consolidate with or into,
or sell, lease or otherwise dispose of all or substantially all of its
assets to, the Company or any Wholly-owned Restricted Subsidiary so long as
in any merger or consolidation involving the Company, the Company shall be
the surviving or continuing entity; and
(2) the Company may consolidate or merge with, or sell all or
substantially all of its assets to, any business entity if:
(i) the surviving or continuing entity or the entity to which
all or substantially all of the Company's assets are sold (the
"SURVIVING ENTITY") shall be either the Company or an entity organized
under the laws of the United States or any state thereof which
conducts substantially all of its business and has substantially all
of its assets within the United States, and in the case of any such
consolidation or merger in which the Company is not the Surviving
Entity or in the case of any such sale, the Surviving Entity shall (x)
expressly assume in writing the due and punctual payment of the
principal of,
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premium, if any, and the interest on all of the Notes outstanding
according to their tenor and the due and punctual performance and
observance of all of the covenants in the Notes and this Agreement to
be performed or observed by the Company, and (y) furnish to the
Holders an opinion of independent counsel to the effect that the
instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of the Surviving Entity enforceable in accordance with its
terms, which counsel and opinion shall be satisfactory to Holders
holding at least 66-2/3% in aggregate principal amount of the then
outstanding Notes;
(ii) at the time of such consolidation or merger or such sale
and after giving effect thereto (a) no Default or Event of Default
shall have occurred and be continuing and (b) the Consolidated Net
Worth of the Surviving Entity shall not be less than the Consolidated
Net Worth of the Company immediately prior to such consolidation or
merger or such sale; and
(iii) after giving effect to such consolidation or merger or
such sale, the Surviving Entity would be permitted to incur at least
$1.00 of additional Funded Debt under the provisions of Section
4.6(a)(4).
SECTION 4.10. SALES OF ASSETS. (a) The Company will not, and will not
permit any Restricted Subsidiary to sell, lease or otherwise dispose of all or
any substantial part (as defined in paragraph (b) of this Section 4.10) of the
assets of the Company and its Restricted Subsidiaries, except as permitted by
Section 4.9; PROVIDED, HOWEVER, that:
(1) any Restricted Subsidiary may sell, lease or otherwise dispose of
any substantial part of its assets to the Company or any Wholly-owned
Restricted Subsidiary;
(2) the Company or any Restricted Subsidiary may sell Properties
constituting a substantial part of the assets of
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the Company and its Restricted Subsidiaries if (i) such sale shall be for
an amount not less than the fair market value (as determined in good faith
by the Board of Control) of such Properties; (ii) after giving effect to
such sale, no Default or Event of Default shall have occurred and be
continuing; (iii) the Net Proceeds of the sale of such Properties (to the
extent that the Net Proceeds of such sale exceed the minimum amount
required to define a substantial part pursuant to Section 4.10(b)) are
either:
(A) applied within the Application Period to pay Senior Funded
Debt of the Company or any Restricted Subsidiary (other than Senior
Funded Debt of a Restricted Subsidiary to the Company or another
Restricted Subsidiary) selected by the Company, which in the case of
the Notes shall be applied if and to the extent a prepayment pursuant
to Section 5.1 is required to be made within such Application Period
then in accordance with Section 5.1 and otherwise pursuant to Section
5.2; PROVIDED, HOWEVER, in the event that a Lien encumbering the
Property that is the subject of the sale was given to secure
Indebtedness incurred in connection with the acquisition thereof, the
Net Proceeds of such sale may be applied first to the payment of such
Indebtedness and any remaining Net Proceeds shall be applied as set
forth above, or
(B) deposited and held in a separate trust account with a bank
or trust company satisfactory to the Holders holding at least a
majority in aggregate principal amount of the outstanding Notes (which
account may be invested in Investments of the type described in
Section 4.8(b), (c), or (d)) and such Net Proceeds shall be either (x)
applied within such Application Period to the acquisition of
productive assets useful in the Company's business, or (y) committed,
pursuant to a binding written contract entered into by the Company
during such Application Period, to be applied to the acquisition of
productive assets useful in the Company's business (in either
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case, having a fair market value, determined in good faith by the
Board of Control, but excluding in the case of any timberlands any
value based on a higher or better use thereof) not less than the
amount of such Net Proceeds so applied, PROVIDED that the acquisition
contemplated by such binding contract shall be consummated
substantially in accordance with the terms thereof within 90 days
after the end of such Application Period, and PROVIDED, FURTHER, that
the Net Proceeds of the sale of any Property shall be considered to
have been applied to an acquisition of Property although the
acquisition occurred prior to the sale of Property giving rise to such
Net Proceeds so long as such acquisition and sale were a series of
related transactions occurring within a 180-day period; and
(iv) within ten Business Days after any sale pursuant to this clause (2),
the Company shall have delivered to the Holders a certificate of the Board
of Control certifying that such sale was for fair market value received by
the Company and that after giving effect to such sale no Default or Event
of Default has occurred and is continuing, and within ten Business Days
after the earlier to occur of (a) the application pursuant to this clause
(2) of the Net Proceeds of any sale or (b) the last day of any Application
Period with respect to any sale, the Company shall have delivered to the
Holders a certificate of the Board of Control certifying as to the
application of the Net Proceeds of such sale and establishing compliance
with the requirements of this clause (2);
(3) the Company may sell timberlands in a like-kind exchange for a
like interest in other timberlands having a fair market value (determined
in good faith by the Board of Control, but excluding any value based on a
higher and better use thereof) of at least the fair market value of the
timberlands so sold, PROVIDED that 30 days prior to any like-kind exchange,
the Company shall have delivered to the
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Holders a description of such exchange in sufficient detail to
establish compliance with the foregoing requirements; and
(4) the Company may sell not more than 25,000 acres in the
aggregate of timberlands owned by the Company designated in good faith
by a Responsible Officer for a higher and better use, PROVIDED that
ten Business Days after any such sale, the Company shall have
delivered to the Holders a certificate of a Responsible Officer
notifying the Holders of such sale and certifying as to the number of
acres sold pursuant to this clause (4) and the amount of gross
proceeds from such sale and establishing compliance herewith.
(b) As used in this Section 4.10, a sale, lease or other disposition of
assets (other than timber harvested and sold and inventory sold, in each case,
in the ordinary course of business) shall be deemed to be a "SUBSTANTIAL PART"
of the assets of the Company and its Restricted Subsidiaries if the book value
of such assets, when added to the book value of all other assets sold, leased or
otherwise disposed of by the Company and its Restricted Subsidiaries (other than
pursuant to clauses (1) through (4) above) (x) during the 12-month period ending
with the date of such sale, lease or other disposition, exceeds $10,000,000 or
(y) since December 22, 1994, exceeds $52,900,000, PROVIDED that each such amount
shall be adjusted annually from the first Closing Date for the percentage
increase or decrease from the prior calendar year in the Consumer Price Index.
Section 4.11. SALE OF EQUITY INTERESTS IN RESTRICTED SUBSIDIARIES.
(a) The Company will not permit any Restricted Subsidiary to issue or sell any
Equity Interest (including as "Equity Interest" for the purposes of this Section
4.11, any warrants, rights or options to purchase or otherwise acquire an Equity
Interest or other Securities exchangeable for or convertible into an Equity
Interest) of such Restricted Subsidiary to any Person other than the Company or
a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying
directors, or except in satisfaction of the validly pre-existing preemptive
rights of minority shareholders in connection with the simultaneous issuance of
stock to the Company and/or a Restricted Subsidiary
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whereby the Company and/or such Restricted Subsidiary maintain their same
proportionate interest in such Restricted Subsidiary.
(b) The Company will not sell, transfer or otherwise dispose of any Equity
Interest in any Restricted Subsidiary (except to qualify directors) or any
Indebtedness of any Restricted Subsidiary, and will not permit any Restricted
Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a
Wholly-owned Restricted Subsidiary) any Equity Interest in or any Indebtedness
of any other Restricted Subsidiary, unless:
(1) simultaneously with such sale, transfer, or disposition, all the
Equity Interests and all Indebtedness of such Restricted Subsidiary at the
time owned by the Company and by every other Restricted Subsidiary shall be
sold, transferred or disposed of as an entirety;
(2) the Board of Control shall have determined, as evidenced by a
resolution thereof, that the proposed sale, transfer or disposition of said
Equity Interest and Indebtedness is in the best interests of the Company;
(3) said Equity Interest and Indebtedness are sold, transferred or
otherwise disposed of to a Person, for a cash consideration and on terms
reasonably deemed by the Board of Control to be adequate and satisfactory;
(4) the Restricted Subsidiary being disposed of shall not have any
continuing Investment in the Company or any other Restricted Subsidiary not
being simultaneously disposed of; and
(5) such sale or other disposition is not prohibited by Section 4.10.
SECTION 4.12. LIMITATION ON HARVESTING. The Company will not, and will
not permit any Restricted Subsidiary to, harvest timber on its or such
Restricted Subsidiary's timberlands in excess in the aggregate of the following
limitations:
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150% of the Planned Volume during any fiscal year of the Company,
140% of the Planned Volume during any period of two consecutive fiscal
years of the Company,
130% of the Planned Volume during any period of three consecutive fiscal
years of the Company, and
120% of the Planned Volume during any period of four consecutive fiscal
years of the Company;
PROVIDED, HOWEVER, that the Company and its Restricted Subsidiaries may harvest
timber from their timberlands exceeding the limitations set forth above (the
"EXCESS HARVEST") if (i) after giving effect to such Excess Harvest, no Default
or Event of Default shall have occurred and be continuing, (ii) the Net Proceeds
of the sale of such Excess Harvest (based upon the average price received by the
Company and its Restricted Subsidiaries for timber sold during such period) are
either:
(A) applied within the Application Period to pay Senior Funded Debt
of the Company or any Restricted Subsidiary (other than Senior Funded Debt
of a Restricted Subsidiary to the Company or another Restricted Subsidiary)
selected by the Company, which in the case of the Notes shall be applied if
and to the extent a prepayment pursuant to Section 5.1 is required to be
made within such Application Period then in accordance with Section 5.1 and
otherwise pursuant to Section 5.2, or
(B) deposited and held in a separate trust account with the bank or
trust company satisfactory to the Holders holding at least a majority in
aggregate principal amount of the outstanding Notes (which account may be
invested in Investments of the type described in Section 4.8(b), (c), or
(d)) and such Net Proceeds shall be either (x) applied by the Company
within the Application Period to the acquisition of timber or timberland or
(y) committed, pursuant to a binding written contract entered into by the
Company during such
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Application Period, to be applied to the acquisition of timber or
timberland (in either case, having a fair market value, determined in good
faith by the Board of Control, but excluding any value based on a higher or
better use thereof) not less than the amount of such Net Proceeds so
applied, PROVIDED that the acquisition contemplated by such binding
contract shall be consummated substantially in accordance with the terms
thereof within 90 days after the end of such Application Period, and
(iii) within ten Business Days after any Excess Harvest, the Company shall have
delivered to the Holders a certificate of the Board of Control certifying that
after giving effect to such Excess Harvest no Default or Event of Default has
occurred and is continuing, and within ten Business Days after the earlier to
occur of (a) the application of the Net Proceeds as set forth clause (ii) of
this Section 4.12 or (b) the last day of any Application Period with respect to
any Excess Harvest, the Company shall have delivered to the Holders a
certificate of the Board of Control certifying as to the application of the Net
Proceeds of such Excess Harvest and establishing compliance with the
requirements of clause (ii) of this Section 4.12.
SECTION 4.13. PAYMENT OF DIVIDENDS BY RESTRICTED SUBSIDIARIES. The
Company will not and will not permit any Restricted Subsidiary to enter into any
agreement which restricts the ability of any Restricted Subsidiary to declare
any dividend or to make any distribution on any Equity Interest of such
Restricted Subsidiary, PROVIDED that the limited partnership agreement of any
Restricted Subsidiary which is a limited partnership may limit the amount of any
distribution by such Restricted Subsidiary to the amount of available cash for
such Restricted Subsidiary (calculated on the same basis as Available Cash
hereunder) for the period in respect of which such distribution is being made.
SECTION 4.14. GUARANTIES. The Company will not and will not permit any
Restricted Subsidiary to become or be liable in respect of any Guaranty except
(i) Guaranties by the Company which are limited in amount to a stated maximum
dollar exposure,
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(ii) Guaranties of obligations incurred by any Restricted Subsidiary in
compliance with the provisions of this Agreement and (iii) bonds posted by the
Company or a Restricted Subsidiary in the ordinary course of business in
connection with timber harvest contracts, permits for road construction or work
in respect of environmental remediation.
SECTION 4.15. TRANSACTIONS WITH AFFILIATES. The Company will not, and
will not permit any Restricted Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including without limitation, the
purchase from, sale to or exchange of Property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of, and
pursuant to the reasonable requirements of, the Company's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than would be obtained in a comparable
arm's-length transaction with a Person other than an Affiliate; PROVIDED,
HOWEVER, the Company shall be entitled to reimburse the Managing General Partner
for Specified Expenses. The Managing General Partner shall determine the
Specified Expenses that are allocable to the Company in any reasonable manner
determined by the Managing General Partner.
SECTION 4.16. MULTIEMPLOYER PLAN LIABILITY AND TERMINATION OF PENSION
PLANS. The Company will not and will not permit any ERISA Affiliate to withdraw
from any Multiemployer Plan if such withdrawal would result in withdrawal
liability (as described in Part 1 of Subtitle E of Title IV of ERISA) that could
reasonably be expected to have a material adverse effect on the business,
profits or financial condition of the Company and its Restricted Subsidiaries,
taken as a whole. The Company will not and will not permit any ERISA Affiliate
to permit any employee benefit plan maintained by it to be terminated in a
manner which could result in the imposition of a Lien on any Property of the
Company or any Subsidiary pursuant to Section 4068 of ERISA.
SECTION 4.17. REPORTS AND RIGHTS OF INSPECTION. The Company will keep,
and will cause each Subsidiary to keep, proper books of record and account in
which full and correct entries will be
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made of all dealings or transactions of or in relation to the business and
affairs of the Company or such Subsidiary, in accordance with GAAP consistently
applied (except for changes disclosed in the financial statements furnished to
the Holders pursuant to this Section 4.17 and concurred in by the independent
public accountants referred to in Section 4.17(b) hereof), and will furnish to
each Holder of any Note (in duplicate if so specified below or otherwise
requested), and in the case of the financial statements delivered pursuant to
Section 4.17(b), to the Securities Valuation Office, National Association of
Insurance Commissioners, 195 Broadway, Suite 1903, New York, New York 10007:
(a) QUARTERLY STATEMENTS. As soon as available and in any event
within 60 days after the end of each quarterly fiscal period (except the
last) of each fiscal year, duplicate copies of:
(1) consolidated balance sheets of the Company and its
Restricted Subsidiaries as of the close of such quarter setting forth
in comparative form the amount as of the close of the corresponding
period of the preceding fiscal year and the amount as of the close of
said preceding fiscal year, and
(2) consolidated statements of income and cash flows of the
Company and its Restricted Subsidiaries for such quarterly period and
the year to date period setting forth in comparative form the amount
for the corresponding periods of the preceding fiscal year,
all in reasonable detail and certified as complete and correct, by an
authorized financial officer of the Company;
(b) ANNUAL STATEMENTS. As soon as available and in any event within
120 days after the close of each fiscal year of the Company, duplicate
copies of:
(1) consolidated balance sheets of the Company and its
Restricted Subsidiaries as of the close of such fiscal year, and
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(2) consolidated statements of income and cash flows of the
Company and its Restricted Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
opinion thereon of a firm of independent public accountants of recognized
national standing selected by the Company to the effect that the
consolidated financial statements have been prepared in accordance with
GAAP consistently applied (except for changes in application in which such
accountants concur) and present fairly the financial condition and results
of operations of the Company and its Restricted Subsidiaries and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards and accordingly, includes such tests of the accounting records
and such other auditing procedures as were considered necessary in
connection therewith;
(c) SEC AND OTHER REPORTS. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by the Company to all holders of Equity Interests in the Company
generally and of each regular or periodic report, and any registration
statement or prospectus filed by the Company, any Subsidiary or the
Partnership with any securities exchange or the Securities and Exchange
Commission or any successor agency, and copies of any orders in any
proceedings to which the Company or any of its Subsidiaries is a party,
issued by any governmental agency, Federal or state, having jurisdiction
over the Company or any of its Subsidiaries, other than reports or licenses
granted by any such governmental agency with respect to the timber;
(d) REQUESTED INFORMATION. With reasonable promptness, such other
data and information as any Holder may reasonably request including,
without limitation, any information required to be provided to such Holder
or a
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prospective purchaser of the Notes by Rule 144A(d)(4) under the Securities
Act;
(e) OFFICER'S CERTIFICATES. Within the periods provided in
paragraphs (a) and (b) above, a certificate signed by the chief financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish whether
the Company was in compliance with the requirements of Section 4.6 through
Section 4.12, inclusive, and Section 4.20 at the end of the period covered
by the financial statements then being furnished (including with respect to
Section 4.10(a)(2) and Section 4.12, a certification as to the application
of any Net Proceeds during such period and the amount of Net Proceeds
remaining to be applied in accordance with each such Section as of such
date) and (ii) whether there existed as of the date of such financial
statements and whether, to the best of his knowledge, there exists on the
date of the certificate or existed at any time during the period covered by
such financial statements any Default or Event of Default and, if any such
condition or event exists on the date of the certificate, specifying the
nature and period of existence thereof and the action the Company is taking
and proposes to take with respect thereto;
(f) ACCOUNTANT'S CERTIFICATES. Within the period provided in
paragraph (b) above, a letter, addressed to the Holders, of the accountants
who render an opinion with respect to such financial statements, stating
that they have reviewed this Agreement and stating further that nothing
came to their attention that caused them to believe that the Company was
not in compliance with any of the provisions of Section 4.6 through Section
4.12, both inclusive, or Section 4.20 insofar as said provisions relate to
accounting matters, and if any non-compliance has come to their attention
specifying the nature and period of existence thereof, PROVIDED that such
accountants may state that their audit was not directed primarily toward
obtaining knowledge of any noncompliance by
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the Company with any of the terms or provisions of this Agreement;
(g) ERISA REPORTING. Prompt written notice, and in any event within
five Business Days upon learning of its occurrence, of the following and
the action the Company has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC") with respect thereto: (i) a Reportable Event
with respect to any employee benefit plan; (ii) the institution of any
steps by the Company, any ERISA Affiliate, the PBGC or any other Person to
terminate any employee benefit plan pursuant to Sections 4041(c) or 4042 of
ERISA; (iii) the institution of any steps by the Company or any ERISA
Affiliate to withdraw from any Multiemployer Plan, within the meaning of
ERISA which would result in a material adverse effect on the business,
profits or financial condition of the Company and its Restricted
Subsidiaries taken as a whole; (iv) a "prohibited transaction" within the
meaning of Section 406 of ERISA in connection with any employee benefit
plan which would result in a material adverse effect on the business,
profits or financial condition of the Company and its Restricted
Subsidiaries, taken as a whole; or (v) any increase in the liability of the
Company or any Subsidiary with respect to any post-retirement welfare
benefits which would result in a material adverse effect on the business,
profits or financial condition of the Company and its Restricted
Subsidiaries, taken as a whole; and
(h) NOTICE OF LITIGATION. Prompt written notice, and in any event
within five Business Days after the Company first obtains knowledge
thereof, with respect to the institution of any suit or proceeding against
the Company or any Restricted Subsidiary which if determined adversely
could, individually or in the aggregate with other suits and proceedings,
reasonably be expected to have a material adverse effect on the business,
profits, Properties or
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financial condition of the Company or any Restricted Subsidiary.
