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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 2, 1998
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CROWN PACIFIC PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 93-1161833
(State or other jurisdiction of incorporation (I.R.S. Employer
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
(Former name or former address, if changed since last report): N/A
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CROWN PACIFIC PARTNERS, L.P.
FORM 8-K
INDEX
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ITEM DESCRIPTION PAGE
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<S> <C> <C>
Item 5. Other Events 2
Item 7. Financial Statements and Exhibits 2
Signatures 3
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ITEM 5. OTHER EVENTS
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Attached as Exhibit 1.1 is a form of Underwriting Agreement for an offering
of common units representing limited partner interests in Crown Pacific
Partners, L.P. (the "Partnership") registered pursuant to the Registration
Statement on Form S-3, No. 333-27269.
Attached as Exhibits 10.1 and 10.2 are Facility Leases recently entered into
by Crown Pacific Management Limited Partnership in connection with the
financing of its new facilities in Bonners Ferry, Idaho and Port Angeles,
Washington.
Attached as Exhibits 99.1 and 99.2 are unaudited balance sheets and
accompanying notes thereto for Crown Pacific, Ltd. and Crown Pacific
Management Limited Partnership. Crown Pacific, Ltd. is the Special General
Partner of Crown Pacific Partners, L.P. (the "Partnership"). Crown Pacific
Management Limited Partnership is the managing general partner of the
Partnership and Crown Pacific Limited Partnership. Crown Pacific Limited
Partnership is a 99% owned subsidiary of the Partnership, through which the
Partnership acquires, owns and operates timberland properties, related
manufacturing assets and its wholesale operations.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(a) Financial Statements of Businesses Acquired
None.
(b) Pro Forma Financial Information
None.
(c) Exhibits
1.1 Form of Underwriting Agreement
10.1 Facility Lease - Idaho, dated November 18, 1998, by and between
Wilmington Trust Company, Lessor and Crown Pacific Limited
Partnership, Lessee.
10.2 Facility Lease - Washington, dated October 30, 1998 by and between
Wilmington Trust Company, Lessor and Crown Pacific Limited
Partnership, Lessee.
99.1 Balance Sheet of Crown Pacific, Ltd. at December 31, 1997 and
September 30, 1998.
99.2 Balance Sheet of Crown Pacific Management Limited Partnership at
December 31, 1997 and September 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 2, 1998 CROWN PACIFIC PARTNERS, L.P.
By: Crown Pacific Management
Limited Partnership, as
General Partner
By: /s/ Richard D. Snyder
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Richard D. Snyder
Vice President and Chief Financial
Officer of HS Corp. of Oregon, a general
partner of Crown Pacific Management
Limited Partnership
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
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DRAFT: 11/30/98
[2,250,000] COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS
CROWN PACIFIC PARTNERS, L.P.
UNDERWRITING AGREEMENT
PaineWebber Incorporated December __, 1998
Salomon Smith Barney Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Crown Pacific Partners, L.P., a Delaware limited partnership (the
"Partnership"), proposes to sell common units representing limited partner
interests in the Partnership (the "Common Units") in an aggregate amount of
[2,250,000] Common Units (the "Firm Units") to you (the "Underwriters"). The
Partnership has also agreed to grant to the Underwriters an option (the
"Option") to purchase up to an additional ______ Common Units (the "Option
Units") on the terms and for the purposes set forth in Section 1(b). The Firm
Units and the Option Units are hereinafter referred to as the "Units."
The initial public offering price per Common Unit for the Units and the
purchase price per Common Unit for the Units to be paid by the Underwriters
shall be agreed upon by the Partnership and the Underwriters, and such agreement
shall be set forth in a separate written instrument substantially in the form of
Exhibit A hereto (the "Price Determination Agreement"). The Price Determination
Agreement may take the form of an exchange of any standard form of written
telecommunication among the Partnership and the Underwriters and shall specify
such applicable information as is indicated in Exhibit A hereto. The offering
of the Units will be governed by this Agreement, as supplemented by the Price
Determination Agreement. From and after the date of the execution and delivery
of the Price Determination Agreement, this Agreement shall be deemed to
incorporate, and, unless the context otherwise indicates, all references
contained herein to "this Agreement" and to the phrase "herein" shall be deemed
to include, the Price Determination Agreement.
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Crown Pacific Management Limited Partnership, a Delaware limited
partnership (the "Managing General Partner"), is the managing general partner of
the Partnership and the sole general partner of Crown Pacific Limited
Partnership (the "Operating Partnership"), and Crown Pacific, Ltd., an Oregon
corporation (the "Special General Partner" and, with the Managing General
Partner, the "General Partners"), is the special general partner of the
Partnership. The Partnership, the Operating Partnership and the General
Partners are collectively referred to herein as the "Crown Entities." The Crown
Entities confirm as follows their agreements with the Underwriters:
1. AGREEMENT TO SELL AND PURCHASE.
(a) On the basis of the representations, warranties and agreements of
the Crown Entities herein contained and subject to all the terms and conditions
of this Agreement, the Partnership agrees to sell to the Underwriters, and the
Underwriters agrees to purchase from the Partnership, at the purchase price per
Common Unit to be agreed upon by the Underwriters and the Partnership in
accordance with Section 1(c) hereof and set forth in the Price Determination
Agreement, the Firm Units.
(b) Subject to all the terms and conditions of this Agreement, the
Partnership grants the Option to the Underwriters to purchase up to _______
Option Units from the Partnership at the same price per Common Unit as the
Underwriters shall pay for the Firm Units. The Option may be exercised only to
cover over-allotments in the sale of the Firm Units by the Underwriters and may
be exercised in whole or in part at any time (but not more than once) on or
before the 30th day after the date hereof, upon written or telegraphic notice
(the "Option Units Notice") by the Underwriters to the Partnership no later than
12:00 noon, New York City time, at least two and no more than five business days
before the date specified for closing in the Option Units Notice (the "Option
Closing Date") setting forth the aggregate number of Option Units to be
purchased and the time and date for such purchase. On the Option Closing Date,
the Partnership will issue and sell to the Underwriters, and the Underwriters
will purchase, the number of Option Units set forth in the Option Units Notice.
(c) The initial public offering price per Common Unit for the Firm
Units and the purchase price per Common Unit for the Firm Units to be paid by
the Underwriters shall be agreed upon and set forth in the Price Determination
Agreement, which shall be dated the date hereof.
2. DELIVERY AND PAYMENT. Delivery of the Units shall be made by causing
The Depository Trust Company to credit the Units to the account of the
Partnership, against payment of the purchase price by wire transfer of Federal
Funds or similar same day funds to an account designated in writing by the
Partnership to the Underwriters at least one business day prior to the Closing
Date (as hereinafter defined). Such payment shall be made at 10:00 a.m., New
York City time, on the third business day (or fourth business day, if the Price
Determination Agreement is executed after 4:30 p.m.) after the date on which the
first bona fide offering of the Units to the public is made by the Underwriters
or at such time on such other date, not later than ten business days after
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such date, as may be agreed upon by the Partnership and the Underwriters (such
date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option Units against
payment by the Underwriters (in the manner specified above) will take place at
the offices specified above for the Closing Date at the time and date (which may
be the Closing Date) specified in the Option Units Notice.
The cost of original issue tax stamps, if any, in connection with the
issuance and delivery of the Units by the Partnership to the Underwriters shall
be borne by the Partnership. The Partnership will pay and save the Underwriters
and any subsequent holder of the Units harmless from any and all liabilities
with respect to or resulting from any failure or delay in paying Federal and
state stamp and other transfer taxes, if any, which may be payable or determined
to be payable in connection with the original issuance or sale to the
Underwriters of the Firm Units and Option Units.
3. REPRESENTATIONS AND WARRANTIES OF THE CROWN ENTITIES. Each of the
Crown Entities, jointly and severally, represents, warrants and covenants to the
Underwriters that:
(a) The Partnership meets the requirements for use of Form S-3 and a
registration statement (Registration No. 333-27269) on Form S-3 relating to the
Units (and such amendments to such registration statement as may have been
required to the date of this Agreement) has been prepared by the Partnership in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations (collectively referred to as the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. Such registration statement
has been declared effective by the Commission. Copies of such registration
statement and amendments have been delivered to the Underwriters. The term
"Registration Statement" means the registration statement, including all
financial statements and exhibits and all documents incorporated or deemed
incorporated therein by reference, as from time to time amended or supplemented
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), Rule 430A and Rule 434 of the Rules and Regulations, or otherwise, and
any registration statement filed under Rule 462 of the Rules and Regulations as
such registration statement may be amended from time to time. The term
"Prospectus" means the prospectus constituting a part of the Registration
Statement and any amendments or supplements to such prospectus, including
without limitation the prospectus supplement filed with the Commission in
connection with the proposed sale of Units contemplated by this Agreement (the
"Prospectus Supplement"), through the date of such Prospectus Supplement;
provided, however, that if any revised prospectus or prospectus supplement,
including the Prospectus Supplement, shall be provided to the Underwriters by
the Partnership for use in connection with the offering of the Units that
differs from the Prospectus (whether or not such revised prospectus or
prospectus supplement is required to be filed by the Partnership with the
Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus or prospectus supplement, as
the case may be, from and after the time it is first provided to the
Underwriters for such use. Any reference herein to the Registration Statement
or the Prospectus shall be deemed to
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refer to and include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 which were filed under the Exchange Act, on or before the
date hereof or are so filed hereafter. Any reference herein to the terms
"amend," "amendment" or "supplement" with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include any such document
filed or to be filed under the Exchange Act after the date of the Prospectus,
and deemed to be incorporated therein by reference.