Without limiting the foregoing, the Company will permit each Holder (or such
Persons as such Holder may designate) to visit and inspect any of the Properties
of the Managing General Partner, the Company or any Subsidiary, to examine all
their books of account, records, reports and other papers, to make copies and
extracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers, employees, and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss with such Holder or Person so designated the finances and affairs of the
Company and its Subsidiaries with or without an officer or employee of the
Company or any of its Subsidiaries being present) all at such reasonable times
and as often as may be reasonably requested; PROVIDED that unless a Default or
Event of Default shall have occurred and shall be continuing, such Holders shall
give the Company at least 10 days' prior written notice of any such visit. The
Company shall not be required to pay or reimburse any Holder for expenses which
it may incur in connection with any such visitation or inspection except in the
case of any such visitation or inspection which shall occur while a Default or
Event of Default shall have occurred and shall be continuing.
SECTION 4.18. CHANGES IN STATUS OF SUBSIDIARIES. So long as no Default or
Event of Default shall have occurred and be continuing, the Board of Control may
at any time and from time to time, upon not less than 30 days' prior written
notice given to each Holder, designate a previously Unrestricted Subsidiary as a
Restricted Subsidiary, PROVIDED that immediately after such designation and
after giving effect thereto (i) no Default or Event of Default shall have
occurred and be continuing and (ii) the Company could incur at least $1.00 of
additional Funded Debt under the provisions of Section 4.6(a)(4).
Any notice of designation pursuant to this Section 4.18 shall be
accompanied by a certificate signed by the chief financial officer of the
Company stating that the provisions of this Section 4.18
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have been complied with in connection with such designation and setting forth
the name of each other Subsidiary (if any) which has or will become a Restricted
Subsidiary, as the case may be, as a result of such designation.
SECTION 4.19. REPURCHASE OF NOTES. Neither the Company nor any Restricted
Subsidiary, directly or indirectly or through any Affiliate, may repurchase or
make any offer to repurchase any Notes unless an offer has been made to
repurchase Notes, PRO RATA, from all Holders at the same time and upon the same
terms (without regard to the different maturities but taking into account the
interest rates applicable to each series of Notes). In case the Company
repurchases or otherwise acquires any Notes, such Notes shall immediately
thereafter be cancelled and no Notes shall be issued in substitution therefor.
Without limiting the foregoing, upon the repurchase or other acquisition of any
Notes by the Company, any Restricted Subsidiary or any Affiliate, such Notes
shall no longer be outstanding for purposes of any section of this Agreement
relating to the taking by the Holders of any actions with respect hereto,
including, without limitation, SECTIONS 6.3, 6.4 and 7.1.
SECTION 4.20. LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their Property, whether now owned or hereafter acquired, or
upon any income or profits therefrom, or transfer any Property for the purpose
of subjecting the same to the payment of obligations in priority to the payment
of its or their general creditors, or acquire or agree to acquire, or permit any
Restricted Subsidiary to acquire, any Property upon conditional sales agreements
or other title retention devices, except:
(a) Liens for property taxes and assessments or governmental charges
or levies and Liens securing claims or demands of carriers, loggers,
mechanics and materialmen incurred in the ordinary course of business,
PROVIDED that payment thereof is not at the time required by
SECTION 4.3(a);
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(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or in
respect of which the Company or a Restricted Subsidiary shall at any time
in good faith be prosecuting an appeal or proceeding for a review, and in
respect of which a stay of execution pending such appeal or proceeding for
review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership of
Properties (including Liens in connection with worker's compensation,
unemployment insurance and other like laws, warehousemen's and attorneys'
liens and statutory landlords' liens) and Liens to secure the performance
of bids, tenders or trade contracts, or to secure statutory obligations,
surety or appeal bonds or other Liens of like general nature incurred in
the ordinary course of business and not in connection with the borrowing of
money; PROVIDED in each case, the obligation secured is not overdue or, if
overdue, is being contested in good faith by appropriate actions or
proceedings which will prevent the forfeiture or sale of any Property of
the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, rights of others for rights-of-way, utilities and other
similar purposes, zoning or other restrictions as to the use of real
properties, and leases and subleases thereof, in each case, which (i) are
necessary or appropriate for the conduct of the activities of the Company
and its Restricted Subsidiaries or customarily exist on Properties of
business entities engaged in similar activities and similarly situated and
(ii) do not in any event materially impair the use of such real property in
the operation of the business of the Company and its Restricted
Subsidiaries;
(e) Liens securing Indebtedness of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
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(f) Liens on inventory and receivables securing Indebtedness incurred
pursuant to the Working Capital Facility, PROVIDED that the aggregate
outstanding principal amount so secured shall not exceed $40,000,000 at any
time;
(g) Liens incurred in connection with the acquisition of any fixed
asset useful and intended to be used in carrying on the business of the
Company or a Restricted Subsidiary, including Liens existing on such fixed
asset at the time of acquisition by the Company or a Restricted Subsidiary
of any business entity then owning such fixed asset, whether or not such
existing Liens were given to secure the payment of the purchase price of
the fixed asset to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition, PROVIDED in any
case that (i) the Lien shall attach solely to the fixed asset acquired or
purchased, (ii) at the time of acquisition of such fixed asset, the amount
remaining unpaid on all Indebtedness secured by Liens on such fixed asset
whether or not assumed by the Company or a Restricted Subsidiary shall not
exceed an amount equal to 85% (or 100% in the case of Capitalized Leases)
of the total purchase price of such fixed asset, and the aggregate amount
remaining unpaid on all Indebtedness secured by Liens on fixed assets
acquired or purchased subsequent to the first Closing Date (including such
fixed asset) shall not exceed the following amounts:
On or before November 30, 1999 $25,000,000
December 1, 1999 to November 30, $50,000,000
2004
December 1, 2004 and thereafter $100,000,000,
(iii) all such Indebtedness shall have been incurred within the applicable
limitations provided in SECTION 4.6, and (iv) after giving effect to such
acquisition no Default or Event of Default shall have occurred and be
continuing; and
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(h) Liens existing on the first Closing Date and described in Part II
of Annex C to Exhibit B-1.
In the event that any Property of the Company or its Restricted
Subsidiaries is subjected to a Lien in violation of this Section 4.20 (an
"EXCESS LIEN"), (1) the Company or such Restricted Subsidiary shall make or
cause to be made provision whereby the obligations of the Company under the
Notes and this Agreement will be secured equally and ratably with all other
obligations secured by such Excess Lien pursuant to security arrangements
reasonably satisfactory in form, scope and substance to the Holders holding not
less than 66-2/3% in aggregate principal amount of the outstanding Notes and (2)
the Company or such Restricted Subsidiary shall deliver an opinion of counsel
satisfactory to the Holders holding not less than 66-2/3% in aggregate principal
amount of the outstanding Notes regarding the validity of such security interest
and to the effect that the Notes are secured equally and ratably with such other
obligations; PROVIDED, HOWEVER, that satisfaction of the conditions set forth in
clauses (1) and (2) above does not remedy the Event of Default resulting from
such Excess Lien. In the case of any Excess Lien, said obligations of the
Company under the Notes and this Agreement shall have the benefit, to the full
extent that the Holders may be entitled thereto under applicable law, of an
equitable lien on such Property subject to the Excess Lien.
SECTION 4.21. RATINGS. Upon receipt of a request from any Holder, the
Company will, and will cause its Subsidiaries to, provide such information as
shall be reasonably requested for the purpose of maintaining any rating
applicable to the Notes, whether by a governmental authority or private
association; and, if requested, the Company shall make a presentation relevant
to the maintenance of any such rating to such authority or association, PROVIDED
that the Company shall not be obligated to maintain any specific rating with
respect to the Notes with any such authority or association.
SECTION 5. PREPAYMENT OF NOTES.
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SECTION 5.1. REQUIRED PREPAYMENTS. The Company agrees that it will
prepay and apply and there shall become due and payable on the principal
indebtedness evidenced by the Series B Notes on each of the following dates an
amount equal to the lesser of (i) the amount set forth opposite such date or
(ii) the principal amount of the Series B Notes then outstanding:
February 1, 2010 $ 8,250,000
February 1, 2011 $ 8,250,000
February 1, 2012 $19,250,000
The entire remaining principal amount of the Series B Notes shall become due and
payable on February 1, 2013.
No premium shall be payable in connection with a required prepayment made
pursuant to this Section 5.1. For purposes of this Section 5.1, any prepayment
of less than all of the outstanding Series B Notes pursuant to Section 5.2 shall
reduce the principal amount of the Series B Notes required to be prepaid on
February 1 in each subsequent year to and including the stated maturity of the
Series B Notes in the same proportion as the aggregate principal amount of the
Series B Notes outstanding immediately prior to such prepayment has been reduced
by such prepayment.
SECTION 5.2. OPTIONAL PREPAYMENT WITH PREMIUM. In addition to the
payments required by Section 5.1, upon compliance with Section 5.3 the Company
shall have the privilege, at any time and from time to time, of prepaying the
outstanding Notes of all series, either in whole or in part (but if in part then
in an aggregate minimum principal amount of $1,000,000 or such lesser amount as
permitted in connection with a sale of assets under Section 4.10 or an excess
harvest under Section 4.12) by payment of the outstanding principal amount of
the Notes or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of three Business Days prior to the date of such prepayment
pursuant to this Section 5.2.
SECTION 5.3. NOTICE OF OPTIONAL PREPAYMENTS. The Company will give
notice of any prepayment of the Notes pursuant to Section 5.2
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to each Holder thereof not less than 10 days nor more than 30 days before the
date fixed for such optional prepayment specifying (i) such date (which shall be
a Business Day), (ii) the outstanding principal amount of the Holder's Notes to
be prepaid on such date, (iii) that a premium may be payable, (iv) the date when
such premium will be calculated, (v) the estimated premium, and (vi) the accrued
interest applicable to the prepayment. Such notice of prepayment shall also
certify all facts, if any, which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes to be prepaid specified in such notice, together with
accrued interest thereon and the premium, if any, payable with respect thereto
shall become due and payable on the prepayment date specified in said notice.
Not later than two Business Days prior to the prepayment date specified in such
notice, the Company shall provide written notice by facsimile communication
followed by delivery on the next succeeding Business Day by overnight air
courier to each Holder of Notes to be prepaid of the amount of premium, if any,
payable in connection with such prepayment and, whether or not any premium is
payable, a reasonably detailed computation of the Make-Whole Amount. In the
event the Company shall incorrectly compute the Make-Whole Amount payable in
connection with any Note to be prepaid pursuant to Section 5.2, or declared to
be immediately due and payable pursuant to Section 6.3, the Holder shall not be
bound by such incorrect computation, but instead shall be entitled to receive an
amount equal to the correct Make-Whole Amount, if any, computed in compliance
with the terms of this Agreement.
SECTION 5.4. APPLICATION OF PREPAYMENTS. All partial prepayments of the
Notes of a series pursuant to Section 5.1 shall be applied on all outstanding
Notes of such series ratably in accordance with the unpaid principal amounts
thereof. All partial prepayments of the Notes pursuant to Section 5.2 shall be
applied on all outstanding Notes ratably in accordance with the unpaid principal
amounts thereof.
SECTION 5.5. DIRECT PAYMENT. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any note owned by a
Purchaser or any Purchaser's nominee or owned
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by any subsequent Holder which has given written notice to the Company
requesting that the provisions of this Section 5.5 shall apply, the Company will
punctually pay when due the principal thereof, interest thereon and premium, if
any, due with respect to said principal, without any presentment thereof,
directly to such Purchaser, to its nominee or to such subsequent Holder at its
address or such nominee's address set forth herein or such other address as such
Purchaser, its nominee or such subsequent Holder may from time to time designate
in writing to the Company or, if a bank account with a United States bank is so
designated for such Holder, the Company will make such payments in immediately
available funds to such bank account no later than 10:00 A.M. Portland, Oregon
time on the date due, marked for attention as indicated, or in such other manner
or to such other account in any United States bank as such Purchaser, its
nominee or any such subsequent Holder may from time to time direct in writing.
Such payments will be made without notations being made on such Note, except
that (a) any such Note so paid or prepaid in full (including the payment of all
interest accrued to the date of such payment or prepayment and premium, if any)
shall be surrendered to the Company within a reasonable time after such payment
or prepayment in full, and (b) before any sale or other transfer by any Holder
of any Note in respect of which any principal payments have been made in the
manner provided in this Agreement, such Holder will make appropriate notation of
such payments on such Note.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
SECTION 6.1. EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "EVENT OF DEFAULT" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue
for more than five Business Days; or
(b) Default shall occur in the making of any required prepayment
on any of the Notes as provided in Section 5.1; or
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(c) Default shall occur in the making of any other payment of
the principal of any Note or premium, if any, thereon at the expressed
or any accelerated maturity date or at any date fixed for prepayment;
or
(d) Default continuing beyond the period of grace, if any,
allowed with respect thereto shall be made in the payment when due
(whether by lapse of time, by declaration, by call for redemption or
otherwise) of the principal of or interest on any Funded Debt (other
than the Notes) or Current Debt of the Company or any Restricted
Subsidiary, and, individually or in the aggregate, the principal
amount of such Funded Debt and Current Debt shall be in excess of
$5,000,000; or
(e) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Funded Debt
or Current Debt of the Company or any Restricted Subsidiary may be or
has been issued and, individually or in the aggregate, the aggregate
principal amount of such Funded Debt and Current Debt which has been
issued or may be issued thereunder shall be in excess of $5,000,000,
and such default or event shall continue for a period of time
sufficient to permit the acceleration of the maturity of such Funded
Debt or Current Debt; or
(f) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 4.6 through Section 4.12,
both inclusive; or
(g) Default shall occur in the observance or performance of the
covenant contained in Section 4.20 which is not remedied within ten
days after the earlier of (i) the day on which the Company first
obtains knowledge of such default, or (ii) the day on which written
notice thereof is given to the Company by any Holder; or
(h) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after the earlier of (i) the
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day on which the Company first obtains knowledge of such default, or
(ii) the day on which written notice thereof is given to the Company
by any Holder; or
(i) Any representation or warranty made by the Company or the
Managing General Partner herein, or by the Company or the Managing
General Partner in any statement or certificate furnished by the
Company or the Managing General Partner in connection with the
consummation of the issuance and delivery of the Notes or furnished by
the Company or the Managing General Partner pursuant hereto, is untrue
in any material respect as of the date of the issuance or making
thereof; or
(j) Final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Company or any Restricted Subsidiary or against any Property of either
and such judgment or judgments have remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 60
consecutive days from the date of its entry; or
(k) The Company, or any Person on behalf of the Company, shall
contest or deny the validity or enforceability of this Agreement or
the Notes or its obligations hereunder and thereunder; or
(l) An order or decree requiring a split-up or divestiture of
the Company is outstanding against the Company and such order or
decree remains unstayed and in effect for more than 30 consecutive
days; or
(m) A custodian, liquidator, trustee, receiver or similar
official is appointed for the Company or any Restricted Subsidiary or
for the major part of the Property of either and is not discharged
within 60 days after such appointment; or
(n) The Company, any Restricted Subsidiary or the Managing
General Partner becomes insolvent or bankrupt, is
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generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any
Restricted Subsidiary or the Managing General Partner applies for or
consents to the appointment of a custodian, liquidator, trustee,
receiver or similar official for the Company, such Restricted
Subsidiary or the Managing General Partner or for the major part of
the Property of any of them; or
(o) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company, any Restricted Subsidiary or the Managing General
Partner and, if instituted against the Company, any Restricted
Subsidiary or the Managing General Partner, are consented to or are
not dismissed within 60 days after such institution.
SECTION 6.2. NOTICE TO HOLDERS. When any Default or Event of Default
described in the foregoing Section 6.1 has occurred, or if the holder of any
Note or of any other evidence of Indebtedness of the Company or any Restricted
Subsidiary gives any notice or takes any other action with respect to a claimed
default, the Company agrees to give notice within three Business Days of such
event to all Holders.
SECTION 6.3. ACCELERATION OF MATURITIES. When any Event of Default
described in paragraph (a), (b) or (c) of Section 6.1 has happened and is
continuing, any Holder may, by notice to the Company, declare the entire
principal, premium, if any, and all interest accrued on the Note or Notes held
by such Holder to be, and such Note or Notes shall thereupon become forthwith
due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraphs (a) through (l), inclusive, of Section 6.1 has happened
and is continuing, the Holders holding not less than 50% of the principal amount
of the outstanding Notes may, by notice to the Company, declare the entire
principal, premium, if any, and all interest accrued on all Notes to be, and all
Notes shall thereupon become, forthwith
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due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived. When any Event of Default
described in paragraph (m), (n) or (o) of Section 6.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind, all of which are hereby expressly waived. Upon
any Notes becoming due and payable as a result of any Event of Default as
aforesaid, the Company will forthwith pay to the Holders of such Notes the
entire principal and interest accrued on the Notes so accelerated and, in the
case of an Event of Default specified in paragraphs (a) through (l), inclusive
of Section 6.1, to the extent not prohibited by applicable law, the Company will
pay an amount as liquidated damages for the loss of the bargain evidenced hereby
(and not as a penalty) equal to the Make-Whole Amount, determined as of the date
on which such Notes shall so become due and payable. No course of dealing on
the part of the Holders nor any delay or failure on the part of any Holder to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such Holder's rights, powers and remedies. The Company further
agrees, to the extent permitted by law, to pay to the Holders all costs and
expenses incurred by them in the collection of any Notes upon any default
hereunder or thereon, including reasonable compensation to such Holders'
attorneys and financial advisors for all services rendered in connection
therewith.
SECTION 6.4. RESCISSION OF ACCELERATION. The provisions of Section 6.3
are subject to the condition that if the principal of, premium, if any, and
accrued interest on all or any outstanding Notes have been declared immediately
due and payable by reason of the occurrence of any Event of Default described in
paragraphs (a) through (l), inclusive, of Section 6.1, the Holders holding
66-2/3% in aggregate principal amount of the Notes then outstanding may, by
written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, PROVIDED that at the time such declaration is
annulled and rescinded:
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(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under Section 6.3) shall have been duly paid;
and
(c) each and every other Default and Event of Default shall have been
made good, cured or waived pursuant to Section 7.1;
and PROVIDED FURTHER, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
SECTION 7.1. CONSENT REQUIRED. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively) if the Company shall have obtained
the consent in writing of the Holders holding at least 55% in aggregate
principal amount of outstanding Notes, PROVIDED that without the written consent
of the Holders holding all of the Notes then outstanding, no such amendment or
waiver shall be effective (i) which will change the time of payment (including
any prepayment required by Section 5.1) of the principal of or the interest on
any Note or change the principal amount thereof or change the rate of interest
thereon, (ii) which will change any of the provisions with respect to optional
prepayments, (iii) which will change the percentage of Holders required to
consent to any such amendment or waiver of any of the provisions of Section 6 or
this Section 7 or (iv) which will change any provision of Section 4.19 or
Section 7.2.
SECTION 7.2. SOLICITATION OF HOLDERS. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment
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of any of the provisions of this Agreement or the Notes unless each Holder
(irrespective of the amount of Notes then owned by it) shall be informed thereof
by the Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it to
make an informed decision with respect thereto. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any Holder as
consideration for or as an inducement to entering into by any Holder of any
waiver or amendment of any of the terms and provisions of this Agreement or the
Notes unless such remuneration is concurrently paid, on the same terms, ratably
to the Holders.
SECTION 7.3. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver
shall apply equally to all of the Holders and shall be binding upon them, upon
each future Holder and upon the Company, whether or not such Note shall have
been marked to indicate such amendment or waiver. No such amendment or waiver
shall extend to or affect any obligation not expressly amended or waived or
impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
SECTION 8.1. DEFINITIONS. Unless the context shall otherwise require,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
"ACQUISITION" means any transaction in which the Company or any Restricted
Subsidiary acquires (through an asset acquisition, merger, stock acquisition or
other form of investment) control over all or a portion of the Properties or
business of another Person for the purpose of increasing the operating capacity
of the Company and its Restricted Subsidiaries, taken as a whole, from the
operating capacity of the Company and its Restricted Subsidiaries, taken as a
whole, existing immediately prior to such transaction.