(b) On the date hereof, at all times subsequent to and including the
Closing Date and, if later, the Option Closing Date and when any post-effective
amendment to the Registration Statement becomes effective or any amendment or
supplement to the Prospectus is filed with the Commission, the Registration
Statement and the Prospectus (as amended or as supplemented if the Partnership
shall have filed with the Commission any amendment or supplement thereto),
including the financial statements included or incorporated by reference in the
Prospectus or the Registration Statement, did or will comply, in all material
respects, with all applicable provisions of the Act, the Exchange Act, the rules
and regulations thereunder (the "Exchange Act Rules and Regulations") and the
Rules and Regulations and will contain, in all material respects, all statements
required to be stated therein in accordance with the Act, the Exchange Act, the
Exchange Act Rules and Regulations and the Rules and Regulations. On the date
the Registration Statement was declared effective by the Commission (the
"Effective Date") and when any post-effective amendment to the Registration
Statement becomes effective, no part of the Registration Statement or any such
amendment did or will contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and, if later, the Option Closing Date, the
Prospectus did not or will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. In
addition, each of the statements made in such documents within the coverage of
Rule 175(b) of the Rules and Regulations, including (but not limited to) any
statements with respect to future available cash or future cash distributions or
the anticipated ratio of taxable income to distributions, was made or will be
made by the Partnership or the General Partners, as the case may be, with a
reasonable basis and in good faith. The foregoing representations and
warranties in this Section 3(b) do not apply to any statements or omissions made
in reliance on and in conformity with information relating to the Underwriters
furnished in writing to the Partnership by the Underwriters specifically for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto. For all purposes of this Agreement the only information
relating to the Underwriters furnished in writing to the Partnership by the
Underwriters specifically for inclusion in the Registration Statement or the
Prospectus is (i) the number of Common Units to be purchased by the Underwriters
set forth in the section captioned "Underwriting" in the Prospectus Supplement
and (ii) the third, fourth and last paragraphs of the section captioned
"Underwriting" in the Prospectus Supplement. The Partnership has not
distributed any offering material in connection with the offering or sale of the
Units other than the Registration Statement and the Prospectus. There is no
contract or document required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement
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or to a document incorporated by reference into the Registration Statement which
is not described or filed as required.
(c) The documents which are incorporated by reference in the
Registration Statement and the Prospectus or from which information is so
incorporated by reference, when they become effective or were filed with the
Commission, as the case may be, complied in all material respects with the
requirements of the Act or the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations; and any documents so filed
and incorporated by reference subsequent to the Closing Date shall, when they
are filed with the Commission, conform in all material respects with the
requirements of the Act and the Exchange Act, as applicable, the Exchange Act
Rules and Regulations and the Rules and Regulations.
(d) PricewaterhouseCoopers LLP, whose reports are incorporated by
reference in the Prospectus, are independent certified public accountants with
respect to each of the Crown Entities as required by the Act and the Rules and
Regulations. The financial statements (including the related notes and
supporting schedules) included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the financial condition, results of
operations and cash flows of the entities purported to be shown thereby at the
dates and for the periods indicated and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated. The selected historical financial data of the
Crown Entities for the four years ended December 31, 1997 included in the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1997
(the "Form 10-K") under the caption "Selected Financial Data" and incorporated
by reference in the Registration Statement and the Prospectus are fairly stated
in relation to the historical financial statements of the Crown Entities from
which they have been derived.
(e) None of the Crown Entities has sustained since the date of the
latest audited financial statements incorporated by reference in the Prospectus
any material loss or interference with its business from fire, explosion, flood,
accident or other calamity, whether or not covered by insurance, or from any
labor dispute, or has become a party to or the subject of any material
litigation, court or governmental action, investigation, order or decree, in any
case otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Prospectus, there
has not been any change in the partners' capital, capital stock or long-term
debt of the Crown Entities, any material adverse change in the short-term debt
of the Crown Entities, or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the general
affairs, operations, business, prospects, management, capitalization, financial
condition, results of operations or net worth of the Crown Entities, otherwise
than as set forth or contemplated in the Prospectus.
(f) The Partnership has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Revised Uniform
Limited Partnership Act (the "Delaware Act"), with all necessary partnership
power and authority to own or lease its properties and conduct its business, in
each case in all material respects as described in the Prospectus, and is
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duly qualified or registered as a foreign limited partnership for the
transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the location of the properties
owned or leased by it make such qualification or registration necessary (except
where the failure to so qualify or register could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
results of operations or business of the Crown Entities, taken as a whole, or to
subject the Partnership or the limited partners of the Partnership to any
material liability or disability).
(g) The Operating Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Delaware Act, with
all necessary partnership power and authority to own or lease its properties and
conduct its business, in each case in all material respects as described in the
Prospectus, and is duly qualified or registered as a foreign limited partnership
for the transaction of business under the laws of each jurisdiction in which the
character of the business conducted by it or the location of the properties
owned or leased by it make such qualification or registration necessary (except
where the failure to so qualify or register could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
results of operations or business of such Crown Entities, taken as a whole, or
to subject the Operating Partnership or the Partnership to any material
liability or disability). Other than the Operating Partnership itself, neither
the Partnership nor the Operating Partnership has any "Significant Subsidiaries"
as such term is defined under Rule 1-02 of Regulation S-X.
(h) Each of the Special General Partner, HS Corp. of Oregon ("HS
Corp."), CP Acquisition Co. ("CP Acquisition") and CP Air, Inc. ("CP Air") has
been duly incorporated and is validly existing in good standing as a corporation
under the laws of the State of Oregon; Fremont Timber, Inc. ("Fremont Timber")
has been duly incorporated and is validly existing in good standing as a
corporation under the laws of the State of Delaware; the Managing General
Partner has been duly formed and is validly existing in good standing as a
limited partnership under the Delaware Act; each of the Managing General
Partner and the Special General Partner has all necessary partnership or
corporate power and authority to own or lease its properties and conduct its
business and to execute and deliver this Agreement and perform its obligations
hereunder and is duly qualified or registered as a foreign limited partnership
or foreign corporation for the transaction of business (and, with respect to the
Special General Partner, is in good standing) under the laws of each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it make such qualification
necessary (except where the failure to so qualify or register could not
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations or business of the Crown
Entities, taken as a whole, or to subject the Partnership or the limited
partners of the Partnership to any material liability or disability).
(i) HS Corp. and Fremont Timber are the sole general partners of the
Managing General Partner with 0.3% and 0.7% general partner interests,
respectively; such general partner interests are duly authorized by the Second
Amended and Restated Agreement of Limited Partnership of the Managing General
Partner and were validly issued to each of HS Corp. and Fremont Timber; and,
except as provided in the Purchase Rights Agreement dated as of
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December 22, 1994, as amended (the "Purchase Rights Agreement"), among the
Managing General Partner, the Special General Partner, Fremont Investors, Inc.,
formerly Fremont Group, Inc. ("Fremont"), Bechtel Crown Partners, Fremont
Timber, HS Corp., Peter W. Stott ("Stott") and Roger L. Krage ("Krage"), HS
Corp. and Fremont Timber own such general partner interests in the Managing
General Partner free and clear of all liens, encumbrances, security interests,
equities, charges or claims (except for such liens, encumbrances, security
interests, equities, charges or claims as are not, individually or in the
aggregate, material or as described in the Prospectus).
(j) Fremont Timber, Stott and Krage are the sole limited partners of
the Managing General Partner, with 73.9%, 23.2% and 1.9% limited partner
interests, respectively; such limited partner interests are duly authorized by
the Second Amended and Restated Agreement of Limited Partnership of the Managing
General Partner, were validly issued in accordance therewith and are fully paid;
and, except as provided in the Purchase Rights Agreement, Stott, Krage and
Fremont Timber own their respective limited partner interests in the Managing
General Partner free and clear of all liens, encumbrances, security interests,
equities, charges or claims (except for such liens, encumbrances, security
interests, equities, charges or claims as are not, individually or in the
aggregate, material or as described in the Prospectus).
(k) Except as provided in the Purchase Rights Agreement, all of the
outstanding capital stock of HS Corp. is owned by Stott and Krage free and clear
of all liens, encumbrances, security interests, equities, charges or claims
(except for such liens, encumbrances, security interests, equities, charges or
claims as are not, individually or in the aggregate, material or as described in
the Prospectus). All of the outstanding capital stock of the Special General
Partner is duly authorized and validly issued and is fully paid and
nonassessable and, except as provided in the Purchase Rights Agreement, is owned
by Fremont, Stott and Krage, free and clear of all liens, encumbrances, security
interests, equities, charges or claims (except for such liens, encumbrances,
security interests, equities, charges or claims as are not, individually or in
the aggregate, material or as described in the Prospectus).
(l) All of the outstanding capital stock of CP Acquisition is duly
authorized, validly issued, fully paid and nonassessable and is owned by CP Air
free and clear of all liens, encumbrances, security interests, equities, charges
or claims (except for such liens, encumbrances, security interests, equities,
charges or claims as are not, individually or in the aggregate, material or as
described in the Prospectus). All of the outstanding capital stock of CP Air is
duly authorized, validly issued, fully paid and nonassessable and is owned by
the Partnership free and clear of all liens, encumbrances, security interests,
equities, charges or claims (except for such liens, encumbrances, security
interests, equities, charges or claims as are not, individually or in the
aggregate, material or as described in the Prospectus).
(m) The Managing General Partner and the Special General Partner are
the sole general partners of the Partnership with 0.99% and 0.01%, respectively,
general partner interests in the Partnership; such general partner interests are
duly authorized by the Partnership Agreement, and were validly issued to each
General Partner, and, except as provided in the Purchase Rights
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Agreement, the General Partners own such general partner interests free and
clear of all liens, encumbrances, security interests, equities, charges or
claims (except for such liens, encumbrances, security interests, equities,
charges or claims as are not, individually or in the aggregate, material or as
described in the Prospectus).
(n) The Managing General Partner is the sole general partner of the
Operating Partnership with a 1.0101% general partner interest in the Operating
Partnership; such general partner interest is duly authorized by the Agreement
of Limited Partnership of the Operating Partnership (the "Operating Partnership
Agreement" and, together with the Partnership Agreement, the "Partnership
Agreements") and was validly issued to the Managing General Partner; and the
Managing General Partner owns such general partner interest free and clear of
all liens, encumbrances, security interests, equities, charges or claims (except
for such liens, encumbrances, security interests, equities, charges or claims as
are not, individually or in the aggregate, material or as described in the
Prospectus).
(o) At the Closing Date (as defined in Section 2) after giving effect
to the issuance of the Firm Units, the capitalization of the Partnership will
consist of _____________ Common Units and 5,773,088 units representing
subordinated limited partner interests in the Partnership ("Subordinated
Units"), representing a 99% limited partner interest in the Partnership, a 0.99%
general partner interest held by the Managing General Partner and a 0.01%
general partner interest held by the Special General Partner. All of the
outstanding Subordinated Units and Common Units of the Partnership have been
duly authorized by the Partnership Agreement, are validly issued and are fully
paid and nonassessable (except as nonassessability may be affected by matters
described in the Prospectus under the caption "The Partnership Agreement --
Limited Liability"); the Units to be issued and sold by the Partnership
hereunder and the limited partner interests represented thereby have been duly
authorized by the Partnership Agreement and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
have been validly issued and will be fully paid and nonassessable (except as
such nonassessability may be affected by matters described in the Prospectus
under the caption "The Partnership Agreement -- Limited Liability").