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"ACQUISITION CREDIT AGREEMENT" AND "ACQUISITION FACILITY" are defined in
Section 3.9.
"AFFILIATE" shall mean any Person (other than a Wholly-owned Restricted
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company,
(ii) which beneficially owns or holds 5% or more of the Voting Equity Interest
of the Company or (iii) 5% or more of the Voting Equity Interest of which is
beneficially owned or held by the Company or a Subsidiary. The term "CONTROL"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Equity Interest, by contract or otherwise.
"APPLICATION PERIOD" shall mean, with respect to any sale of assets
pursuant to Section 4.10(a)(2), the 180-day period following the date of such
sale; and, with respect to any sale of harvested timber subject to Section 4.12,
the 180-day period following the last day of the fiscal year of the Company in
which such Excess Harvest occurred.
"AVAILABLE CASH" shall mean, with respect to any fiscal quarter of the
Company and without duplication,
(a) the sum of:
(i) all cash receipts of the Company during such quarter from
all sources,
(ii) any reduction with respect to such quarter in a cash
reserve previously established pursuant to clause (b)(ii) below
(either by reversal or utilization) from the level of such reserve at
the end of the prior quarter, and
(iii) any utilization with respect to such quarter of the
Working Capital Reserve; LESS
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(b) the sum of:
(i) all cash disbursements of the Company during such quarter;
and
(ii) any cash reserves established with respect to such
quarter, and any increase with respect to such quarter in a cash
reserve established pursuant to this clause (b)(ii) from the level of
such reserve at the end of the prior quarter, in such amounts as the
Managing General Partner determines in its reasonable discretion to be
necessary or appropriate (A) to provide for the proper conduct of the
business of the Company, (B) to comply with the provisions of the
Partnership Agreement, (C) to provide funds for distributions to
Partners in respect of any one or more of the next four quarters or
(D) because the distribution of such amounts would be prohibited by
applicable law or by any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which the Company
is a party or by which any of its assets are subject, PROVIDED that
Available Cash shall reflect (x) in each fiscal quarter a reserve
equal to at least 50% of the aggregate amount of all interest to be
paid in respect of the Notes, the 1994 Notes, the 1995 Notes and the
1996 Notes on the next interest payment date, and (y) in the third
fiscal quarter immediately preceding each fiscal quarter in which any
scheduled principal payment is due with respect to the Notes, the 1994
Notes, the 1995 Notes and/or the 1996 Notes (a "PRINCIPAL PAYMENT
QUARTER"), a reserve equal to at least 25% of the aggregate amount of
all principal to be paid in respect of such Notes, 1994 Notes, 1995
Notes and 1996 Notes in such principal payment quarter; in the second
calendar quarter immediately preceding a principal payment quarter, a
reserve equal to at least 50% of the aggregate amount of all principal
to be paid in respect of such Notes, 1994 Notes, 1995 Notes and 1996
Notes in such principal payment quarter; and in the calendar
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quarter immediately preceding a principal payment quarter, a reserve
equal to at least 75% of the aggregate amount of all principal to be
paid in respect of such Notes, 1994 Notes, 1995 Notes and 1996 Notes
in such principal payment quarter.
So long as the Company is not a taxpaying entity, taxes paid by the Company
on behalf of, or amounts withheld with respect to, all or less than all of the
Partners shall not be considered cash disbursements of the Company that reduce
Available Cash, but the payment or withholding thereof shall be deemed to be a
distribution of Available Cash to such Partners. Alternatively, in the
discretion of the Managing General Partner, so long as the Company is not a
taxpaying entity, such taxes (if pertaining to all Partners) may be considered
to be cash disbursements of the Company which reduce Available Cash, but the
payment or withholding thereof shall not be deemed to be a distribution of
Available Cash to such Partners.
"BOARD OF CONTROL" shall mean the Board of Control of the Managing General
Partner.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day on
which banks in the States of New York, California or Oregon are authorized or
permitted to be closed in the observance of a legal holiday.
"CAPITAL ADDITIONS AND IMPROVEMENTS" means (i) additions or improvements to
the capital assets owned by the Company or any Restricted Subsidiary or (ii) the
acquisition of existing or the construction of new capital assets (including,
without limitation, timberlands and timber processing and manufacturing
facilities and related assets) made to increase the operating capacity of the
Company and its Restricted Subsidiaries, taken as a whole, from the operating
capacity of the Company and its Restricted Subsidiaries, taken as a whole,
existing immediately prior to such addition, improvement, acquisition or
construction.
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"CAPITALIZED LEASE" shall mean any lease the obligation for Rentals with
respect to which is required to be capitalized on a balance sheet of the lessee
in accordance with GAAP.
"CAPITALIZED RENTALS" of any Person shall mean as of the date of any
determination the amount at which the aggregate Rentals due and to become due
under all Capitalized Leases under which such Person is a lessee would be
reflected as a liability on a consolidated balance sheet of such Person in
accordance with GAAP.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections 9601 ET SEQ., and any future
amendments.
"CLOSING DATE" is defined in Section 1.2.
"COMPANY" is defined in the introductory paragraph of this Agreement.
"CONSOLIDATED CASH FLOW" for any period shall mean Operations Cash for such
period adjusted to include (a) in the case of any acquisition of timber or
timberland by the Company or a Restricted Subsidiary during such period, an
amount equal to the projected cash flow of the timber or timberland so acquired,
based on the harvest plan for the first harvest year, PROVIDED that such harvest
plan shall not include more than 8-1/3% of the total volume of merchantable
timber so acquired, and PROVIDED, FURTHER, that in determining projected cash
flow from acquired timber or timberlands, prices shall be assumed to equal the
average price realized by the Company for comparable timber sold during such
period, and (b) in the case of any acquisition of any other productive asset by
the Company or a Restricted Subsidiary during such period, an amount equal to
80% of the average annual cash flow of the productive asset so acquired for the
preceding two years, which amount will be increased if and to the extent a
Responsible Officer of the Company shall certify in writing to the Holders (x)
specified cost savings that can be effected by the Company in the operation of
such productive asset or (y) the
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net additional resources to be allocated to increase productivity of such asset,
PLUS (to the extent deducted in determining Operations Cash) (i) all cash debt
service payments of the Company and its Restricted Subsidiaries during such
period, (ii) all cash capital expenditures (except capital expenditures relating
to Acquisitions and Capital Additions and Improvements) of the Company and its
Restricted Subsidiaries during such period, and (iii) the amount deducted from
Operations Cash as a result of the increase in any reserve for the future cash
payment of items of the type referred to in the foregoing clauses (i) or (ii).
"CONSOLIDATED NET WORTH" of any Person shall mean, as of the date of any
determination, the amount by which the total assets of such Person and its
subsidiaries appearing on a balance sheet of such Person and its subsidiaries
prepared in accordance with GAAP on a consolidated basis exceeds the total
liabilities of such Person and its subsidiaries appearing on a balance sheet of
such Person and its subsidiaries prepared in accordance with GAAP on a
consolidated basis, in each case after eliminating all intercompany
transactions.
"CONSUMER PRICE INDEX" shall mean the consumer price index for goods and
services for the United States, as published by the U. S. Bureau of Labor
Statistics, or if such index is no longer printed, its successor publications.
"CONTROLLING GENERAL PARTNERSHIP INTEREST" shall mean a General Partnership
Interest which permits the owner of such General Partnership Interest to direct
the management of a general partnership or a limited partnership.
"CP INLAND" shall mean Crown Pacific Inland Limited Partnership, an Oregon
limited partnership, previously merged into the Company.
"CP INLAND LUMBER" is defined in Exhibit C.
"CPLP" shall mean Crown Pacific Limited Partnership, an Oregon limited
partnership, previously merged into the Company.
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"CREDIT AGREEMENTS" means the Acquisition Credit Agreement and the Working
Capital Credit Agreement.
"CURRENT DEBT" of any Person shall mean, as of the date of any
determination thereof, (i) all Indebtedness of such Person for borrowed money or
for the acquisition of assets, other than Funded Debt of such Person and (ii)
Guaranties by such Person of Current Debt of others.
"DAW" is defined in Exhibit B.
"DEFAULT" shall mean any event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both, constitute an Event of
Default.
"DISTRIBUTION" in respect of the Company shall mean:
(a) dividends, distributions or other payments of any kind whatsoever
on or in respect of the Partnership Interests (except distributions payable
solely in Partnership Interests or in rights or options to acquire
Partnership Interests);
(b) the redemption or acquisition of Partnership Interests or of
rights or other options to purchase Partnership Interests; and
(c) any payment of or on account of Subordinated Funded Debt owed to
the Managing General Partner or any payment on account of the purchase,
redemption or other retirement thereof.
"ENVIRONMENTAL AND NATURAL RESOURCE CLAIM" shall mean any administrative,
regulatory or judicial action, judgment, order, consent decree, suit, demand,
demand letter, claim, Lien, notice of non-compliance or violation, investigation
or other proceeding arising (a) pursuant to any Environmental and Natural
Resource Law or Governmental Approval issued under any such Environmental and
Natural Resource Law, (b) from the presence, use, generation, storage,
treatment, Release, threatened Release, disposal,
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remediation or other existence of any Hazardous Material, (c) from any removal,
remedial, corrective or other response action pursuant to an Environmental and
Natural Resource Law or the order of a Governmental Authority, (d) from any
third party seeking damages, contribution, indemnification, cost recovery,
compensation, injunctive or other relief in connection with a Hazardous Material
or arising from alleged injury or threat of injury to health, safety, natural
resources or the environment, or (e) from any Lien against the Properties of the
Company or any Subsidiary in favor of a Governmental Authority in connection
with a Release, threatened Release or disposal of a Hazardous Material.
"ENVIRONMENTAL AND NATURAL RESOURCE LAW" shall mean any statute, law,
regulation, ordinance, order, consent decree, judgment, permit, license, code,
common law, treaty, convention or other requirement of a Governmental Authority,
pertaining to protection of the environment, health or safety of persons,
natural resources, forestry, conservation, wildlife, waste management, hazardous
substances or wastes, and pollution (including, without limitation, regulation
of releases and disposals to air, land, water and groundwater), now or hereafter
enacted, and includes, without limitation, the Idaho Reforestation Law, Idaho
Code Sections 38-201, ET SEQ., Idaho Forest Practices Act, Idaho Code Sections
38-1301 ET SEQ., Idaho Hazardous Substances Emergency Response Act, Idaho Code
Sections 39-7101 ET SEQ., Montana Timber Resources Code, Mont. Code Ann.
Sections 76-13-101 ET SEQ., Montana Environmental Protection Code, Mont. Code
Ann. Sections 75-1-101 ET SEQ., Oregon Forest Practices Act, Or. Rev. Stat.
Sections 527.610 ET SEQ., Oregon Hazardous Waste and Hazardous Materials Code,
Or. Rev. Stat. Sections 465.003 ET SEQ., Washington Forest Practice Code, Wash.
Rev. Code Sections 76.09.010 ET SEQ., Washington Model Toxic Control Act, Wash.
Rev. Code Sections 70.105D.010 ET SEQ., Endangered Species Act of 1973, 16
U.S.C. Sections 1531 ET SEQ., Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. Sections 9601 ET SEQ., Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 ET
SEQ., Federal Water Pollution Control
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Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Sections 1251 ET SEQ.,
Clean Air Act of 1966, as amended, 42 U.S.C. Sections 7401 ET SEQ., Toxic
Substances Control Act of 1976, 15 U.S.C. Sections 2601 ET SEQ., Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. Sections 651 ET SEQ., Oil
Pollution Act of 1990, 33 U.S.C. Sections 2701 ET SEQ., Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 ET SEQ., National
Environmental Policy Act of 1975, 42 U.S.C. Sections 4321 ET SEQ., Safe Drinking
Water Act of 1974, as amended, 42 U.S.C. Sections 300(f) ET SEQ., and all
similar or implementing laws, rules, regulations, approvals, guidance documents
and amendments promulgated thereunder.
"EQUITY INTEREST" shall mean, in the case of a corporation, stock of any
class, and in the case of a partnership or a limited partnership, a General
Partnership Interest or Limited Partnership Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Section 414(b) and
414(c), respectively, of the Internal Revenue Code of 1986, as amended, or
Section 4001 of ERISA.
"EVENT OF DEFAULT" is defined in Section 6.1.
"EXCESS HARVEST" is defined in Section 4.12.
"EXCESS LIEN" is defined in Section 4.20.
"FOUR QUARTER PERIOD" shall mean a period of four full consecutive
quarterly fiscal periods of the Company, taken together as one accounting
period.
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"FUNDED DEBT" of any Person shall mean (i) all Indebtedness of such Person
for borrowed money or which has been incurred in connection with the acquisition
of assets in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, (ii) all Capitalized
Rentals of such Person, and (iii) all Guaranties by such Person of Funded Debt
of others.
"FUNDING AGENT" is defined in Section 1.6.
"GAAP" shall mean generally accepted accounting principles at the time in
the United States.
"GENERAL PARTNERSHIP INTEREST" shall mean the interest of a general partner
in a general partnership and the interest of a general partner in a limited
partnership.
"GOVERNMENTAL APPROVAL" shall mean any written permit, license, variance,
certification, consent, no-action letter, clearance, exemption or other approval
granted by a Governmental Authority.
"GOVERNMENTAL AUTHORITY" shall mean any international, foreign, federal,
state, regional, county, local or other body or authority of a governmental
entity.
"GUARANTIES" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise (including, without limitation, such obligations that arise as a
matter of law including obligations of a joint venturer in connection with a
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joint venture and of a partner in connection with a partnership), by such
Person: (i) to purchase such Indebtedness or obligation or any Property
constituting security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of such Indebtedness or obligation or (y) to maintain
working capital or other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness or obligation,
(iii) to lease Property or to purchase Securities or other Property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"HARVEST/YIELD RESTRICTION" shall mean any restriction, limitation,
prohibition, constraint, event, occurrence or condition which materially impairs
the cultivation, harvest or yield of timber at a property, including but not
limited to the following conditions or an Environmental and Natural Resource Law
concerning such following conditions:
(1) natural phenomena, including fire, drought, disease or pests;
(2) threatened or endangered species of wildlife, fish or flora;
(3) protected or sensitive habitats (including brooding, nesting,
feeding and sheltering areas) of sensitive, threatened, endangered or other
species of wildlife or fish;
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(4) critical natural resources (including soil, water, wetlands,
riparian areas, forestland and visually sensitive areas);
(5) cultural resource sites (including Properties of historic,
archaeological or tribal significance);
(6) condemnation or other regulation of forestland for public uses
(such as for recreation, wilderness or park purposes);
(7) timber export;
(8) agrichemicals (including fertilizers and pesticides);
(9) environmental quality standards (including non-point source best
management practices);
(10) access and transportation factors (including road construction
and improvement and riparian logging crossings); and
(11) forest practices (including harvest rates, clear cuts and
reforestation).
"HAZARDOUS MATERIAL" shall mean any hazardous or toxic chemical, waste,
byproduct, pollutant, contaminant, compound, product or substance, including,
without limitation, asbestos, polychlorinated biphenyls, petroleum (including
crude oil or any fraction thereof), and any material the exposure to, or
manufacture, possession, presence, use, generation, storage, transportation,
treatment, release, disposal, abatement, cleanup, removal, remediation or
handling of which, is prohibited, controlled or regulated by any Environmental
and Natural Resource Law.
"HOLDER" shall mean any Person which is, at the time of reference, the
registered holder of any outstanding Note.
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"HS CORP." is defined in Exhibit C.
"INDEBTEDNESS" of any Person shall mean and include all obligations of such
Person which in accordance with GAAP shall be classified upon a balance sheet of
such Person as liabilities of such Person and in any event shall include all
(i) obligations of such Person for borrowed money, (ii) obligations secured by
any Lien or other charge upon Property owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations,
(iii) obligations created or arising under any conditional sale or other title
retention agreement with respect to Property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of Property, PROVIDED that the preceding provisions of this clause (iii)
shall not include obligations of such Person in respect of Operating Leases,
(iv) Capitalized Rentals of such Person, and (v) Guaranties by such Person of
Indebtedness of others.
"INDEMNIFIED MATTERS" is defined in Section 4.3(b)(6)(A).
"INDEMNITEES" is defined in Section 4.3(b)(6)(A).
"INSTITUTIONAL HOLDER" shall mean any insurance company, bank, savings and
loan association, trust company, investment company, charitable foundation,
broker or dealer registered under the Securities Exchange Act of 1934, as
amended, employee benefit plan (as defined in ERISA) or other institutional
investor or financial institution, including, without limitation, each
Purchaser.
"INTEREST EXPENSE" for any period shall mean all interest (including the
interest component of Rentals payable by the Company and its Restricted
Subsidiaries on Capitalized Leases) and all amortization of debt discount and
expense expensed during such period in accordance with GAAP on any Indebtedness
of the Company and its Restricted Subsidiaries for which such calculations are
being made.
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"INTERIM CAPITAL TRANSACTIONS" means (i) borrowings, refinancings or
refundings of Current Debt and Funded Debt of the Company or any Restricted
Subsidiary and sales of debt securities (other than for working capital purposes
and other than for items purchased on open account in the ordinary course of
business) by the Company or any Restricted Subsidiary, (ii) sales of Equity
Interests by the Company and (iii) sales or other voluntary or involuntary
dispositions of any assets of the Company or any Restricted Subsidiary (other
than (x) sales or other dispositions of inventory, accounts receivable and other
assets in the ordinary course of business, including the exchange of timber or
real property for other timber or real property, to the extent that the timber
or real property received in exchange is of equal or greater value, or the sale
of timber or real property, to the extent the proceeds from which are invested
within 180 days in other timber or real property, and (y) sales or other
dispositions of assets as a part of normal retirements or replacements), other
than in the context of the commencement of the dissolution and liquidation of
the Company.
"INVESTMENTS" shall mean all investments, in cash or by delivery of
Property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise.
"LIEN" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting Property. For the purposes of this
Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any Property which
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it has acquired or holds subject to a conditional sale agreement, Capitalized
Lease or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes, and such
retention or vesting shall constitute a Lien.
"LIMITED PARTNERSHIP INTEREST" shall mean the interest of a limited partner
in a limited partnership.
"MAKE-WHOLE AMOUNT" shall mean in connection with any prepayment or
acceleration of the Notes of a series the excess, if any, of (i) the aggregate
present value as of the date of such prepayment or acceleration of each dollar
of principal being prepaid or accelerated of the Notes of such series (taking
into account the application of such prepayment required by Section 5.1) and the
amount of interest (exclusive of interest accrued to the date of prepayment or
acceleration) that would have been payable in respect of such dollar if such
prepayment or acceleration had not been made, determined by discounting on a
semiannually compounded basis such amounts at the Reinvestment Rate from the
respective dates on which they would have been payable, over (ii) 100% of the
principal amount of the outstanding Notes of the series being prepaid. The
Make-Whole Amount shall not be less than zero. For purposes of any
determination of the Make-Whole Amount:
"REINVESTMENT RATE" shall mean (a) the sum of 0.50%, plus the yield
reported at 10:00 A.M. (New York time) on the date of determination of the
Make-Whole Amount by the Dow Jones Markets, a Division of Dow Jones &
Company (formerly known as Telerate Access Service) on the display
designated "Page 5" for United States government Securities having a
maturity (rounded to the nearest month) corresponding to the remaining
Weighted Average Life to Maturity of the principal of such series being
prepaid or accelerated (taking into account the application of such
prepayment required by Section 5.1), or (b) in the event that such Dow
Jones Markets is no longer available or such yield is not reported as of
such time, "REINVESTMENT RATE" shall mean the sum of 0.50%, plus the
arithmetic mean of the two yields under the heading "WEEK ENDING" published
in the Statistical Release under
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the caption "TREASURY CONSTANT MATURITIES" for the maturity (rounded to the
nearest month) corresponding to the Weighted Average Life to Maturity of
the principal of such series being prepaid or accelerated (taking into
account the application of such prepayment required by Section 5.1). If no
maturity exactly corresponds to such Weighted Average Life to Maturity,
yields for the maturity next longer than the Weighted Average Life to
Maturity and for the maturity next shorter than the Weighted Average Life
to Maturity shall be calculated and the Reinvestment Rate shall be
interpolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purposes of
calculating the Reinvestment Rate pursuant to clause (b), the most recent
Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"STATISTICAL RELEASE" shall mean the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded
United States government Securities adjusted to constant maturities or, if
such statistical release is not published at the time of any determination
hereunder, then such other reasonably comparable index which shall be
designated by the Holders holding 66-2/3% in aggregate principal amount of
the outstanding Notes.
"WEIGHTED AVERAGE LIFE TO MATURITY" of the principal amount of the
Notes of a series being prepaid or accelerated shall mean, as of the time
of any determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount of
such principal. The term "REMAINING DOLLAR-YEARS" of such principal shall
mean the amount obtained by (i) multiplying (x) the remainder of (1) the
amount of principal of such series that would have become due on each
scheduled payment date if such prepayment or acceleration and the
application thereof in accordance with the provisions of Section 5.1 had
not been made, less (2) the amount of principal on the Notes of
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such series being prepaid or accelerated scheduled to become due on such
date after giving effect to such prepayment or acceleration, by (y) the
number of years (calculated to the nearest one-twelfth) which will elapse
between the date of determination and such scheduled payment date, and
(ii) totaling the products obtained in (i).
"MANAGING GENERAL PARTNER" is defined in Section 2.2.
"MULTIEMPLOYER PLAN" shall have the same meaning as in ERISA.
"NET PROCEEDS" shall mean the gross proceeds of the disposition or sale of
Property, LESS (i) all reasonable expenses incurred in connection with such
disposition or sale of such Property and (ii) with respect to any Excess
Harvest, all reasonable expenses properly allocable to the harvesting of the
timber constituting the Excess Harvest and other costs incidental thereto.
"1994 NOTES" shall mean the $275,000,000 9.78% Senior Notes due December 1,
2009 of the Company issued under and pursuant to the Note Purchase Agreement
dated as of December 1, 1994 among the Company and the purchasers listed in
Schedule I thereto.
"1995 NOTES" shall mean the $25,000,000 9.60% Senior Notes due December 1,
2009 of the Company issued under and pursuant to the Note Purchase Agreement
dated as of March 15, 1995 among the Company and the purchasers listed in
Schedule I thereto.
"1996 NOTES" shall mean the $91,000,000 Senior Notes due 2006 to 2013 of
the Company issued under and pursuant to the Note Purchase Agreement dated as of
August 1, 1996 among the Company and the purchasers listed in Schedule I
thereto.
"NOTE" shall mean each Series A Note, Series B Note and Series C Note.
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"OPERATING LEASE" shall mean, with respect to any Person, any lease which
is not a Capitalized Lease pursuant to which such Person shall lease real or
personal Property.
"OPERATIONS CASH" for any period shall mean the sum of all cash receipts of
the Company and its Restricted Subsidiaries during such period, on a cumulative
basis and without duplication (including cash receipts from operations of
Restricted Subsidiaries prior to the acquisition thereof by the Company; but
excluding (a) cash proceeds from Interim Capital Transactions, and (b) net cash
receipts from operations in respect of assets sold during such period), LESS the
sum of:
(1) all cash operating expenditures of the Company and its Restricted
Subsidiaries during such period (including, without limitation, (x) cash
operating expenditures of Restricted Subsidiaries prior to the acquisition
thereof by the Company, (y) taxes, if any, paid by the Company as an entity
and by its Restricted Subsidiaries, and (z) amounts owed to the Managing
General Partner as reimbursement for Specified Expenses);
(2) all cash debt service payments of the Company and its Restricted
Subsidiaries during such period (other than payments or prepayments of
principal and premium (x) required by reason of loan agreements (including,
without limitation, covenants and default provisions therein) or by
lenders, in each case, in connection with sales or other dispositions of
assets or (y) made in connection with refinancings or refundings of
Indebtedness with the proceeds from new Indebtedness or from the sale of
Equity Interests, PROVIDED, that any payment or prepayment of principal and
premium, whether or not then due, shall be deemed, at the election and in
the discretion of the Managing General Partner, to be refunded or
refinanced by any Indebtedness incurred or to be incurred by the Company
simultaneously with or within 180 days prior to or after such payment or
prepayment to the extent of the principal amount of such Indebtedness so
incurred);
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(3) all cash capital expenditures of the Company and its Restricted
Subsidiaries during such period, except capital expenditures (including
associated transaction costs) relating to (x) Acquisitions, (y) Capital
Additions and Improvements and (z) Interim Capital Transactions;
(4) the amount, if any, by which cash reserves outstanding as of the
end of such period that the Managing General Partner has determined in its
reasonable discretion to be necessary or appropriate in order to provide
funds for the future cash payment of items of the type referred to in
clauses (1) through (3) above exceeds such cash reserves outstanding at the
beginning of such period;
(5) the amount, if any, by which any cash reserves outstanding at the
end of such period that the Managing General Partner has determined in its
reasonable discretion to be necessary or appropriate in order to provide
funds for Distributions in respect of any one or more of the four
consecutive fiscal quarters following the end of such period exceeds such
cash reserves outstanding at the beginning of the such period; and
(6) any cash receipts of any Restricted Subsidiary which for any
reason (including pursuant to its organizational documents) is unavailable
for distribution to the Company or any other Restricted Subsidiary,
all determined on a consolidated basis. Where cash capital expenditures are
made in part in respect of Acquisitions or Capital Additions and Improvements
and in part for other purposes, the Managing General Partner's good faith
allocation thereof between the portion made for Acquisitions or Capital
Additions and Improvements and the portion made for other purposes shall be
conclusive.
So long as the Company is not a taxpaying entity, taxes paid by the Company
on behalf of, or amounts withheld with respect to, all or less than all of the
Partners shall not be considered cash operating expenditures of the Company that
reduce Operations
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Cash, but the payment or withholding thereof shall be deemed to be a
distribution of Available Cash to such Partners. Alternatively, in the
discretion of the Managing General Partner, so long as the Company is not a
taxpaying entity, such taxes (if pertaining to all Partners) may be considered
to be cash operating expenditures of the Company which reduce Operations Cash,
but the payment or withholding thereof shall not be deemed to be a distribution
of Available Cash to such Partners.
"OVERDUE RATE" with respect to each series of Notes shall mean a rate per
annum equal to the lesser of (i) the maximum rate of interest allowable by law
and (ii) the rate of interest then borne by the Notes of such series plus 2%.
"PARTNERS" shall mean the Managing General Partner and each other Person
owning a Partnership Interest in the Company.
"PARTNERSHIP" shall mean Crown Pacific Partners, L.P., a Delaware limited
partnership, together with any Person who succeeds to all, or substantially all
Crown Pacific Partners, L.P.'s assets and business.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated Agreement of
Limited Partnership of the Company dated as of December 22, 1994 between the
Managing General Partner and the Partnership, as the same may from time to time
be supplemented, amended, or restated as permitted thereby.
"PARTNERSHIP INTEREST" shall mean Limited Partnership Interests and General
Partnership Interests.
"PBGC" is defined in Section 4.17(g).
"PERSON" shall mean an individual, partnership, corporation, trust or
limited liability company or other unincorporated organization, and a government
or agency or political subdivision thereof.
"PLAN" shall mean a "pension plan," as such term is defined in ERISA and
which is covered by Title IV of ERISA, other
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than a Multiemployer Plan, established or maintained by the Company or any ERISA
Affiliate or as to which the Company or any ERISA Affiliate contributed or is a
member or otherwise may have any liability.
"PLANNED VOLUME" shall mean as of the first Closing Date 325,000,000 board
feet per annum of timber, and shall be adjusted for any Annual Timber Increase,
as of the Effective Date for such Annual Timber Increase, by increasing such per
annum amount by an amount equal to 8-1/3% of such Annual Timber Increase. In
addition, such per annum amount shall, if there shall be an Annual Timber
Decrease in any Determination Period, be permanently (with respect to such
Annual Timber Decrease) adjusted, effective as of the Effective Date for such
Annual Timber Decrease, by decreasing such per annum amount in the same
proportion that the Predisposition Timber Amount in respect of such Annual
Timber Decrease is reduced by such Annual Timber Decrease; PROVIDED that such
adjustment shall not be made if the percentage decrease represented by such
adjustment would be less than 5% and if the Asset Coverage Ratio as of the last
day of such Determination Period is at least 2:1. For purposes of the
foregoing:
"ANNUAL TIMBER INCREASE" shall mean, for any Determination Period, the
amount, in board feet, by which the number of board feet of timber acquired
by the Company and its Restricted Subsidiaries during such Determination
Period shall exceed the number of board feet of timber sold or otherwise
disposed of by the Company and its Restricted Subsidiaries during such
Determination Period; and "ANNUAL TIMBER DECREASE" shall mean, for any
Determination Period, the amount, in board feet, by which the number of
board feet of timber sold or otherwise disposed of by the Company and its
Restricted Subsidiaries during such Determination Period shall exceed the
number of board feet of timber acquired by the Company and its Restricted
Subsidiaries during such Determination Period; PROVIDED that, neither such
calculation shall include timber acquired with the Net Proceeds of an
Excess Harvest pursuant to Section 4.12.
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"ASSET COVERAGE RATIO" shall mean, as of the date of determination,
the ratio of (a) the fair market value (determined in good faith by a
Responsible Officer, but excluding any value based on a higher and better
use thereof) of the timberlands owned by the Company and its Restricted
Subsidiaries on such determination date to (b) Funded Debt of the Company
and its Restricted Subsidiaries on a consolidated basis on such
determination date.
"DETERMINATION PERIOD" shall mean the period from and including the
first Closing Date to and including December 31, 1998 and each calendar
year thereafter.
"EFFECTIVE DATE" for any Annual Timber Increase or Annual Timber
Decrease shall be July 1 of the Determination Period for which such Annual
Timber Increase or Annual Timber Decrease, as the case may be, occurs.
"PREDISPOSITION TIMBER AMOUNT" with respect to any Annual Timber
Decrease shall mean the amount of timber owned by the Company and its
Restricted Subsidiaries as of the first day of the Determination Period for
which such Annual Timber Decrease occurred.
"PREDECESSOR PARTNERSHIPS" shall mean CPLP and CP Inland.
"PRIVATE PLACEMENT MEMORANDUM" shall mean the Placement Memorandum, dated
November, 1997, prepared by the Company with the assistance of BancAmerica
Robertson Stephens.
"PRO FORMA INTEREST EXPENSE" for any Four Quarter Period shall mean the
Interest Expense payable by the Company and its Restricted Subsidiaries during
such Four Quarter Period on all Current Debt and Funded Debt of the Company and
its Restricted Subsidiaries on a consolidated basis, PLUS the Interest Expense
which would have been payable during such Four Quarter Period in respect of (i)
any Current Debt and Funded Debt to be issued on the date of determination of
Pro Forma Interest Expense and (ii) the Current Debt or Funded Debt issued after
the end of such Four Quarter Period and prior to such date of determination, in
each
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case, giving effect as of the beginning of such Four Quarter Period (y) to the
incurrence of all such Current Debt and Funded Debt described in clauses (i) and
(ii), and (z) to the application of any such Funded Debt or Current Debt to the
substantially concurrent repayment of any other Current Debt or Funded Debt
outstanding during such Four Quarter Period. Computations of Pro Forma Interest
Expense for Current Debt and Funded Debt having a variable interest rate shall
be calculated at the rate in effect on the date of such determination.
"PRO FORMA MAXIMUM DEBT SERVICE" shall mean, as of any date of
determination, the highest total amount payable by the Company and its
Restricted Subsidiaries on a consolidated basis, during any Four Quarter Period,
commencing with the fiscal quarter in which such date of determination occurs
and ending on March 31, 2018, in respect of scheduled principal payments and all
Interest Expense with respect to all Current Debt and Funded Debt of the Company
and its Restricted Subsidiaries outstanding on such date of determination, after
giving effect to any Current Debt and Funded Debt proposed to be incurred on
such date and to the substantially concurrent repayment of any other Current
Debt and Funded Debt (i) assuming, in the case of Current Debt or Funded Debt
having a variable interest rate, that the rate in effect on the date of
determination will remain in effect throughout such period, (ii) including only
actual interest payments with respect to the Current Debt and Funded Debt
incurred pursuant to the Working Capital Facility during the most recent Four
Quarter Period and (iii) treating the principal amount of all Current Debt and
Funded Debt outstanding as of such date of determination under a revolving
credit or similar agreement (other than the Working Capital Facility) as
maturing and becoming due and payable on the scheduled maturity date or dates
thereof (including the maturity of any payment required by any commitment
reduction or similar amortization provision), without regard to any provision
permitting such maturity date to be extended; PROVIDED, HOWEVER, that for
purposes of the foregoing clause (iii), the Company shall be deemed to have
elected to have any amount outstanding under the Acquisition Facility to be
amortized in the manner and over the period
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provided for therein commencing at the expiration of the period during which the
Acquisition Facility is revolving in nature.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PTE" is defined in Section 2.3(a).
"PURCHASERS" is defined in the introductory paragraph to this Agreement.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments
of 1984, 42 U.S.C. Sections 6901 ET SEQ., and any future amendments.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the environment, including, without limitation, the abandonment or discarding of
barrels, drums, containers, tanks and other receptacles containing or previously
containing any Hazardous Material.
"RENTALS" of any Person shall mean and include as of the date of
determination thereof all fixed payments (including as such all payments which
the lessee is obligated to make to the lessor on termination of the lease or
surrender of the Property) payable by such Person, as lessee or sublessee under
a lease of real or personal Property, but shall be exclusive of any amounts
required to be paid by such Person (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed solely on the basis of the minimum rents, if any, required to be paid
by the lessee regardless of sales volume or gross revenues.
"REPORTABLE EVENT" shall mean a "reportable event" as described in Section
4043 of ERISA for which the notice requirement to the PBGC has not been waived,
PROVIDED that the
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loss of qualification of a Plan and the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code of 1986, as amended, or
Section 302 of ERISA shall be a Reportable Event regardless of the issuance of
any waiver of the reporting requirement by the PBGC.
"RESPONSIBLE OFFICER" shall mean any of the Chief Executive Officer,
President, Chief Financial Officer, General Counsel and any Executive Vice
President of the Managing General Partner.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary (i) which is organized
under the laws of the United States or Canada or any state or province thereof;
(ii) which conducts substantially all of its business and has substantially all
of its assets within the United States or Canada; (iii) of which (A) in the case
of any corporation, more than 50% of the Voting Stock is beneficially owned,
directly or indirectly by the Company, or (B) in the case of any partnership,
more than 50% of each of the Limited Partnership Interest and the General
Partnership Interest is beneficially owned, directly or indirectly by the
Company; and (iv) which is designated as a Restricted Subsidiary in the most
recent written notice with respect to such Subsidiary given by the Company
pursuant to Section 4.18.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITY" shall have the same meaning as in Section 2(1) of the Securities
Act.
"SENIOR FUNDED DEBT" shall mean all Funded Debt other than Subordinated
Funded Debt.
"SERIES A NOTE" shall mean each 7.76% Senior Note, Series A, due
February 1, 2012 issued under and pursuant to this Agreement, including any Note
issued in substitution therefor or replacement thereof pursuant to Section 9.1,
Section 9.2, or Section 9.3.
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"SERIES B NOTE" shall mean each 7.76% Senior Note, Series B, due
February 1, 2013 issued under and pursuant to this Agreement, including any Note
issued in substitution therefor or replacement thereof pursuant to Section 9.1,
Section 9.2, or Section 9.3.
"SERIES C NOTE" shall mean each 7.93% Senior Note, Series C, due
February 1, 2018 issued under and pursuant to this Agreement, including any Note
issued in substitution therefor or replacement thereof pursuant to Section 9.1,
Section 9.2, or Section 9.3.
"SOURCE" is defined in Section 2.3.
"SPECIFIED EXPENSES" shall mean (i) all reasonable direct and indirect
expenses the Managing General Partner incurs or payments it makes on behalf of
the Company (including, without limitation, salary, bonus, incentive
compensation, and other amounts paid to any Person to perform services for the
Company or for the Managing General Partner in the discharge of its duties to
the Company), and (ii) all other necessary or appropriate reasonable expenses
allocable to the Company or otherwise reasonably incurred by the Managing
General Partner in connection with operating the Company's business (including
without limitation reasonable expenses allocated to the Managing General Partner
by its affiliates and, for so long as Fremont Group, Inc. owns an interest in
the Managing General Partner, an annual fee of $100,000, payable semi-annually
in arrears in consideration of management services).
"SUBORDINATED FUNDED DEBT" shall mean all unsecured Funded Debt of the
Company which shall contain or have applicable thereto subordination provisions
substantially in the form set forth in Exhibit G attached hereto providing for
the subordination thereof to other Funded Debt of the Company, including,
without limitation, the Notes.
"SUBSIDIARY" shall mean, as to any particular parent business entity, any
business entity of which such parent business entity and/or one or more business
entities which are themselves subsidiaries of such parent business entity, (i)
in the case of any corporation, own more than 50% of the Voting
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Stock, or (ii) in the case of any partnership, own more than 50% of the Limited
Partnership Interest, or own a Controlling General Partnership Interest.
"SUBSIDIARY" shall mean a subsidiary of the Company.
"SURVIVING ENTITY" is defined in Section 4.9(2)(i).
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a Restricted
Subsidiary.
"VOTING EQUITY INTEREST" shall mean Voting Stock and General Partnership
Interests.
"VOTING STOCK" of any Person shall mean Securities of any class or classes,
the holders of which are entitled at such time to elect a majority of the
corporate directors of such Person (or Persons performing similar functions).
"W-I" is defined in Exhibit B.
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean (i)
in the case of a corporation, a Subsidiary of which all the issued and
outstanding shares of stock (except shares required as directors' qualifying
shares) and all Indebtedness shall be owned by the Company and/or one or more of
its Wholly-owned Subsidiaries, and (ii) in the case of any partnership shall
mean a Subsidiary of which all of the outstanding General Partnership Interests
are owned by the Managing General Partner and all of the Limited Partnership
Interests and all Indebtedness shall be owned by the Company and/or one or more
of its Wholly-owned Subsidiaries.
"WORKING CAPITAL CREDIT AGREEMENT" is defined in Section 3.9.
"WORKING CAPITAL FACILITY" shall mean the facility made available to the
Company for working capital and general partnership purposes pursuant to the
Working Capital Credit Agreement, as from time to time renewed, extended,
amended and supplemented and any other credit agreement from time to time
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entered into by the Company for purposes of obtaining working capital financing,
PROVIDED that such facility or facilities shall not be for an amount in excess
of $40,000,000 in the aggregate.
"WORKING CAPITAL RESERVE" shall mean the amount, if any, available to be
borrowed at the time of determination under the Working Capital Facility, up to
a maximum of $40,000,000.
SECTION 8.2. ACCOUNTING PRINCIPLES. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement the same shall be done in accordance with GAAP, to
the extent applicable, except (i) that audit adjustments shall be effective as
of the related period and not as of the period made, and (ii) where such
principles are inconsistent with the requirements of this Agreement.