(p) The Partnership and CP Acquisition are the sole limited partners
of the Operating Partnership, with limited partner interests of 98.1219% and
0.868%, respectively; such limited partner interests have been duly authorized
by the Operating Partnership Agreement, have been validly issued in accordance
with the Operating Partnership Agreement and are fully paid and nonassessable
(except as such nonassessability may be affected by matters described in the
Prospectus under the caption "The Partnership Agreement -- Limited Liability");
and the Partnership and CP Acquisition own such limited partner interests in the
Operating Partnership free and clear of all liens, encumbrances, security
interests, equities, charges or claims (except for such liens, encumbrances,
security interests, equities, charges or claims as are not, individually or in
the aggregate, material or as described in the Prospectus).
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(q) Except as described in the Prospectus or pursuant to the Purchase
Rights Agreement, there are no preemptive rights or other rights to subscribe
for or to purchase, nor any restrictions upon the voting or transfer of, any
limited partner interests or shares in any of the Crown Entities pursuant to any
of the Partnership Agreements, any articles or certificates of incorporation or
other governing documents or any agreement or other instrument to which any of
the Crown Entities is a party or by which any of them may be bound. Neither the
filing of the Registration Statement nor the offering or sale of the Units as
contemplated by this Agreement gives rise to any rights, other than those which
have been waived or satisfied, for or relating to the registration of any Units
or other securities of the Partnership. The Units, when issued and delivered
against payment therefor as provided herein, will conform in all material
respects to the description thereof contained in the Prospectus. Except as
disclosed in the Prospectus, there are no outstanding options or warrants to
purchase any Common Units or Subordinated Units. The Partnership has all
requisite power and authority to issue, sell and deliver the Units to be sold by
it hereunder, in accordance with and upon the terms and conditions set forth in
this Agreement and in the Registration Statement and Prospectus. At the Closing
Date and the Option Closing Date, all action required to be taken by the
Partnership for the authorization, issuance, sale and delivery of the Units
shall have been validly taken.
(r) This Agreement has been duly authorized, executed and delivered
by each of the Crown Entities and constitutes the valid and binding agreement of
each such person, enforceable against such persons in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as rights to indemnity and contribution hereunder
may be limited by applicable law.
(s) The Partnership Agreement has been duly authorized, executed and
delivered by the General Partners and the limited partners and is a valid and
legally binding agreement of the General Partners, enforceable against the
General Partners in accordance with its terms; and the Operating Partnership
Agreement has been duly authorized, executed and delivered by the parties
thereto and is a valid and legally binding agreement of such parties,
enforceable against such parties in accordance with its terms; provided that, in
each case, the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or similar laws relating to or
affecting creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as rights to indemnity and contribution hereunder
may be limited by applicable law.
(t) Neither the issuance and sale by the Partnership of the Units to
be sold by it hereunder, nor the execution, delivery and performance of this
Agreement by the Crown Entities which are parties thereto, nor the consummation
of the transactions contemplated herein, will (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under (or an event which, with notice or lapse of time or both, would
constitute such a default), any indenture, mortgage, deed of trust, loan
agreement or other material agreement or
9
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instrument to which any of the Crown Entities is a party or by which any of them
is bound or to which any of the property or assets of any of them is subject,
(ii) result in any violation of the provisions of the certificate of
incorporation, bylaws, agreement of limited partnership or other governing
documents of any of the Crown Entities, (iii) result in the violation of any
order of any court or governmental agency or body directed to any of them or any
of their properties in a proceeding to which any of them or their property is a
party, (iv) result in the violation of any order of any court or governmental
agency or body or any law, statute, rule or regulation, the violation of which
would have a material adverse effect upon the condition (financial or
otherwise), results of operation or business of the Crown Entities or on the
purchase and sale of the Units or (v) result in the creation or imposition of
any material lien, charge, claim or encumbrance upon any property or asset of
the Crown Entities. Except (A) for permits, consents, approvals and similar
authorizations required under the Act and the securities or "Blue Sky" laws of
certain jurisdictions, (B) for such permits, consents, approvals and
authorizations which have been obtained and (C) as set forth or contemplated in
the Prospectus, no permit, consent, approval, authorization or order of any
court, governmental agency or body or financial institution is required in
connection with the consummation of the transactions contemplated by this
Agreement.
(u) None of the Crown Entities is in (i) breach or violation of the
provisions of its agreement of limited partnership, charter or bylaws or
(ii) default (and no event has occurred which, with notice or lapse of time or
both, would constitute such a default) in the due performance of any term,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties are subject, which breach, violation
or default could reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), results of operations or business of the
Crown Entities, taken as a whole. To the actual knowledge of the Partnership
and the General Partners, without independent investigation, no third party to
any indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which it is a party or by which it is bound or to
which any of its properties are subject is in default under any such agreement.
(v) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental agency or body
which prevents the issuance, sale or delivery of the Units, or suspends the
effectiveness of the Registration Statement or suspends the sale of the Units in
any jurisdiction referred to in Section 4(d) hereof; no injunction, restraining
order or order of any nature by a federal or state court of competent
jurisdiction has been issued with respect to the Crown Entities which would
prevent or suspend the issuance, sale or delivery of the Units, the
effectiveness of the Registration Statement or the use of any Prospectus in any
jurisdiction referred to in Section 4(d) hereof; no action, suit or proceeding
is pending against or, to the best knowledge of the Partnership and the General
Partners, threatened against or affecting any of the Crown Entities before any
court or arbitrator or any governmental body, agency or official, domestic or
foreign, which, if adversely determined, would materially interfere with or
adversely affect the issuance of the Units or the subject matter of this
Agreement.