SECTION 8.3. DIRECTLY OR INDIRECTLY. Where any provision of this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
SECTION 9.1. REGISTERED NOTES. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes and
the Company will register or transfer or cause to be registered or transferred
as hereinafter provided any Note issued pursuant to this Agreement, PROVIDED
that nothing in this Section 9.1 shall be construed to require the Company to
register the Notes under the Securities Act or the United States Securities
Exchange Act of 1934, as amended.
At any time and from time to time the registered Holder holding any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a
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written instrument of transfer duly executed by the registered Holder or its
attorney duly authorized in writing. Any transferee of a Note shall, by its
acceptance of such Note, be deemed to have made the same representations to the
Company regarding the purchase of the Note as the original Purchaser made
pursuant to Section 2.3; PROVIDED, HOWEVER, that with respect to the
representation made in the third sentence of Section 2.3, such transferee will
not be deemed to have chosen the options set forth in Section 2.3(b), (c), (d)
or (f) unless such transferee shall have made the disclosures referred to
therein at least ten Business Days prior to its acceptance of such Note and
shall have received prior to its acceptance of such Note written confirmation
from the Company to the effect set forth in the first sentence of Paragraph 20
of Exhibit B-1 hereto. The Company shall exercise such reasonable due diligence
as is necessary to respond to any such disclosure, PROVIDED THAT, if the Company
shall not respond within 10 Business Days following receipt of any such
disclosure, it shall be deemed to have made such confirmation.
The Person in whose name any registered Note shall be registered shall be
deemed and treated as the owner and Holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any registered Note shall be made to or upon the written order of
such registered Holder.
SECTION 9.2. EXCHANGE OF NOTES. At any time and from time to time, upon
not less than ten days' notice to that effect given by the Holder holding any
Note initially delivered or of any Note substituted therefor pursuant to Section
9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note at its
office, the Company will deliver in exchange therefor, without expense to such
Holder, except as set forth below, a Note of the same series and for the same
aggregate principal amount as the then unpaid principal amount of the Note so
surrendered, or Notes of the same series in the denomination of $1,000,000 or
any amount in excess thereof as such Holder shall specify, dated as of the date
to which interest has been paid on the Note so surrendered or, if such surrender
is prior to the payment of any interest thereon, then dated as of
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the date of issue, registered in the name of such Person or Persons as may be
designated by such Holder, and otherwise of the same form and tenor as the Notes
so surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
SECTION 9.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the Holder
thereof, a new Note, of the same series and of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Note. If the Purchaser or any subsequent
Institutional Holder is the owner of any such lost, stolen or destroyed Note,
then the affidavit of an authorized officer of such owner, setting forth the
fact of loss, theft or destruction and of its ownership of such Note at the time
of such loss, theft or destruction shall be accepted as satisfactory evidence
thereof and no further indemnity shall be required as a condition to the
execution and delivery of a new Note other than the written agreement of such
owner to indemnify the Company.
SECTION 9.4. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay
or failure on the part of any Holder in the exercise of any power or right shall
operate as a waiver thereof; nor shall any single or partial exercise of the
same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of any Holder are cumulative
to, and are not exclusive of, any rights or remedies any such Holder would
otherwise have, and no waiver or consent shall extend to or affect any
obligation or right not expressly waived or consented to.
SECTION 9.5. NOTICES. (a) All communications under this Agreement shall
be in writing and shall be mailed by registered
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or certified mail, postage prepaid or shall be sent by overnight courier:
(1) If to any Purchaser, at such Purchaser's address appearing on
Schedule I hereto, marked for attention as there indicated, or at such
other address as such Purchaser or any subsequent Holder may have furnished
to the Company in writing; or
(2) If to the Company, at its address beneath its signature at the
foot of this Agreement, or at such other address as it may have furnished
in writing to each Holder.
(b) Any notice so addressed and mailed by registered or certified mail to
any Holder shall be deemed to be given when delivered to such Holder and any
notice so addressed and sent by overnight courier to any Holder shall be deemed
to be given when delivered to such Holder.
SECTION 9.6. REPRODUCTION OF DOCUMENTS. This Agreement and all documents
relating thereto including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by each
Purchaser at the closing of its purchase of the Notes (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to such Purchaser, may be reproduced by such
Purchaser by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and such Purchaser may destroy any
original document so reproduced. The Company agrees and stipulates that any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 9.7. SURVIVAL. All warranties, representations and covenants
made by the Company herein or on any certificate or
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other instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by each Purchaser and shall survive the
delivery to such Purchaser of the Notes regardless of any investigation made by
such Purchaser or on its behalf. All representations made by the Purchasers in
Section 2.3 shall be considered to have been relied upon by the Company and
shall survive the delivery to the Company of the purchase price of the Notes
regardless of any investigation made by the Company or on its behalf. All
statements in any such certificate or other instrument shall constitute
warranties and representations by the Company hereunder.
SECTION 9.8. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties. The provisions of this Agreement are intended to be for the benefit of
all Holders, from time to time, and shall be enforceable by any such Holder,
whether or not an express assignment to such Holder of rights under this
Agreement has been made by any Purchaser or its successor or assign.
SECTION 9.9. GOVERNING LAW. This Agreement and the Notes shall be
governed by and construed in accordance with the laws of the State of New York.
SECTION 9.10. SUBMISSION TO JURISDICTION. The Company hereby irrevocably
submits to the jurisdiction of the courts of the State of New York and of the
courts of the United States of America having jurisdiction in the State of New
York for the purpose of any legal action or proceeding in any such court with
respect to, or arising out of, this Agreement. The Company designates and
appoints Prentice Hall Legal & Financial Services, 15 Columbus Circle, New York,
New York 10023 and its successors as the Company's lawful agent in the United
States of America upon which may be served and which may accept and acknowledge,
for and on behalf of the Company all process in any action, suit or proceedings
that may be brought against the Company in any of the courts referred to in this
Section 9.10, and agrees that such service of process, or the acceptance or
acknowledgment thereof by said agent, shall be valid, effective and binding in
every
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respect; PROVIDED, HOWEVER, that if said agency shall cease for any reason
whatsoever, the Company hereby designates and appoints, without power or
revocation, the Secretary of State of the State of New York to serve as its
agent for service of process. If any Holder shall cause process to be served
upon the Company by being served upon such agent, a copy of such process shall
also be mailed to the Company by registered mail, first class postage prepaid,
at the Company's address set forth at the foot of this Agreement. Nothing
contained in this Section 9.10 shall limit the right of any Holders to take
proceedings against the Company in any other court of competent jurisdiction
nor, by virtue of anything contained herein, shall the taking of proceedings in
one or more jurisdictions preclude the taking of proceedings in any other
jurisdiction whether concurrently or not.
SECTION 9.11. LIMITATIONS OF LIABILITY. Anything in this Agreement to the
contrary notwithstanding, neither the Holders nor the successors or assigns
thereof shall have any claim, remedy or right to proceed against (i) the
Managing General Partner or (ii) any past, present or future partner, employee,
director, officer, stockholder or incorporator of the Managing General Partner,
the Partnership or any subsidiary thereof (other than the Company) for the
payment of any deficiency or any other sum owing on account of the Indebtedness
evidenced by the Notes or for the payment of any liability resulting from the
breach of any covenant, agreement, warranty or representation of any nature
whatsoever in this Agreement or in any certificate delivered pursuant hereto,
except with respect to CP Acquisition Co. pursuant to the Collection Guaranty
dated as of January 2, 1998 relating to the Series A Notes. Nothing herein
contained shall limit, restrict or impair the rights of the Holders to
accelerate the maturity of the Notes upon an Event of Default, to bring suit and
obtain a judgment against the Company on the Notes, to execute any such judgment
on the Company's Properties or to exercise all other rights and remedies against
the Company provided under this Agreement.
SECTION 9.12. SEVERABILITY. Should any part of this Agreement for any
reason be declared invalid, such decision shall not
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affect the validity of any remaining portion, which remaining portion shall
remain in force and effect as if this Agreement had been executed with the
invalid portion thereof eliminated.
SECTION 9.13. CAPTIONS. The descriptive headings of the various Sections
or parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
SECTION 9.14. DUPLICATE ORIGINALS. Two or more counterparts of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
-87-
<PAGE>
The execution hereof by the Purchasers shall constitute a contract among
the Company and the Purchasers for the uses and purposes hereinabove set forth.
CROWN PACIFIC LIMITED
PARTNERSHIP, a Delaware
limited partnership
By: CROWN PACIFIC
MANAGEMENT
LIMITED PARTNERSHIP,
a Delaware
limited
partnership
Its General
Partner
By: HS Corp. of
Oregon, an Oregon
corporation
Its
General Partner
By
-----------------------
Its
Crown Pacific Limited Partnership
121 S.W. Morrison Street
Portland, Oregon 97204
Attention: Roger L. Krage
Telefacsimile number: (503) 228-4875
Confirmation number: (503) 274-2300
Acknowledged (as to
representations made
pursuant to Section 2.2) by:
CROWN PACIFIC
MANAGEMENT
-88-
<PAGE>
LIMITED PARTNERSHIP,
a
Delaware
limited partnership
As
Managing General
Partner
By: HS Corp. of
Oregon, an Oregon
corporation
Its
General Partner
By
------------------
Its
Crown Pacific Management Limited
Partnership
121 S.W. Morrison Street
Portland, Oregon 97204
Attention: Roger L. Krage
Telefacsimile number: (503) 228-4875
Confirmation number: (503) 274-2300
-89-
<PAGE>
Accepted as of December 15, 1997:
JOHN HANCOCK MUTUAL LIFE INSURANCE
COMPANY
By
Its
-90-
<PAGE>
Accepted as of December 15, 1997:
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By
Its
-91-
<PAGE>
Accepted as of December 15, 1997:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By
Its
-92-
<PAGE>
Accepted as of December 15, 1997:
PROVIDENT LIFE AND ACCIDENT
INSURANCE COMPANY
By: Provident Investment
Management, LLC
Its Agent
By
Its Vice President
-93-
<PAGE>
Accepted as of December 15, 1997
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By
Name:
Title:
-94-
<PAGE>
Accepted as of December 15, 1997
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, on behalf of one
or more _________ separate accounts
By CIGNA Investments, Inc.
By
Name:
Title:
-95-
<PAGE>
Accepted as of December 15, 1997
GENERAL ELECTRIC CAPITAL ASSURANCE
COMPANY
By
Its
-96-
<PAGE>
Accepted as of December 15, 1997
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By MIMLIC Asset Management
Company
By
Its
-97-
<PAGE>
Accepted as of December 15, 1997
MUTUAL TRUST LIFE INSURANCE
COMPANY
By MIMLIC Asset Management
Company
By
Its
-98-
<PAGE>
Accepted as of December 15, 1997
OHIO NATIONAL LIFE ASSURANCE
CORPORATION
By
Its
-99-
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
JOHN HANCOCK MUTUAL LIFE INSURANCE Series A Series B Series C
COMPANY -------- --------
<S> <C> <C> <C>
John Hancock Place $5,000,000 $6,000,000 $15,000,000
200 Clarendon Street (Two Notes: (Two Notes: (Three Notes:
Boston, Massachusetts 02117 $500,000 $1,500,000 $7,000,000
$4,500,000) $4,500,000) $5,000,000
$3,000,000)
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Crown
Pacific Limited Partnership, 7.76% Senior Notes, Series A, due February 1, 2012,
PPN 22844# AH 3, 7.76% Senior Notes, Series B, due February 1, 2013, PPN 22844#
AJ 9, 7.93% Senior Notes, Series C, due February 1, 2018, PPN 22844# AK 6, as
the case may be, principal or interest") to:
Bank Boston
ABA #011000390
Boston, Massachusetts 02110
For the account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account
Account Number 541-55417
On Order of: Crown Pacific Limited Partnership, [Applicable PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and
SCHEDULE I
(to Note Purchase Agreement)
<PAGE>
address of Bank (or Trustee) from which wire transfer was sent, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Marie Mazzulli, Investment Accounting Division
T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Marie Mazzulli, Investment Accounting Division T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
and
John Hancock Bond and Corporate Finance Group
Paper and Forest Products Team
1900 Point West Way, Suite 188
Sacramento, California 95818
Attention: Whit Hill, Assistant Investment Officer
Phone: (916) 922-6554
I-101
<PAGE>
Fax: (916) 922-4777
and a copy of any notices relating to change in issuer's name, address or
principal place of business and a copy of any legal opinions shall be delivered
or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Investment Law Division, T-50
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1414660
Closing Date: December 30, 1997 for Series A Notes
Commitment Expiration Date: December 31, 1997 for Series A Notes
Closing Date: January 13, 1998 for Series B and C Notes
Commitment Expiration Date: January 30, 1998 for Series B and C Notes
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
JOHN HANCOCK VARIABLE LIFE INSURANCE Series A Series B Series C
COMPANY -------- --------
<S> <C> <C> <C>
John Hancock Place $1,000,000 -0- -0-
200 Clarendon Street
Boston, Massachusetts 02117
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
immediately available funds for credit, not later than 12 noon, Boston time,
(identifying each payment as "Crown Pacific Limited Partnership, 7.76% Senior
Notes, Series A, due February 1, 2012, PPN 22844# AH 3, 7.76% Senior Notes,
Series B,
I-102
<PAGE>
due February 1, 2013, PPN 22844# AJ 9, 7.93% Senior Notes, Series C, due
February 1, 2018, PPN 22844# AK 6, as the case may be, principal or interest")
to:
Bank Boston
ABA #011000390
Boston, Massachusetts 02110
For the account of: John Hancock Mutual Life Insurance Company
Private Placement Collection Account
Account Number 541-55417
On Order of: Crown Pacific Limited Partnership, [Applicable PPN]
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the Notes or other obligations; (2)
allocation of payment between principal and interest and any special payment;
and (3) name and address of Bank (or Trustee) from which wire transfer was sent,
shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Marie Mazzulli, Investment Accounting Division T-10
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
I-103
<PAGE>
Attention: Marie Mazzulli, Investment Accounting Division
T-10
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, shall be
delivered or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Bond and Corporate Finance Department, T-57
and
John Hancock Bond and Corporate Finance Group
Paper and Forest Products Team
1900 Point West Way, Suite 188
Sacramento, California 95818
Attention: Whit Hill, Assistant Investment Officer
Phone: (916) 922-6554
Fax: (916) 922-4777
and a copy of any notices relating to change in issuer's name, address or
principal place of business and a copy of any legal opinions shall be delivered
or mailed to:
John Hancock Mutual Life Insurance Company
John Hancock Place
200 Clarendon Street
Boston, Massachusetts 02117
Attention: Investment Law Division, T-50
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-2664016
Closing Date: December 30, 1997 for Series A Notes
Commitment Expiration Date: December 31, 1997 for Series A Notes
I-104
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
TEACHERS INSURANCE AND ANNUITY Series A Series B Series C
ASSOCIATION OF AMERICA -------- -------- --------
<S> <C> <C> <C>
730 Third Avenue $9,000,000 -0- -0-
New York, New York 10017-3263
Attention: Angela Brock-Kyle,
Securities Division, Private
Placements
Telephone Number: (212) 916-5724
or (212) 490-9000 (general number)
Facsimile Number: (212) 916-6901
</TABLE>
Payments
All payments on account of the Series A Notes shall be made in immediately
available funds at the opening of business on the due date by electronic funds
transfer through the Automated Clearing House System to:
Chase Manhattan Bank
New York, New York
ABA No. 021-000-021
Account Number: 900-9-000200
For Further Credit to the TIAA Account Number: G07040
Reference: PPN 22844# AH 3; Crown Pacific Limited Partnership;
Maturity Date: February 1, 2012; Interest Rate:
7.76%
per annum; P&I breakdown
Notices
Contemporaneous with the above electronic funds transfer, mail or send by
facsimile written confirmation of each such payment to be addressed as set forth
below including the following information:
I-105
<PAGE>
(1) the full name, private placement number, interest rate, series and maturity
date of the Notes; (2) the allocation of payment between principal, interest,
premium and any special payment; and (3) the name and address of the bank from
which such electronic funds transfer was sent to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, NY 10017
Attention: Securities Accounting Division
Telephone Number: (212) 916-4188
Facsimile Number: (212) 916-6955
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1624203
Closing Date: December 30, 1997
Commitment Expiration Date: December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF NOTES
NAME AND ADDRESS TO BE PURCHASED
OF PURCHASERS
PROVIDENT LIFE AND ACCIDENT INSURANCE Series A Series B Series C
COMPANY -------- --------
<S> <C> <C> <C>
-0- -0- $10,000,000
(1) All payments on account of the
Notes shall be made by wire
transfer of immediately available
funds to:
CUDD & CO.
c/o The Chase Manhattan Bank, N.A.
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
</TABLE>
I-106
<PAGE>
Custodial Account No. G06704
Please reference: Issuer: Crown Pacific Limited Partnership
PPN: 22844# AK 6
Coupon: 7.93%
Maturity: February 1, 2018
Principal=$__________
Interest=$___________
(2) Address all communications with respect to payments and all other
communications to:
Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755-1365
Fax: (423) 755-3351
(3) Tax Identification Number: 13-6022143
Name of Nominee in which Notes are to be issued: (CUDD & CO.)
Closing Date: January 13, 1998
Closing Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
CONNECTICUT GENERAL LIFE INSURANCE Series A Series B Series C
COMPANY -------- --------
<S> <C> <C> <C>
c/o CIGNA Investments, Inc. -0- $6,200,000 -0-
900 Cottage Grove Road (Two Notes: $3,200,000 and $3,000,000)
Hartford, Connecticut 06152-2307
Attention: Private Securities
Division - S-307
Fax: 860-726-7203
</TABLE>
I-107
<PAGE>
Payments
All payments on or in respect of the Notes to be by Federal Funds Wire Transfer
to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=Crown Pacific Limited Partnership, Series B Senior Notes, 7.76%, due
February 1, 2013, PPN 22844# AJ 9, (as among principal, premium and
interest of the payment being made); contact name and phone.
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for All Other Notices:
I-108
<PAGE>
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
Taxpayer I.D. Number for Connecticut General Life Insurance Company: 06-0303370
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
Series A Series B Series C
-------- --------
<S> <C> <C> <C>
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, on behalf
of one or more separate -0- $13,800,000 -0-
accounts
c/o CIGNA Investments, Inc. (Three Notes: $6,000,000,
900 Cottage Grove Road $4,212,000, and $3,588,000)
Hartford, Connecticut 06152-2307
Attention: Private Securities
Division - S-307
Fax: 860-726-7203
</TABLE>
Payments
All payments on or in respect of the notes to be by Federal Funds Wire Transfer
to:
I-109
<PAGE>
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=Crown Pacific Limited Partnership, Series B Senior Notes, 7.76%, due
February 1, 2013, PPN 22844# AJ 9, (as among principal, premium and
interest of the payment being made); contact name and phone.
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities - S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
I-110
<PAGE>
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
Taxpayer I.D. Number for Connecticut General Life Insurance Company, on behalf
of one or more separate accounts: 06-0303370
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
GENERAL ELECTRIC CAPITAL ASSURANCE Series A Series B Series C
COMPANY -------- -------- --------
<S> <C> <C> <C>
c/o GE Financial Assurance -0- $15,000,000 -0-
Two Union Square, 601 Union Street
Seattle, Washington 98101
Attn: Investment Dept., S. De Motto
Telephone No.: (206) 516-4614
Fax No.: (206) 516-4998
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Crown
Pacific Limited Partnership, 7.76% Senior Notes, Series B, due February 1, 2013,
PPN 22844# AJ 9, as the case may be, principal or interest") to:
Bankers Trust Company
16 Wall Street
I-111
<PAGE>
New York, New York 10015
ABA 021001033
Attention: 99-911-145
Account Number 097817
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed to:
General Electric Capital Assurance Company
c/o GE Financial Assurance
Two Union Square, 601 Union Street
Seattle, Washington 98101
Attn: Investment Accounting, 14th Floor
Telephone No.: (206) 516-2871
Fax No.: (206) 516-4740
Name of Nominee in which Notes are to be issued: SALKELD & CO.