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(w) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which any of the Crown Entities is a party
or to which any of their respective properties is the subject which, if
determined adversely to such person, would individually or in the aggregate have
a material adverse effect on the properties, business, general affairs,
management, condition (financial or otherwise), financial position, results of
operations or prospects of the Crown Entities, taken as a whole; and, to the
best knowledge of the Partnership and the General Partners, no such proceedings
are threatened by governmental authorities or threatened by others.
(x) Each of the Crown Entities has good and marketable title to all
real and personal property owned by it, free and clear of all liens, claims,
encumbrances and title defects except (i) as described in the Prospectus and
(ii) such as do not materially interfere with the use of such properties as they
have been used in the past and are proposed to be used in the future as
described in the Prospectus.
(y) Each of the Crown Entities carries, or is covered by, insurance
in such amounts and covering such risks as is customarily obtained by businesses
similarly situated.
(z) None of the Crown Entities is, or at the Closing Date will be,
(i) a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" thereof, within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (ii) an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and the rules
and regulations thereunder.
(aa) Except as described in the Prospectus, the Crown Entities
possess, and operate in compliance in all material respects with, all
certificates, authorizations or permits issued by the appropriate local, state,
federal or foreign regulatory agencies or bodies necessary to conduct the
business currently (or, as described or contemplated in the Prospectus, to be)
operated by them, except for such certificates, authorizations or permits which,
if not obtained, would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect upon the ability of the Crown Entities
to conduct their businesses in all material respects as currently conducted and
as contemplated by the Prospectus to be conducted; and, except as described in
the Prospectus, none of the Crown Entities has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would be expected to have a
material adverse effect upon the ability of the Crown Entities to conduct their
businesses in all material respects as currently conducted and as contemplated
by the Prospectus to be conducted.
(bb) None of the Crown Entities has violated any environmental safety
or similar law or regulation applicable to its business relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"), lacks
any permits, licenses or other approvals required of them under applicable
Environmental Laws to own, lease and operate their respective properties and to
conduct their
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businesses in the manner described in the Prospectus, is violating any terms and
conditions of any such permit, license or approval or has permitted to occur any
event that allows, or after notice or lapse of time would allow, revocation or
termination of any such permit, license or approval or results in any other
impairment of their rights thereunder, which in each case might result, singly
or in the aggregate, in a material adverse effect on the condition (financial or
otherwise), results of operations or business of the Crown Entities, taken as a
whole.
(cc) None of the Crown Entities (i) has taken, and none of such
persons shall take, directly or indirectly, any action designed to cause or
result in, or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the Common Units
to facilitate the sale or resale of the Common Units in violation of any law,
rule or regulation or (ii) since the initial filing of the Registration
Statement, except as contemplated by this Agreement, (A) has sold, bid for,
purchased or paid anyone any compensation for soliciting purchases of the Common
Units or (B) has paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Partnership, except
for open market purchases of Common Units in connection with the exercise of
options to purchase Common Units under the Partnership's 1994 Unit Option Plan.
(dd) Immediately prior to the Closing Date, the Partnership will have
good and valid title to the Units to be sold by the Partnership hereunder, free
and clear of all liens, encumbrances, equities or claims (except as described in
the Prospectus); and, upon delivery of such Units and payment therefor pursuant
hereto, good and valid title to such Units, free and clear of all liens,
encumbrances, equities or claims (except as described in the Prospectus), will
pass to the Underwriters.
(ee) The Common Units are listed on the New York Stock Exchange (the
"NYSE") and the Units have been approved for listing on the NYSE, subject only
to official notice of issuance.
(ff) From September 30, 1998 through the date hereof, and except as
may otherwise be disclosed in the Prospectus, the Crown Entities have not
(i) issued or granted any securities, (ii) incurred any material liability or
obligation, direct or contingent, other than liabilities and obligations which
were incurred in the ordinary course of business, (iii) entered into any
material transaction not in the ordinary course of business or (iv) declared or
paid any dividend on its capital stock or made any distributions on its units
representing limited partner interests, as the case may be.
(gg) Each of the Crown Entities (i) makes and keeps accurate books and
records and (ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit preparation
of its financial statements in conformity with generally accepted accounting
principles and to maintain accountability for its assets, (C) access to its
assets is permitted only in accordance with management's general or specific
authorization and (D) the
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recorded accountability for its assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4. AGREEMENTS OF THE PARTNERSHIP. Each of the Partnership and the
General Partners covenant and agree with the Underwriters as follows:
(a) The Partnership shall comply with the provisions of and make all
requisite filings with the Commission pursuant to Rule 424(b) not later than the
Commission's close of business on the second Business Day following the
execution and delivery of this Agreement or, if applicable, such earlier time as
may be required by Rule 430A(a)(3) of the Rules and Regulations. So long as a
Prospectus is required to be delivered in connection with sales of the Units by
the Underwriters or dealers, the Partnership shall advise the Underwriters,
promptly after it receives notice thereof, of the time when any post-effective
amendment to the Registration Statement becomes effective. The Partnership
shall notify you promptly of any request by the Commission for any amendment of
or supplement to the Registration Statement or the Prospectus or for additional
information; the Partnership shall prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or the Prospectus which, in your opinion or our opinion, may be
reasonably necessary or advisable in connection with the distribution of the
Units; and the Partnership shall not file any amendment or supplement to the
Registration Statement or the Prospectus or, so long as a Prospectus is required
to be delivered in connection with sales of the Units by the Underwriters or a
dealer, file any information, documents or reports pursuant to the Exchange Act
without providing you with reasonable notice and opportunity to comment thereon
as permitted by the circumstances. The Partnership shall advise you promptly of
the issuance by the Commission or any State or other regulatory body of any stop
order or other order suspending the effectiveness of the Registration Statement,
suspending or preventing the use of the Prospectus or suspending the
qualification of the Units for offering or sale in any jurisdiction, or of the
institution of any proceedings for any such purpose; and the Partnership shall
use its best efforts to prevent the issuance of any stop order or other such
order and, should a stop order or other such order be issued, to obtain as soon
as possible the lifting thereof.