Taxpayer I.D. Number: 91-6027719
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
Series A Series B Series C
-------- -------- --------
<S> <C> <C> <C>
THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
400 Robert Street North -0- $8,000,000 -0-
St. Paul, Minnesota 55101
Attention: MIMLIC Asset Management
Company
</TABLE>
Payments
I-112
<PAGE>
All payments on or in respect of the notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Crown
Pacific Limited Partnership, 7.76% Senior Notes, Series B, due February 1, 2013,
PPN 22844# AJ 9, as the case may be, principal or interest") to:
First Bank National Association
Minneapolis, Minnesota
ABA #091000022
BNF The Minnesota Mutual Life Insurance Company
Account number 1801-10-00600-4
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0417830
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
Series A Series B Series C
-------- -------- --------
<S> <C> <C> <C>
MUTUAL TRUST LIFE INSURANCE
COMPANY
c/o MIMLIC Asset Management Company -0- $1,000,000 -0-
400 Robert Street North
St. Paul, Minnesota 55101
Attn: Client Administrator
</TABLE>
Payments
I-113
<PAGE>
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Crown
Pacific Limited Partnership, 7.76% Senior Notes, Series B, due February 1, 2013,
PPN 22844# AJ 9, as the case may be, principal or interest") to:
The Northern Chgo/Trust
ABA #071-000-152
For credit to: Account Number: 5186041000
For further credit to: Mutual Trust Life Insurance Company
Account Number: 26-00621
Attn: MBS Department
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: ELL & Co.
Taxpayer I.D. Number: 36-1516780
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
NAME AND ADDRESS NOTES TO BE PURCHASED
OF PURCHASERS
Series A Series B Series C
-------- -------- --------
<S> <C> <C> <C>
OHIO NATIONAL LIFE
ASSURANCE CORPORATION
P. O. BOX 237 -0- $5,000,000 -0-
Cincinnati, Ohio 45201
Attention: Investment Department
Facsimile: (513) 794-4506
</TABLE>
I-114
<PAGE>
Overnight Delivery Address:
[One Financial Way
Cincinnati, Ohio 45242]
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Crown
Pacific Limited Partnership, 7.76% Senior Notes, Series B, due February 1, 2013,
PPN 22844# AJ 9, as the case may be, principal or interest") to:
Star Bank, N.A. (ABA #042-0000-13)
Fifth and Walnut Streets
Cincinnati, Ohio 45202
for credit to: Ohio National Life Assurance Corporation
Account Number 865-215-8
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 31-0962495
Closing Date: January 13, 1998
Commitment Expiration Date: January 30, 1998
I-115
<PAGE>
INVESTMENTS
Following the closing of the transactions contemplated by the Agreement, the
Company will have the following Investments:
1. Purchase money promissory note executed by J.S. & P.H. Bewick, with an
outstanding principal balance of approximately $49,444.53 as of November 30,
1997.
2. Purchase money promissory note executed by M. & C. Ruland, with an
outstanding principal balance of approximately $2,109.00 as of November 30,
1997.
SCHEDULE II
(to Note Purchase Agreement)
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
7.76% SENIOR NOTE, SERIES A, DUE FEBRUARY 1, 2012
PPN: 22844# AH 3
NO. R-A- ____________, 19___
$
CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware Limited partnership (the
"COMPANY"), for value received, hereby promises to pay to
or registered assigns
on the first day of February, 2012
the principal amount of
DOLLARS
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.76% per annum from the date hereof until maturity, payable
semiannually on the first day of February and August in each year commencing
February 1, 1998, and at maturity. The Company agrees to pay interest (computed
on the same basis) on overdue principal (including any overdue optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate (as
defined in the Note Purchase Agreement referred to below) after the date due,
whether by acceleration or otherwise, until paid. The principal hereof,
premium, if any, and interest hereon are payable at the principal office of the
Company in Portland, Oregon in coin or currency of the United States of America
which at the time of payment shall be legal tender for the payment of public and
private debts.
EXHIBIT A-1
(to Note Purchase Agreement)
<PAGE>
This Note is one of the 7.76% Senior Notes, Series A, due February 1, 2012
of the Company in the aggregate principal amount of $15,000,000, which along
with the 7.76% Senior Notes, Series B, due February 1, 2013 of the Company in
the aggregate principal amount of $55,000,000 and the 7.93% Senior Notes,
Series C, due February 1, 2018 of the Company in the aggregate principal amount
of $25,000,000 (such Series A Notes, Series B Notes and Series C Notes of the
Company being herein referred to as the "NOTES"), are issued or to be issued
under and pursuant to the terms and provisions of the Note Purchase Agreement
dated as of December 15, 1997 (the "NOTE PURCHASE AGREEMENT"), entered into by
the Company with the original purchasers therein referred to and this Note and
the holder hereof are entitled equally and ratably with the holders of all other
Notes outstanding under the Note Purchase Agreement to all the benefits provided
for thereby or referred to therein, to which Note Purchase Agreement reference
is hereby made for the statement thereof.
This Note and the other Notes outstanding under the Note Purchase Agreement
may be declared or otherwise become due prior to their expressed maturity dates,
all in the events, on the terms and in the manner and amounts as provided in the
Note Purchase Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Purchase Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
A-1-118
<PAGE>
Any holder of this Note shall, by its acceptance of this Note, be deemed to
have made the representations to the Company regarding the purchase of this Note
pursuant to Section 2.3 of the Note Purchase Agreement; PROVIDED, HOWEVER, that
with respect to the representation made in the third sentence of Section 2.3,
such holder will not be deemed to have chosen the options set forth in Section
2.3(b), (c), (d) or (f) of the Note Purchase Agreement unless such holder shall
have made the disclosures referred to therein at least ten Business Days (as
defined in the Note Purchase Agreement) prior to its acceptance of this Note and
shall have received prior to its acceptance of this Note written confirmation
from the Company to the effect set forth in the first sentence of Paragraph 20
of Exhibit B-1 to the Note Purchase Agreement.
A-1-119
<PAGE>
This Note and the Note Purchase Agreement are governed by the laws of the
State of New York.
CROWN PACIFIC LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP,
a Delaware limited partnership
Its General Partner
By: HS Corp. of Oregon, an Oregon corporation
Its General Partner
By
-------------------------------------------
Its
A-1-120
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
7.76% SENIOR NOTE, SERIES B, DUE FEBRUARY 1, 2013
PPN: 22844# AJ 9
NO. R-B- ____________, 19___
$
CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership (the
"COMPANY"), for value received, hereby promises to pay to
or registered assigns
on the first day of February, 2013
the principal amount of
DOLLARS
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.76% per annum from the date hereof until maturity, payable
semiannually on the first day of February and August in each year commencing
February 1, 1998, and at maturity. The Company agrees to pay interest (computed
on the same basis) on overdue principal (including any overdue optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate (as
defined in the Note Purchase Agreement referred to below) after the date due,
whether by acceleration or otherwise, until paid. The principal hereof,
premium, if any, and interest hereon are payable at the principal office of the
Company in Portland, Oregon in coin or currency of the United States of America
which at the time of payment shall be legal tender for the payment of public and
private debts.
EXHIBIT A-2
(to Note Purchase Agreement)
<PAGE>
This Note is one of the 7.76% Senior Notes, Series B, due February 1, 2013
of the Company in the aggregate principal amount of $55,000,000, which along
with the 7.76% Senior Notes, Series A, due February 1, 2012 of the Company in
the aggregate principal amount of $15,000,000 and the 7.93% Senior Notes,
Series C, due February 1, 2018 of the Company in the aggregate principal amount
of $25,000,000 (such Series A Notes, Series B Notes and Series C Notes of the
Company being herein referred to as the "NOTES"), are issued or to be issued
under and pursuant to the terms and provisions of the Note Purchase Agreement
dated as of December 15, 1997 (the "NOTE PURCHASE AGREEMENT"), entered into by
the Company with the original purchasers therein referred to and this Note and
the holder hereof are entitled equally and ratably with the holders of all other
Notes outstanding under the Note Purchase Agreement to all the benefits provided
for thereby or referred to therein, to which Note Purchase Agreement reference
is hereby made for the statement thereof.
This Note and the other Notes outstanding under the Note Purchase Agreement
may be declared or otherwise become due prior to their expressed maturity dates
and certain prepayments are required to be made thereon by the Company, all in
the events, on the terms and in the manner and amounts as provided in the Note
Purchase Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Purchase Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
A-2-122
<PAGE>
Any holder of this Note shall, by its acceptance of this Note, be deemed to
have made the representations to the Company regarding the purchase of this Note
pursuant to Section 2.3 of the Note Purchase Agreement; PROVIDED, HOWEVER, that
with respect to the representation made in the third sentence of Section 2.3,
such holder will not be deemed to have chosen the options set forth in Section
2.3(b), (c), (d) or (f) of the Note Purchase Agreement unless such holder shall
have made the disclosures referred to therein at least ten Business Days (as
defined in the Note Purchase Agreement) prior to its acceptance of this Note and
shall have received prior to its acceptance of this Note written confirmation
from the Company to the effect set forth in the first sentence of Paragraph 20
of Exhibit B-1 to the Note Purchase Agreement.
A-2-123
<PAGE>
This Note and the Note Purchase Agreement are governed by the laws of the
State of New York.
CROWN PACIFIC LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP,
a Delaware limited partnership
Its General Partner
By: HS Corp. of Oregon, an Oregon corporation
Its General Partner
By
-------------------------------------------
Its
A-2-124
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
7.93% SENIOR NOTE, SERIES C, DUE FEBRUARY 1, 2018
PPN: 22844# AK 6
NO. R-C- ____________, 19___
$
CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership (the
"COMPANY"), for value received, hereby promises to pay to
or registered assigns
on the first day of February, 2018
the principal amount of
DOLLARS
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 7.93% per annum from the date hereof until maturity, payable
semiannually on the first day of February and August in each year commencing
February 1, 1998, and at maturity. The Company agrees to pay interest (computed
on the same basis) on overdue principal (including any overdue optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate (as
defined in the Note Purchase Agreement referred to below) after the date due,
whether by acceleration or otherwise, until paid. The principal hereof,
premium, if any, and interest hereon are payable at the principal office of the
Company in Portland, Oregon in coin or currency of the United States of America
which at the time of payment shall be legal tender for the payment of public and
private debts.
This Note is one of the 7.93% Senior Notes, Series C, due February 1, 2018
of the Company in the aggregate principal amount
EXHIBIT A-3
(to Note Purchase Agreement)
<PAGE>
of $25,000,000, which along with the 7.76% Senior Notes, Series A, due
February 1, 2012 of the Company in the aggregate principal amount of $15,000,000
and the 7.76% Senior Notes, Series B, due February 1, 2013 of the Company in the
aggregate principal amount of $55,000,000 (such Series A Notes, Series B Notes
and Series C Notes of the Company being herein referred to as the "NOTES"), are
issued or to be issued under and pursuant to the terms and provisions of the
Note Purchase Agreement dated as of December 15, 1997 (the "NOTE PURCHASE
AGREEMENT"), entered into by the Company with the original purchasers therein
referred to and this Note and the holder hereof are entitled equally and ratably
with the holders of all other Notes outstanding under the Note Purchase
Agreement to all the benefits provided for thereby or referred to therein, to
which Note Purchase Agreement reference is hereby made for the statement
thereof.
This Note and the other Notes outstanding under the Note Purchase Agreement
may be declared or otherwise become due prior to their expressed maturity dates,
all in the events, on the terms and in the manner and amounts as provided in the
Note Purchase Agreement.
The Notes are not subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Purchase Agreement.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
Any holder of this Note shall, by its acceptance of this Note, be deemed to
have made the representations to the Company regarding the purchase of this Note
pursuant to Section 2.3 of the Note
A-3-126
<PAGE>
Purchase Agreement; PROVIDED, HOWEVER, that with respect to the representation
made in the third sentence of Section 2.3, such holder will not be deemed to
have chosen the options set forth in Section 2.3(b), (c), (d) or (f) of the Note
Purchase Agreement unless such holder shall have made the disclosures referred
to therein at least ten Business Days (as defined in the Note Purchase
Agreement) prior to its acceptance of this Note and shall have received prior to
its acceptance of this Note written confirmation from the Company to the effect
set forth in the first sentence of Paragraph 20 of Exhibit B-1 to the Note
Purchase Agreement.
A-3-127
<PAGE>
This Note and the Note Purchase Agreement are governed by the laws of the
State of New York.
CROWN PACIFIC LIMITED
PARTNERSHIP, a Delaware
limited partnership
By: CROWN PACIFIC
MANAGEMENT LIMITED PARTNERSHIP,
a Delaware limited partnership
Its General Partner
By: HS Corp. of Oregon, an Oregon
corporation Its General Partner
By
---------------------------------
Its
A-3-128
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
CLOSING CERTIFICATE
To the Purchasers named
in Schedule I attached hereto
Gentlemen:
This certificate is delivered to you in compliance with the requirements of
the Note Purchase Agreement dated as of December 15, 1997 (the "AGREEMENT")
entered into by the undersigned, Crown Pacific Limited Partnership, a Delaware
limited partnership (the "COMPANY"), with the Purchasers named therein, and as
an inducement to and as part of the consideration for your several purchases on
this date of the Senior Notes (the "NOTES") of the Company to be purchased by
you on the date hereof pursuant to the Agreement. The capitalized terms used
herein shall have the same meanings as in the Agreement.
The Company hereby represents and warrants to you on the date hereof as
follows:
(1) SUBSIDIARIES. The Company has no Subsidiaries.
(2) ORGANIZATION AND AUTHORITY. (a) The Company:
(i) is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) has all requisite power and authority and all necessary
licenses and permits to own and operate its Properties and to carry on
its business as described in the Private Placement Memorandum;
(iii) is duly licensed or qualified and is in good standing as a
foreign partnership (to the extent qualification as a foreign
partnership is permitted by
EXHIBIT B-1
(to Note Purchase Agreement)
<PAGE>
statute) in each jurisdiction wherein the failure to be so qualified
would have a material adverse effect on the business, operations or
financial condition of the Company; and
(iv) does not believe that the inability of the Company to
qualify as a foreign partnership in any state in which such
qualification is not permitted by law will have a material adverse
effect on the business, operations or financial condition of the
Company.
(b) Annex A attached hereto states the name of each Person holding
either a General Partnership Interest or Limited Partnership Interest in
the Company.
(3) REPRESENTATIONS AND WARRANTIES OF MANAGING GENERAL PARTNER. The
representations and warranties of the Managing General Partner given to you in
its Certificate of even date herewith are true and correct.
(4) BUSINESS AND PROPERTY. The Private Placement Memorandum sets forth a
substantially accurate and complete description of the business conducted and
proposed to be conducted by the Company and the principal Properties of the
Company.
(5) FINANCIAL STATEMENTS. (a) The unaudited pro forma combined balance
sheet of the Partnership as of September 30, 1994 and the unaudited pro forma
combined statement of operations of the Partnership for the year ended
December 31, 1993 and the nine-month period ended September 30, 1994 attached
hereto as Annex B have been prepared in accordance with GAAP, are correct and
complete and present fairly the pro forma financial position of the Partnership
as of September 30, 1994 and the pro forma results of its operations for the
year ended December 31, 1993 and the nine-month period ended September 30, 1994.
The combined balance sheets of the predecessors of the Partnership as of
December 31, 1992 and December 31, 1993 and the combined statements of
operations and changes in partners' and
B-1-130
<PAGE>
shareholders' equity and in cash flows for the fiscal years ended on
December 31, 1991, 1992 and 1993, and the combined balance sheet of the
predecessors of the Partnership as of September 30, 1994 and the combined
statement of operations and changes in partners' and shareholders' equity and in
cash flows for the nine-month period ended on said date, all as attached hereto
as Annex B, accompanied by a report thereon containing an opinion unqualified as
to scope imposed by the Partnership or its predecessors and otherwise without
qualification except as therein noted, by Price Waterhouse LLP, have been
prepared in accordance with GAAP consistently applied except as therein noted,
are correct and complete and present fairly the financial position of the
predecessors of the Partnership as of such dates and the results of their
operations and cash flows for such periods. The consolidated balance sheets of
CPLP as of December 31 in each of the years 1991 to 1993, both inclusive, and CP
Inland as of December 31, 1993, and the statements of operations, changes in
partners' equity and cash flows for the fiscal years ended on said dates, each
as attached hereto as Annex B and each accompanied by a report thereon
containing an opinion unqualified as to scope limitations imposed by the
Predecessor Partnerships and otherwise without qualification except as therein
noted, by Price Waterhouse LLP, have been prepared in accordance with GAAP
consistently applied except as therein noted, are correct and complete and
present fairly the financial position of the Predecessor Partnerships and their
respective subsidiaries as of such dates and the results of their operations and
cash flows for such periods. The statement of operations and changes in
partners' equity and in cash flows for each of DAW Forest Products Company,
L.P., a Delaware limited partnership ("DAW"), and W-I Forest Products Limited
Partnership, a Washington limited partnership ("W-I"), for the fiscal year ended
on December 31, 1992 and for the period from January 1, 1993 to October 28,
1993, each as attached hereto as Annex B and each accompanied by a report
thereon containing an opinion unqualified as to scope limitations imposed by the
Company, its predecessors or DAW or W-I, respectively, and otherwise without
qualification except as therein noted, by Price Waterhouse LLP, have, to the
knowledge of the Company, been prepared in accordance with GAAP consistently
applied except as
B-1-131
<PAGE>
therein noted, to the knowledge of the Company (x) are correct and complete and
(y) present fairly the financial position of DAW and W-I, respectively, as of
such dates and the results of their operations and cash flows for such periods.
The combined balance sheets of the Company as of December 31 in each of the
years 1994 and 1995 and the balance sheet of the Company as of December 31, 1996
and the statements of income (or of operations, as the case may be), of changes
in partners' and shareholders' equity and of cash flows for the fiscal years
ended on said dates (combined in the case of 1994 and 1995), each attached
hereto as Annex B and each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Price Waterhouse LLP, have been
prepared in accordance with GAAP consistently applied except as therein noted,
are correct and complete and present fairly the financial position of the
Company and its affiliates as of such dates and the results of their combined
operations and combined cash flows for such periods. The unaudited balance
sheet of the Company as of September 30, 1997, and the statement of income, of
cash flows and of changes in partners' capital for the nine-month period ended
on said date, attached hereto as Annex B, have been prepared in accordance with
GAAP consistently applied except as therein noted, are correct and complete and
present fairly the financial position of the Company as of such date and the
results of its operations and cash flows for such period, subject only for
year-end audit adjustments in the ordinary course.
(b) Since December 31, 1996, there has been no change in the condition,
financial or otherwise, of the Company as shown on the balance sheet of the
Company as of such date, except changes in the ordinary course of business, none
of which individually or in the aggregate has been materially adverse.
(6) INDEBTEDNESS. Annex C attached hereto correctly describes all Funded
Debt (other than Capitalized Rentals), Current Debt and Capitalized Rentals of
the Company outstanding as of the first Closing Date.
B-1-132
<PAGE>
(7) FULL DISCLOSURE. The Private Placement Memorandum, the financial
statements referred to in paragraph 5, the Agreement and all other written
statements furnished by or on behalf of the Company to you in connection with
the negotiation of the sale of the Notes, do not, taken as a whole, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading. There is no fact
peculiar to the Company which the Company has not disclosed to you in writing
which materially affects adversely nor, so far as the Company can now foresee,
will materially affect adversely the business, Properties, profits or financial
condition of the Company or the ability of the Company to perform its
obligations under the Agreement or the sale and issuance of the Notes.