(b) The Partnership shall furnish to the Underwriters and to counsel
for the Underwriters a signed copy of the Registration Statement as originally
filed and each amendment thereto filed with the Commission, including all
consents and exhibits filed therewith, and shall furnish to the Underwriters
such number of conformed copies of the Registration Statement, as originally
filed and each amendment thereto, the Prospectus and all amendments and
supplements to any of such documents (including any document filed under the
Exchange Act and deemed to be incorporated by reference in the Prospectus), in
each case as soon as available and in such quantities as the Underwriters may
from time to time reasonably request.
(c) Within the time during which the Prospectus relating to the Units
is required to be delivered under the Act, the Partnership shall comply with all
requirements imposed upon it by the Act, as now and hereafter amended, and by
the Rules and Regulations, as from time to time in force, so far as is necessary
to permit the continuance of sales of or dealings in the Units as
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contemplated by the provisions hereof and by the Prospectus. If during such
period any event occurs as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the Prospectus or
file any document to comply with the Act and the Exchange Act, the Partnership
shall promptly notify you and shall amend the Registration Statement or
supplement the Prospectus or file any document (at the expense of the
Partnership) so as to correct such statement or omission or to effect such
compliance.
(d) The Partnership shall take or cause to be taken all necessary
action and furnish to whomever you may direct such information as may be
required in qualifying the Units for sale under the laws of such jurisdictions
in the United States as you shall designate, and to continue such qualifications
in effect for as long as may be necessary for the distribution of the Units;
except that in no event shall the Partnership or the General Partners be
obligated in connection therewith to qualify as a foreign limited partnership or
as a foreign corporation, or to execute a general consent to service of process.
(e) The Partnership shall make generally available to its security
holders (and shall deliver to the Underwriters), in the manner contemplated by
Rule 158(b) under the Act or otherwise, as soon as practicable but in any event
not later than 45 days after the end of its fiscal quarter in which the first
anniversary date of the Effective Date occurs (or not later than 90 days after
the end of such fiscal quarter if such fiscal quarter is the last fiscal quarter
of the fiscal year), an earnings statement satisfying the requirements of
Section 11(a) of the Act and covering a period of at least 12 consecutive months
beginning after the Effective Date.
(f) The Partnership shall timely complete all required filings and
otherwise fully comply in a timely manner with all provisions of the Exchange
Act and the Exchange Act Rules and Regulations.
(g) The Partnership and the General Partners shall not, directly or
indirectly, sell, offer to sell, contract to sell, grant any option to sell or
otherwise dispose of any Common Units or Subordinated Units, or any securities
convertible into or exchangeable for, or any rights to purchase or acquire,
Common Units or Subordinated Units (other than pursuant to the Partnership's
1994 Unit Option Plan), for a period of 60 days after the Effective Date without
the prior written consent of the Underwriters; provided that the Partnership may
issue Common Units under an effective shelf registration statement in connection
with acquisitions.
(h) The Partnership shall apply the net proceeds of the sale of the
Units to be sold by it as set forth in the Prospectus. The Partnership shall
take such steps as shall be necessary to ensure that none of the Crown Entities
shall become an "investment company" within the meaning of such term under the
Investment Company Act and the rules and regulations thereunder.
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(i) If this Agreement shall terminate or shall be terminated by the
Partnership pursuant to any provisions hereof (other than pursuant to Section 8
hereof) or if this Agreement shall be terminated by the Underwriters because of
any failure or refusal on the part of the Crown Entities to comply with the
terms or fulfill any of the conditions of this Agreement, the Partnership agrees
to reimburse the Underwriters for all out-of-pocket expenses (including fees and
expenses of counsel for the Underwriters) incurred by you in connection
herewith.
(j) The Partnership shall, on or prior to the Closing Date and the
Option Closing Date, cause the Units to be purchased on such date by the
Underwriters to be approved for listing on the NYSE, subject only to official
notice of issuance, and shall take such action as shall be necessary to comply
with the rules and regulations of the NYSE with respect to such Units.
(k) During the period of five years from the Effective Date, the
Partnership shall furnish to the Underwriters copies of all reports or other
communications furnished to unitholders and copies of any reports or financial
statements furnished to or filed with the Commission or the NYSE or any other
national securities exchange on which any class of securities of the Partnership
is listed.