(8) PENDING LITIGATION. There are no proceedings pending, or to the
knowledge of the Company threatened, against or affecting the Company or the
Managing General Partner in any court or before any governmental authority or
arbitration board or tribunal which if adversely determined would materially and
adversely affect the business, profits or financial condition of the Company or
the ability of the Company to perform the Agreement or to issue and sell the
Notes. The Company is not in default with respect to any order of any court,
governmental authority or arbitration board or tribunal.
(9) TITLE TO PROPERTIES. The Company has good and marketable title in fee
simple (or its equivalent under applicable law) to all material parcels of real
property it purports to own and has good and marketable title to all the other
Property it purports to own subject to no Liens other than Liens permitted by
the Agreement.
(10) SALE IS LEGAL AND AUTHORIZED. The sale of the Notes and compliance by
the Company with all of the provisions of the Agreement and of the Notes:
(a) are within the partnership powers of the Company;
B-1-133
<PAGE>
(b) will not result in the violation of any provisions of any law or
any order of any court or governmental authority or agency and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of
any Lien upon any Property of the Company under the provisions of, any
agreement or any indenture or other instrument to which the Company is a
party or by which it may be bound; and
the Agreement and the Notes delivered to the Purchasers on the date hereof have
been duly authorized by proper action on the part of the Company, executed and
delivered by the Company and constitute the legal, valid and binding
obligations, contracts and agreements of the Company enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency, fraudulent
conveyance, and similar laws affecting creditors' rights generally, and to
general principles of equity (regardless of whether the application of such
principles is considered in equity or at law).
(11) NO DEFAULTS. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness, is not in violation in any respect of any terms of
the Partnership Agreement and is not in default, and no event of default has
occurred, under any instrument or instruments or agreements (i) under and
subject to which any Current Debt or Funded Debt has been issued, or (ii)
pursuant to which the Company has any material obligations; and no event has
occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
(12) NO MATERIALLY ADVERSE CONTRACTS. The Company is not a party to, or
bound or affected by, any contract or agreement or subject to any judgment,
order, writ, injunction, rule or regulation or decree or other action of any
court or other governmental authority or agency, or the award of any arbitrator,
or any charter or contractual restriction that materially
B-1-134
<PAGE>
adversely affects or in the future may (so far as the Company can now reasonably
foresee based on facts known to the Company) materially adversely affect the
business, Properties, profits, or financial condition of the Company.
(13) GOVERNMENTAL CONSENT. Neither the nature of the Company or of any of
its business or Properties, nor any relationship between the Company and any
other Person, nor any circumstance in connection with the offer, issue, sale or
delivery of the Notes or the execution and delivery of the Agreement is such as
to require a consent, approval or authorization of, or filing, registration or
qualification with, any regulatory body, state, Federal or local on the part of
the Company as a condition to the execution and delivery of the Agreement or the
offer, issue, sale or delivery of the Notes.
(14) USE OF PROCEEDS. The net proceeds from the sale of the Notes will be
used by the Company to repay indebtedness incurred in connection with
acquisitions of timberlands and other Property and expenses in consummating the
transactions contemplated by the Agreement. None of the transactions
contemplated in the Agreement (including, without limitation thereof, the use of
the proceeds from the sale of the Notes) will violate or result in a violation
of Section 7 of the Securities Exchange Act of 1934, as amended, or any
regulations issued pursuant thereto including, without limitation, Regulation G,
T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter II. The Company does not own or intend to carry or purchase any "MARGIN
STOCK" within the meaning of said Regulation G. None of the proceeds from the
sale of the Notes will be used to purchase, or refinance any borrowing, the
proceeds of which were used to purchase any "SECURITY" within the meaning of the
Securities Exchange Act of 1934, as amended.
(15) PRIVATE OFFERING. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will approach
or negotiate in respect of the Notes or any similar Security with
B-1-135
<PAGE>
any Person other than you and not more than 30 other institutional investors,
each of whom was offered a portion of the Notes at private sale for investment.
Neither the Company, directly or indirectly, nor any agent on its behalf has
offered or will offer the Notes or any similar Security or has solicited or will
solicit an offer to acquire the Notes or any similar Security from any Person so
as to bring the issuance and sale of the Notes within the provisions of Section
5 of the Securities Act.
(16) TAXES. All tax returns required to be filed by the Company or the
Predecessor Partnerships in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or the
Predecessor Partnerships or upon any of their respective Properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. The Company does not know of any material proposed additional tax
assessment against it or the Predecessor Partnerships for which adequate
provision has not been made on its accounts and no material controversy in
respect of additional income taxes due is pending or to the knowledge of the
Company threatened. The provisions for taxes on the books of the Company are
adequate for all open years, and for its current fiscal period.
(17) COMPLIANCE WITH LAW. The Company:
(a) is not, to the knowledge of the Company after due inquiry, in
violation of any laws, ordinances, governmental rules or regulations to
which it is subject, or
(b) has not failed to obtain any license, permit, franchise or other
governmental authorization (and in the case of any temporary permits,
application for permanent permits have been made and are pending) necessary
to the ownership or operation of its Property or to the conduct of its
business,
B-1-136
<PAGE>
which violation or failure to obtain would materially adversely affect the
business, profits, Properties or financial condition of the Company or the
issuance and sale of the Notes.
(18) RESTRICTIONS ON COMPANY. The Company is not a party to or bound by
any security, contract, indenture, agreement, instrument, order of any court or
governmental agency, law or rule or regulation which restricts the right or
ability of the Company to incur Indebtedness, other than the Agreement and the
Credit Agreements and the Note Purchase Agreement dated as of December 1, 1994,
the Note Purchase Agreement dated as of March 1, 1995, the Note Purchase
Agreement dated as of August 1, 1996 in each case between the Company and the
Note Purchasers named therein, the $55,000,000 Purchase Price Note issued by the
Company to Trillium Corporation on October 15, 1997, the $52,500,000 Purchase
Price Note issued by the Company to Trillium Corporation on October 15, 1997,
the Lease Agreement dated as of December 19, 1997 between SELCO Service
Corporation, as lessor, and the Company, as lessee and construction agent,
relating to the Port Angeles Sawmill Complex, and the Lease Agreement dated as
of December 19, 1997 between SELCO Service Corporation, as lessor, and the
Company, as lessee and construction agent, relating to the Bonners Ferry Circle
Mill.
(19) PATENTS AND TRADEMARKS. The Company owns or possesses all the
patents, trademarks, trade names, service marks, copyrights, licenses and rights
with respect to the foregoing necessary for the present and planned future
conduct of its business, without any known conflict with the rights of others.
(20) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. The consummation of
the transactions provided for in the Agreement and compliance by the Company
with the provisions thereof and the Notes issued thereunder will not involve any
prohibited transaction within the meaning of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. The representation of the Company in
the preceding sentence is made in reliance upon and subject to the accuracy of
the representation of each Purchaser in Section 2.3 of the Agreement as to the
source of funds to be used by such Purchaser to pay the purchase price of the
Notes
B-1-137
<PAGE>
to be purchased by such Purchaser. Each Plan complies in all material respects
with all applicable statutes and governmental rules and regulations, and (a) no
Reportable Event has occurred and is continuing with respect to any Plan, (b)
neither the Company nor any ERISA Affiliate has withdrawn from any Multiemployer
Plan or instituted steps to do so, and (c) no steps have been instituted to
terminate any Plan. No condition exists or event or transaction has occurred in
connection with any Plan which could result in the incurrence by the Company or
any ERISA Affiliate of any material liability, fine or penalty. No Plan
maintained by the Company or any ERISA Affiliate, nor any trusts created
thereunder, have incurred any "ACCUMULATED FUNDING DEFICIENCY" as defined in
Section 302 of ERISA nor does the present value of all benefits vested under all
Plans exceed, as of the last annual valuation date, the value of the assets of
the Plans allocable to such vested benefits. Neither the Company nor any ERISA
Affiliate has any contingent liability with respect to any post-retirement
"WELFARE BENEFIT PLAN" (as such term is defined in ERISA) that could reasonably
be expected to have a material adverse affect on the business, profits or
financial condition of the Company.
(21) ENVIRONMENTAL AND NATURAL RESOURCE MATTERS. Except as disclosed in
the reports listed on Annex D attached hereto, none of which disclosures could
materially adversely affect the business, profits, Properties or financial
condition of the Company, to the knowledge of the Company after due inquiry:
(a) neither the Company nor its Properties are in material violation
of any applicable Environmental and Natural Resource Law;
(b) the Company has obtained all material Governmental Approvals
required for its current operations and its Properties by any applicable
Environmental and Natural Resource Law;
(c) there is no and has never been a material Release or threatened
material Release or disposal of any Hazardous Material at the Properties of
the Company; to the knowledge
B-1-138
<PAGE>
of the Company, its Properties are not adversely affected by any Release or
threatened Release originating or emanating from any other Property;
(d) the Properties of the Company do not contain and have not
contained any: (i) underground storage tank, (ii) material amounts of
asbestos containing building material, (iii) any landfills or dumps, (iv)
hazardous waste treatment, storage or disposal facility as defined pursuant
to RCRA or any comparable state law, or (v) site on or nominated for the
National Priority List promulgated pursuant to CERCLA or any state priority
list promulgated pursuant to any comparable state law;
(e) the Company is not subject to any material liability for response
or corrective action, natural resource damage or other harm pursuant to
CERCLA, RCRA or any comparable state law; the Company is not subject to,
has no notice or knowledge of and is not required to give any notice of any
Environmental and Natural Resource Claim arising from the Company, its
operations, its Properties or any other property previously owned or
operated by the Company or its predecessors (including without limitation
the Predecessor Partnerships, but excluding predecessors of the Company
only with respect to title to such property); there are no conditions or
occurrences at the Properties of the Company which could reasonably form
the basis for an Environmental and Natural Resource Claim against the
Company or its Properties;
(f) the Properties of the Company are not subject to, and the Company
has no knowledge of any imminent, material restriction on its ownership,
occupancy, use, productivity or transferability (i) in connection with any
Release, threatened Release or disposal of a Hazardous Material, or
Environmental and Natural Resource Law or (ii) as a consequence of any
Harvest/Yield Restriction;
(g) in connection with any acquisition of real properties by the
Company or its predecessors, the Company
B-1-139
<PAGE>
or its predecessors (including without limitation the Predecessor
Partnerships, but excluding predecessors of the Company only with respect
to title to such property) conducted due and diligent inquiry of any
environmental liability of, compliance with any applicable Environmental
and Natural Resource Law of and the environmental condition of such
acquired Properties, which due and diligent inquiry (i) constituted at the
time of such acquisition all appropriate inquiry into the previous
ownership and uses of such Property consistent with good commercial or
customary practice in an effort to minimize liability, and (ii) constituted
at the time of such acquisition the due diligence a reasonable and prudent
purchaser would have conducted as to environmental, health and safety
matters, when acquiring similar Properties.
(22) The obligations of the Company under the Agreement and the Notes rank
PARI PASSU in priority of payment with the Indebtedness incurred or to be
incurred pursuant to the Working Capital Facility, the Acquisition Facility, the
1994 Notes, the 1995 Notes and the 1996 Notes.
Dated:
CROWN PACIFIC LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP,
a Delaware limited partnership
Its General Partner
By: HS Corp. of Oregon, an Oregon corporation
B-1-140
<PAGE>
Its General Partner
By
------------------------------------------
Its
B-1-141
<PAGE>
SCHEDULE I
NOTE PURCHASERS (1)
- ------------------------
(1) The Purchasers purchasing Notes on such Closing Date
SCHEDULE I
(to Company Closing Certificate)
<PAGE>
GENERAL PARTNER AND LIMITED PARTNER OF THE COMPANY
GENERAL PARTNER:
Crown Pacific Management Limited Partnership, a Delaware limited
partnership, which owns a 1.0101% Equity Interest in the Company
LIMITED PARTNER:
Crown Pacific Partners, L.P., a Delaware limited partnership, which owns
directly or indirectly a 98.9899% Equity Interest in the Company
ANNEX A
(to Company Closing Certificate)
<PAGE>
FINANCIAL STATEMENTS
OF THE COMPANY AND ITS PREDECESSORS
[Financial Statements delivered separately and as a
Part of the Company Closing Certificate delivered on each Closing Date]
ANNEX B
(to Company Closing Certificate)
<PAGE>
CURRENT DEBT AND FUNDED DEBT AND CAPITALIZED RENTALS
OF THE COMPANY
PART I. The Current Debt and Funded Debt (other than Capitalized Rentals)
and Capitalized Rentals of the Company as of the first Closing Date but
immediately prior to the funding of the Notes is as follows:
<TABLE>
<CAPTION>
Item Principal Amount ($000)
---- -----------------------
<S> <C> <C>
CURRENT DEBT: Purchase Price Note
payable to Trillium
Corporation $ 55,000
FUNDED DEBT
(other than Capitalized
Rentals):
Working Capital $ 16,500
Facility $275,000
9.78% Senior Notes $ 25,000
9.60% Senior Notes $ 6,490
8.01% Senior Notes $ 50,000
8.16% Senior Notes $ 19,510
8.21% Senior Notes $ 15,000
8.25% Senior Notes $ 59,000
Acquisition Facility
Purchase Price Note $ 52,500
payable
to Trillium
Corporation
</TABLE>
CAPITALIZED RENTALS:
CAPITALIZED
LEASE DATE PARTY AMOUNT ($000)
----- ---- ----- -------------
ANNEX C
(to Company Closing Certificate)
NONE
C-146
<PAGE>
PART II. The Current Debt and Funded Debt (other than Capitalized Rentals)
and Capitalized Rentals of the Company (including any Current Debt and Funded
Debt and Capitalized Rentals to which the Properties distributed to the Company
on the first Closing Date are subject) as of the first Closing Date but
immediately after the funding of the Notes (2) is as follows:
<TABLE>
<CAPTION>
Item Principal Amount ($000)
---- -----------------------
<S> <C> <C>
CURRENT DEBT: Purchase Price Note
payable to Trillium
Corporation $ 55,000(3)
FUNDED DEBT
(other than Capitalized
Rentals):
Working capital $ 16,500
Facility $275,000
9.78% Senior Notes $ 25,000
9.60% Senior Notes $ 6,490
8.01% Senior Notes $ 50,000
8.16% Senior Notes $ 19,510
8.21% Senior Notes $ 15,000
8.25% Senior Notes $ 59,000
Acquisition Facility
Purchase Price Note $ 52,500
payable
to Trillium
Corporation
</TABLE>
CAPITALIZED RENTALS:
- ---------------------
(2) Funded Debt and Current Debt which is to be incurred on the Closing Date
and which is specifically permitted by Section 4.6(a)(1) and (3) is not
reflected in this Part II.
(3) To be refinanced with the proceeds of the Series B and C Notes.
C-147
<PAGE>
CAPITALIZED RENTALS:
CAPITALIZED
LEASE DATE PARTY AMOUNT ($000)
----- ---- ----- -------------
NONE
EXISTING LIENS:
NONE
C-148
<PAGE>
ENVIRONMENTAL REPORTS
ANNEX D
(to Company Closing Certificate)
<PAGE>
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
CLOSING CERTIFICATE
To the Purchasers named
in Schedule I attached hereto
Ladies and Gentlemen:
This certificate is delivered to you in compliance with the requirements of
the Note Purchase Agreement dated as of December 15, 1997 (the "AGREEMENT")
entered into by Crown Pacific Limited Partnership, a Delaware limited
partnership (the "COMPANY"), with the Purchasers named therein, and as an
inducement to and as part of the consideration for your several purchases on
this date of the Senior Notes (the "NOTES") of the Company to be purchased by
you on the date hereof pursuant to the Agreement. The capitalized terms used
herein shall have the same meanings as in the Agreement.
Crown Pacific Management Limited Partnership, a Delaware limited
partnership and the managing general partner of the Company (the "MANAGING
GENERAL PARTNER") hereby represents and warrants to you on the date hereof as
follows:
(1) SUBSIDIARIES. The Managing General Partner has no subsidiaries.
(2) ORGANIZATION AND AUTHORITY. (a) The Managing Partner:
(i) is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) has all requisite power and authority and all necessary
licenses and permits to own and operate its Properties and to carry on
its present business as now conducted and as presently proposed to be
conducted;
EXHIBIT B-2
(to Note Purchase Agreement)
<PAGE>
(iii) is duly licensed or qualified and is in good standing as a
foreign partnership (to the extent qualification as a foreign
partnership is permitted by statute) in each jurisdiction wherein the
failure to be so qualified would have a material adverse effect on the
Properties, business, prospects, profits or financial condition of the
Managing General Partner; and
(iv) has the power and authority under the Partnership Agreement
of the Company to execute and deliver on behalf of the Company the
Agreement, the Notes and the other certificates and agreements to be
delivered by the Company in connection with the transactions
contemplated by the Agreement.
(b) Annex A attached hereto states the name of each Person holding
either a General Partnership Interest or a Limited Partnership Interest in
the Managing General Partner.
(3) NO CONFLICTS. The execution and delivery by the Managing General
Partner on behalf of the Company of the Agreement, the Notes and the other
certificates and agreements to be delivered by the Company in connection with
the transactions contemplated by the Agreement do not and will not contravene
any law or any order of any court or governmental authority or agency applicable
to or binding on the Managing General Partner or contravene the provisions of,
or constitute a default under, its limited partnership agreement or any
indenture, mortgage, contract or any agreement or instrument to which the
Managing General Partner is a party or by which it or any of its Property may be
bound or affected.
(4) PENDING LITIGATION. There are no proceedings pending, or to the
knowledge of the Managing General Partner threatened, against or affecting the
Managing General Partner, in any court or before any governmental authority or
arbitration board or tribunal which if adversely determined would materially and
adversely affect the Properties, business, profits or financial
B-2-151
<PAGE>
condition of the Managing General Partner. The Managing General Partner is not
in default with respect to any order of any court, governmental authority or
arbitration board or tribunal.
(5) NO DEFAULTS. The Managing General Partner is not in default in the
payment of principal or interest on any Indebtedness, is not in violation in any
respect of any terms of its limited partnership agreement and is not in default
under any instrument or instruments or agreements under and subject to which any
Indebtedness has been issued and no event has occurred and is continuing under
the provisions of any such instrument or agreement which with the lapse of time
or the giving of notice, or both, would constitute an event of default
thereunder.
(6) COMPLIANCE WITH LAWS. The Managing General Partner:
(a) is not in violation of any laws, ordinances, governmental rules
or regulations to which it is subject, and
(b) has not failed to obtain any license, permit, franchise or other
governmental authorization (and in the case of any temporary permits,
application for permanent permits have been made and are pending) necessary
to the ownership or operation of its Property or to the conduct of its
business,
which violation or failure to obtain might materially adversely affect the
Properties, business, profits or financial condition of the Managing General
Partner.
Dated:
CROWN PACIFIC MANAGEMENT LIMITED
PARTNERSHIP
By: HS Corp. of
Oregon, an Oregon
B-2-152
<PAGE>
corporation
Its
General Partner
By
----------------------------
Its
B-2-153
<PAGE>
SCHEDULE I
NOTE PURCHASERS(4)
- ---------------------
(4) The Purchasers purchasing Notes on such Closing Date.
SCHEDULE I
(to Managing General Partner Closing Certificate)
<PAGE>
GENERAL PARTNERS AND LIMITED PARTNERS OF
THE MANAGING GENERAL PARTNER
GENERAL PARTNERS:
Fremont Timber, Inc., a Delaware corporation
HS Corp. of Oregon, an Oregon corporation
LIMITED PARTNERS:
Fremont Timber, Inc., a Delaware Corporation
Peter W. Stott
Roger L. Krage
ANNEX A
(to Managing General Partner Closing Certificate)
<PAGE>
DESCRIPTION OF CLOSING OPINION OF COUNSEL
TO THE COMPANY
The closing opinion of Ball Janik LLP, counsel for the Company, which is
called for on each Closing Date by section 3.3 of the Agreement, shall be dated
such Closing Date and addressed to the Purchasers purchasing Notes on such
Closing Date, shall be satisfactory in form and substance to the purchasers, and
shall be to the effect that:
1. The Company is a limited partnership, duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has full power and authority to enter into and perform its obligations
under the Agreement and to issue the Notes;
2. The Company (i) has full power and authority to own or hold under
lease its property, and (ii) is duly authorized to conduct the activities
in which it is now engaged and (iii) is duly licensed or qualified and is
in good standing as a foreign limited partnership in each jurisdiction in
which such qualification is permitted by law and in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
the business, operations or financial condition of the company; and the
inability of the Company to qualify as a foreign limited partnership in any
state in which such qualification is not permitted by law would not
reasonably be expected to have a material adverse effect on the business,
operations or financial condition of the Company;
3. The Managing General Partner is a limited partnership, duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has full power and authority, in its capacity as the
sole general partner of the Company, to execute and deliver the Agreement
and the Notes on behalf of the Company;
4. The execution and delivery of the Agreement and the Notes by the
Managing General Partner on behalf of the
EXHIBIT C
(to Note Purchase Agreement)
<PAGE>
Company do not conflict with or result in a breach of any provision of the
Partnership Agreement;
5. The Agreement has been duly authorized, executed and delivered by
HS Corp. of Oregon, an Oregon corporation ("HS CORP."), acting in its
capacity as a general partner of the Managing General Partner, acting in
its capacity as the sole general partner of, and on behalf of, the Company,
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
(i) bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, (ii) limitations on enforceability
resulting from public policy and the judicial imposition of an implied
covenant of good faith and fair dealing, (iii) limitations on the
enforceability of equitable rights and remedies resulting from equitable
defenses and judicial discretion, and (iv) to general principles of equity
(regardless of whether the application of such principles is considered in
a proceeding in equity or at law);
6. The Notes delivered on the date hereof have been duly authorized,
executed and delivered by HS Corp., acting in its capacity as a general
partner of the Managing General Partner, acting in its capacity as the sole
general partner of, and on behalf of, the Company, and constitute the
legal, valid and binding obligations of the Company enforceable in
accordance with their terms, subject to (i) bankruptcy, insolvency,
fraudulent conveyance and similar laws affecting creditors' rights
generally, (ii) limitations on enforceability resulting from public policy
and the judicial imposition of an implied covenant of good faith and fair
dealing, (iii) limitations on the enforceability of equitable rights and
remedies resulting from equitable defenses and judicial discretion, and
(iv) to general principles of equity (regardless of whether the application
of such principles is considered in a proceeding in equity or law);
C-157
<PAGE>
7. No approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any Federal, state or local
governmental body is necessary in connection with the execution, delivery
and performance of the Agreement or the Notes by the Company;
8. The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Agreement do not (i) contravene any
law, governmental rule or regulation or any order of any court or
governmental authority or agency known to such counsel after due inquiry
and applicable to or binding on the Company, or (ii) conflict with, result
in any breach of any of the provisions of, constitute a default under, or
result in the creation or imposition of any lien or encumbrance upon any of
the Property of the Company pursuant to any agreement or other instrument
known to such counsel to which the Company is a party or by which the
Company or any of its Property is bound;
9. To the knowledge of such counsel, there are no proceedings
pending or threatened against or affecting the Company or the Managing
General Partner in any court or before any governmental authority or
arbitration board or tribunal which, if determined adversely to the Company
or the Managing General Partner, would reasonably be expected to have a
materially adverse effect on the business, operations or financial
condition of the Company or the ability of the Company to perform its
obligations under the Agreement. To the knowledge of such counsel, neither
the Company nor the Managing General Partner is in default with respect to
any order of any court, governmental authority or arbitration board or
tribunal and, to the knowledge of such counsel, neither the Company nor the
Managing Partner has received any notice of any such default;
10. Neither the purchase of the Notes nor the use by the Company of
all or any portion of the proceeds of the sale of the Notes in the manner
provided in the Agreement
C-158
<PAGE>
will violate Regulation G, T or X of the Board of Governors of the Federal
Reserve System (12 C.F.R. Chapter II);
11. The Company is not an "investment company," a company controlled
by an "investment company" or an "affiliated person" thereof, as such terms
are defined in the Investment Company Act of 1940, as amended; and
12. HS Corp. is a corporation, duly organized, validly existing, and
in good standing under the laws of the state of Oregon and has full power
and authority, in its capacity as a general partner of the Managing General
Partner, to execute and deliver the Agreement and the Notes on behalf of
the Managing General Partner, acting in its capacity as the sole general
partner of the Company.
The opinion of Ball Janik LLP shall cover such other matters relating to
the sale of the Notes as the Purchasers may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Managing General Partner and the Company. Such counsel may assume that the laws
of the State of New York are the same as the laws of the State of Oregon. In
rendering an opinion on the qualification of the Company as a foreign limited
partnership under the laws of any jurisdiction (other than the State of Oregon),
such counsel may rely on appropriate certificates of such public official or
officials as may be responsible for certifying as to such qualification.
C-159
<PAGE>
DESCRIPTION OF CLOSING OPINION OF SPECIAL COUNSEL
TO THE COMPANY
The closing opinion of Andrews & Kurth L.L.P., special counsel for the
Company, which is called for on each Closing Date by Section 3.3 of the
Agreement, shall be dated such Closing Date and addressed to the Purchasers
purchasing Notes on such Closing Date, shall be satisfactory in form and
substance to the Purchasers, and shall be to the effect that:
1. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement do not, under existing law,
require the registration of the Notes under the Securities Act, or the
qualification of an indenture under the Trust Indenture Act of 1939, as
amended; and
2. The Company shall be taxed as a partnership for Federal income
tax purposes.
EXHIBIT D
(to Note Purchase Agreement)
<PAGE>
[INTENTIONALLY RESERVED]
EXHIBIT E
(to Note Purchase Agreement)
<PAGE>
DESCRIPTION OF CLOSING OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, which is called for on each Closing Date by Section 3.3 of the
Agreement, shall be dated such Closing Date and addressed to the Purchasers
purchasing Notes on such Closing Date, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a limited partnership, validly existing under the
laws of the State of Delaware and has the power to enter into and perform
the Agreement and to issue the Notes;
2. The Managing General Partner is a limited partnership, validly
existing under the laws of the State of Delaware and has the power to
execute and deliver the Agreement and the Notes on behalf of the Company;
3. The issuance and sale of the Notes and the execution and delivery
of the Agreement by the Managing General Partner on behalf of the Company
do not conflict with or result in a breach of any provision of the
Partnership Agreement;
4. The Agreement has been duly authorized, executed and delivered by
the Managing General Partner on behalf of the Company and constitutes the
legal valid and binding contract of the Company enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent conveyance
and similar laws affecting creditors' rights generally, and to general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law);
5. The Notes delivered on the date hereof have been duly authorized,
executed and delivered by the Managing
EXHIBIT F
(to Note Purchase Agreement)
<PAGE>
General Partner on behalf of the Company and constitute the legal, valid
and binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar
laws affecting creditors' rights generally, and to general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law); and
6. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Agreement do not, under existing law,
require the registration of the Notes under the Securities Act, or the
qualification of an indenture under the Trust Indenture Act of 1939, as
amended.
The opinion of Chapman and Cutler shall also state that the opinions of
Ball Janik LLP and Andrews & Kurth L.L.P. are satisfactory in scope and form to
Chapman and Cutler and that, in their opinion, the Purchasers are justified in
relying thereon. With respect to matters of fact upon which such opinion is
based, Chapman and Cutler may rely on appropriate certificates of public
officials and officers of the Managing General Partner and the Company and upon
the representations of the Managing General Partner, the Company and the
Purchasers delivered in connection with the issuance and sale of the Notes.
In rendering the opinion set forth in paragraphs 1 and 3 above, Chapman and
Cutler may rely, as to matters referred to in paragraphs 1 and 3, solely upon an
examination of the Partnership Agreement certified by the Managing General
Partner, and a certificate of limited partnership and certificate of existence
of the Company certified by the Secretary of State of the State of Delaware. In
rendering the opinion set forth in paragraph 2 above, Chapman and Cutler may
rely, as to matters referred to in paragraph 2, solely upon an examination of
the limited partnership agreement of the Managing General Partner certified by a
general partner thereof, and a certificate of limited partnership and a
certificate of existence of the Managing General Partner certified by the
Secretary of State of the State of Delaware. In rendering the opinions set
forth in paragraphs 4
F-2
<PAGE>
and 5 above as to the due authorization, execution and delivery of the Agreement
and the Notes by the Managing General Partner on behalf of the Company, Chapman
and Cutler may state that they have not examined the business records of the
Managing General Partner or the Company but have relied on the certificates of
appropriate officers of the Managing General Partner and the Company. The
opinion of Chapman and Cutler is limited to the laws of the State of New York,
the limited partnership law of the State of Delaware and the Federal laws of the
United States.
F-2
<PAGE>
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED FUNDED DEBT
(a) The indebtedness evidenced by the subordinated notes(5) and any
renewals or extensions thereof, shall at all times be
- -----------------
(5) Or debentures or other designation as may be
EXHIBIT G
(to Note Agreement)
<PAGE>
wholly subordinate and junior in right of payment to any and all indebtedness of
the Company [here insert description of indebtedness to which Subordinated
Funded Debt is subordinated which in all events must include the Notes] (herein
called "SUPERIOR INDEBTEDNESS"), in the manner and with the force and effect
hereafter set forth:
(1) In the event of any liquidation, dissolution or winding up of the
Company, or of any execution, sale, receivership, insolvency, bankruptcy,
liquidation, readjustment, reorganization or other similar proceeding
relative to the Company or its property, all principal and interest owing
on all Superior Indebtedness shall first be irrevocably paid in full before
any payment is made upon the indebtedness evidenced by the subordinated
notes; and in any such event any payment or distribution of any kind or
character, whether in cash, property or securities (other than in
securities, including equity securities, or other evidences of
indebtedness, the payment of which is subordinated to the payment of all
Superior Indebtedness which may at the time be outstanding) which shall be
made upon or in respect of the subordinated notes shall be paid over to the
holders of such Superior Indebtedness, PRO RATA, for application in payment
thereof unless and until such Superior Indebtedness shall have been paid or
satisfied in full;
(2) In the event that the subordinated notes are declared or become
due and payable because of the occurrence of any event of default
thereunder (or under the agreement or indenture, as appropriate) or
otherwise than at the option of the Company, under circumstances when the
foregoing clause (l) shall not be applicable, the holders of the
subordinated notes shall be entitled to payments only after there shall
first have been paid in full all Superior Indebtedness outstanding at the
time the subordinated notes so become due and payable because of any such
event, or payment shall have been provided for in a manner satisfactory to
the holders of such Superior Indebtedness; and
G-166
<PAGE>
(3) During the continuance of any default with respect to any
Superior Indebtedness which would permit the holders thereof to accelerate
the maturity of such Superior Indebtedness, no payment of principal,
premium or interest shall be made on the subordinated notes, if written
notice of such default (a "DEFAULT NOTICE") has been given to the Company
by any holder or holders of any Superior Indebtedness. Upon receipt of any
Default Notice from the holders of Superior Indebtedness pursuant to this
clause (3), the Company shall forthwith send a copy thereof to each holder
of the subordinated notes at the time outstanding. Any payment or
distribution of any kind or character, whether in cash, property or
securities made with respect to any subordinated note after receipt by the
Company of a Default Notice shall be held by the holder of such
subordinated note in trust for the benefit of, and shall be paid over to,
the holders of such Superior Indebtedness for application on a PRO RATA
basis to the payment of such Superior Indebtedness unless and until such
Superior Indebtedness shall have been paid or satisfied in full; and
(b) The holder of each subordinated note undertakes and agrees for the
benefit of each holder of Superior Indebtedness to execute, verify, deliver and
file any proofs of claim which any holder of Superior Indebtedness may at any
time require in order to prove and realize upon any rights or claims pertaining
to the subordinated notes and to effectuate the full benefit of the
subordination contained herein; and upon failure of the holder of any
subordinated note so to do, any such holder of Superior Indebtedness shall be
deemed to be irrevocably appointed the agent and attorney-in-fact of the holder
of such note to execute, verify, deliver and file any such proofs of claim.
(c) No right of any holder of any Superior Indebtedness to enforce
subordination as herein provided shall at any time or in any way be affected or
impaired by any failure to act on the part of the Company or the holders of
Superior Indebtedness, or by any noncompliance by the Company with any of the
terms, provisions and covenants of the subordinated notes or the agreement under
G-167
<PAGE>
which they are issued, regardless of any knowledge thereof that any such holder
of Superior Indebtedness may have or be otherwise charged with.
(d) The Company agrees, for the benefit of the holders of Superior
Indebtedness, that in the event that any subordinated note is declared due and
payable before its expressed maturity because of the occurrence of a default
hereunder, the Company will give prompt notice in writing of such happening to
the holders of Superior Indebtedness.
(e) The foregoing provisions are solely for the purpose of defining the
relative rights of the holders of Superior Indebtedness on the one hand, and the
holders of the subordinated notes on the other hand, and nothing herein shall
impair, as between the Company and the holders of the subordinated notes, the
obligation of the Company which is unconditional and absolute, to pay the
principal, premium, if any, and interest on the subordinated notes in accordance
with their terms, nor shall anything herein prevent the holders of the
subordinated notes from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder, subject to the rights of the
holders of Superior Indebtedness as herein provided for.
G-168
<PAGE>
PRE-FUNDING AGREEMENT
---------------------
To the Purchasers Listed
on the Attached Schedule
Re: $95,000,000 Senior Notes, Series A, B and C
Due 2010 - 2018
of
CROWN PACIFIC LIMITED PARTNERSHIP
Ladies and Gentlemen:
In connection with the above-referenced transaction and in consideration of
each of you, as purchasers of the above-captioned Notes (the "PURCHASERS"),
depositing your respective commitments in escrow in a separate trust account on
_______________ (the "FUNDING DATE") with Bank of America National Trust and
Savings Association, as funding agent (the "FUNDING AGENT"), in anticipation of,
and in order to facilitate, a closing on ______________ (the "CLOSING DATE"),
the undersigned, Crown Pacific Limited Partnership, a Delaware limited
partnership (the "COMPANY"), agrees to reimburse each of you, whether or not
your funds are invested hereunder, for (i) any loss of principal you may suffer
as a result of such deposit, and (ii) the loss of the use of your funds by
paying to you (with respect only to the loss referred to in this clause (ii)) a
sum equal to interest at the rate per annum (computed on the basis of a 360-day
year) borne by the series of Notes to be purchased with such funds so advanced
by you on the amount of such funds for the period from and including such
Funding Date to but excluding, as the case may be, (x) the Closing Date, if such
EXHIBIT H
(to Note Purchase Agreement)
<PAGE>
closing occurs on such date, (y) such other Business Day not more than two
calendar days after the Closing Date on which the closing occurs (the
"RESCHEDULED CLOSING DATE") or (z) the Business Day on which your funds are
returned if the wire transfer of such funds is initiated by the Funding Agent by
10:00 a.m. Houston, Texas time or the next following Business Day if such return
is not made by such time. The Company shall pay such amounts referred to in
clauses (i) and (ii) of the preceding sentence to the Funding Agent on behalf of
the Purchasers in immediately available funds by wire transfer to be received by
the Funding Agent no later than 9:00 a.m. Houston, Texas time on the last day of
the period in respect of which interest is payable, and the Funding Agent shall
pay each Purchaser its respective amount due in immediately available funds by
wire transfer on such day to the account specified for such Purchaser on
Schedule I to the Note Purchase Agreement dated as of December 15, 1997 (the
"NOTE AGREEMENT") pursuant to which the above-captioned Notes are to be issued
or to such other account specified by such Purchaser in writing to the Company
and the Funding Agent. "BUSINESS DAY" means any day other than a Saturday,
Sunday or a day on which banks in the States of Texas or California are
authorized or permitted to be closed in observance of a legal holiday.
The funds furnished by you shall be held in a separate trust account and
shall be invested upon the instruction of the Company by the Funding Agent on
your behalf in obligations of the United States of America or obligations fully
guaranteed as to principal and interest by the United States of America, in
either case having a stated maturity not later than one week from the date of
acquisition, PROVIDED that, any of such investments may be made through a
repurchase agreement in commercially reasonable form with the Funding Agent or
any other bank or other financial institution having capital, surplus and
undivided profits of at least $500,000,000 so long as title to the underlying
obligations shall pass to the Funding Agent, and that such underlying
obligations shall be segregated in a custodial or trust account of, or for the
benefit of, the Funding Agent for your further benefit and such account shall be
overcollateralized by 102% (such investments being hereinafter referred to as
H-170
<PAGE>
"INVESTMENTS"). All income and profits on the Investments not in excess of the
sums payable to you pursuant to clause (ii) of the first sentence of the
preceding paragraph shall be for your respective accounts (such income and
profits to be credited against the obligation of the Company to reimburse each
of you for the loss of use of funds made available to the Funding Agent) and all
other income and profits shall be for the account of the Company. All losses on
the Investments shall be borne by the Company and the Company shall reimburse
the Funding Agent therefor for your ratable benefit pursuant to the preceding
paragraph.
Your execution of the Note Agreement shall indicate your acceptance of the
terms and conditions of this letter and your authorization to the Funding Agent
to invest the funds provided by you as specified herein.
Very truly yours,
CROWN PACIFIC LIMITED PARTNERSHIP,
a Delaware limited partnership
By: CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP,
a Delaware limited partnership
Its General Partner
By: HS Corp. of Oregon,
an Oregon corporation
Its General Partner
By
---------------------------------
Its:
H-171
<PAGE>
The undersigned, as Funding Agent, hereby acknowledges the foregoing and
agrees (i) to hold such funds in a separate trust account pursuant to the terms
of which such funds may not be commingled with assets of the Funding Agent and
may not be withdrawn unless and until verbal instructions (the "INSTRUCTIONS")
are received from Robert P. Davis, Esq., Richard F. Klein, Esq., Thomas G. Park,
Esq. or Demetria E. Vong-Spillan of the law firm of Chapman and Cutler, Chicago,
Illinois to withdraw such funds and apply such funds as described in either
clause (iii)(x) or (iii)(y) as specified, (ii) prior to receiving such
Instructions, to invest, if possible, said funds on behalf of each of the
Purchasers in Investments at the instruction of the Company, (iii) immediately
following receipt of such Instructions, (x) if a closing shall have occurred on
the Closing Date or the Rescheduled Closing Date, to withdraw such funds and pay
and apply the same to or upon the instructions of the Company in accordance with
the terms of the Note Agreement, and to disburse all income and profits on the
Investments not in excess of the sums payable to the respective Purchasers in
accordance with the provisions of the foregoing letter and all other income and
profits actually earned thereon to the Company, and (y) if a closing shall not
have occurred on the Closing Date or the Rescheduled Closing Date, to deliver to
each of the Purchasers in immediately available funds by wire transfer to the
account specified in the foregoing letter any funds which are to be returned to
such Purchasers, including any amounts furnished by the Company to reimburse the
Purchasers for losses, if any, incurred on the Investments. The Funding Agent
agrees to initiate a wire transfer to each of the Purchasers by 10:00 a.m.
Chicago, Illinois time of funds it receives from the Company prior to 9:00 a.m.
Chicago, Illinois time.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
Its:
H-172
<PAGE>
SCHEDULE
PURCHASER AMOUNT OF COMMITMENT
--------- --------------------
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-94118) of Crown Pacific Partners, L.P. of our
report dated January 26, 1998 appearing on page F-1 of this Annual Report on
Form 10-K.
/s/ PRICE WATERHOUSE LLP
- -----------------------------
PRICE WATERHOUSE LLP
Portland, Oregon
March 30, 1998
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