5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. In addition to the
execution and delivery of the Price Determination Agreement, the obligations of
the Underwriters hereunder are subject to the accuracy, as of the date hereof
and the Closing Date (as if made at such Closing Date), of the representations
and warranties of the Crown Entities contained herein, to the performance by the
Partnership and the General Partners of their respective obligations hereunder
and to the following additional conditions:
(a) The Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 4(a) hereof, the Registration
Statement and all post-effective amendments to the Registration Statement shall
have become effective, all filings required by Rule 424 and Rule 430A of the
Rules and Regulations shall have been made and no such filings shall have been
made without the consent of the Underwriters; no stop order suspending the
effectiveness of the Registration Statement or any amendment or supplement
thereto or suspending the qualification of the Units for offering or sale in any
jurisdiction shall have been issued; no proceedings for the issuance of any such
order shall have been initiated or, to the Partnership's knowledge, threatened;
and any request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) shall have been
disclosed to you and complied with to your reasonable satisfaction.
(b) The Underwriters shall not have been advised by the Partnership
or the General Partners or shall not have discovered and disclosed to the
Partnership that the Registration Statement or the Prospectus or any amendment
or supplement thereto contains an untrue statement
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of fact which in your opinion, or in the opinion of counsel to the Underwriters,
is material, or omits to state a fact which, in your opinion, or in the opinion
of counsel to the Underwriters, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) On or prior to each of the Closing Date and the Option Closing
Date, you shall have received from Baker & Botts, L.L.P., counsel for the
Underwriters, such opinion or opinions with respect to the validity of the Units
and other related matters as you may reasonably request and such counsel shall
have received such documents and information as they reasonably request to
enable them to pass upon such matters.
(d) On each of the Closing Date and the Option Closing Date, there
shall have been furnished to you the opinion (addressed to the Underwriters) of
Andrews & Kurth L.L.P., special counsel for the Partnership and the General
Partners, dated such Closing Date, in form and substance satisfactory to the
Underwriters, with respect to the matters set forth in Exhibit B to this
Agreement.
(e) On each of the Closing Date and the Option Closing Date, there
shall have been furnished to you the opinion (addressed to the Underwriters) of
Ball Janik LLP, counsel to the Partnership and the General Partners, dated such
Closing Date, in form and substance satisfactory to the Underwriters, with
respect to the matters set forth in Exhibit C hereto.
(f) On each of the Closing Date and the Option Closing Date, there
shall have been furnished to you a certificate, dated such Closing Date and
addressed to you, signed on behalf of the Partnership by the President or the
Secretary and General Counsel and the Chief Financial Officer or Treasurer of HS
Corp., the general partner of the Managing General Partner, to the effect that
(i) the representations and warranties of the Partnership contained in this
Agreement are true and correct, as if made at and as of such Closing Date, and
the Partnership has complied with all the agreements and satisfied all the
conditions on its part to be complied with or satisfied at or prior to such
Closing Date; (ii) no stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the best of their knowledge, no
proceeding for that purpose has been initiated or threatened; (iii) the signers
of said certificate have carefully examined the Registration Statement and the
Prospectus, and any amendments or supplements thereto, and such documents
contain all statements and information required to be included therein, and do
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; (iv) since the Effective Date there has occurred no
event required to be set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth; and (v) no event
contemplated by subsection (h) of this Section 5 in respect of the Crown
Entities shall have occurred.
(g) On each of the Closing Date and the Option Closing Date, there
shall have been furnished to you by each of the General Partners a certificate,
dated such Closing Date and addressed to you, signed on behalf of the Special
General Partner by the President or the Secretary and General Counsel and the
Chief Financial Officer or Treasurer of the Special General Partner, and
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signed on behalf of the Managing General Partner by the President or the
Secretary and General Counsel and the Chief Financial Officer or Treasurer of HS
Corp., the general partner of the Managing General Partner, to the effect that
(i) the representations and warranties of such General Partner contained in this
Agreement are true and correct, as if made at and as of such Closing Date, and
such General Partner has complied with all the agreements and satisfied all the
conditions on its part to be complied with or satisfied at or prior to the
Closing Date and (ii) no event contemplated by subsection (h) of this Section 5
in respect of such General Partner has occurred.
(h) Since the Effective Date, none of the Crown Entities shall have
sustained any material loss or interference with its business by fire, flood,
explosion, accident or other calamity, whether or not covered by insurance, or
shall have become a party to or the subject of any litigation, court or
governmental action, investigation, order or decree which is materially adverse
to the Crown Entities as a whole; nor shall there have been a change in the
partners' capital, capital stock, short-term debt or long-term debt of the Crown
Entities, or any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general affairs,
operations, business, prospects, management, capitalization, financial
condition, results of operations or net worth of the Crown Entities, which loss,
litigation, change or development, in your reasonable judgment, shall be so
material and adverse as to render it impractical or inadvisable to proceed with
the payment for and delivery of the Units on the terms and in the manner
contemplated in the Prospectus.
(i) On each of the Closing Date and the Option Closing Date you shall
have received a letter from PricewaterhouseCoopers LLP, dated such Closing Date
and addressed to you, confirming that they are independent certified public
accountants within the meaning of the Act and the applicable published Rules and
Regulations, and stating, as of the date of such letter (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus as of a date not more
than five days prior to the date of such letter), the conclusions and findings
of such firm with respect to the financial information and other matters covered
by its letter delivered to you concurrently with the execution of this
Agreement, and confirming the conclusions and findings set forth in such prior
letter.
(j) On or prior to the date hereof, the Partnership shall have
furnished to you a letter substantially in the form of Exhibit D hereto from
Roger Krage and Richard Keller.
(k) You shall have been furnished by the Crown Entities such
additional documents and certificates as you or counsel for the Underwriters may
reasonably request.
(l) The Units to be purchased on each of the Closing Date and the
Option Closing Date by the Underwriters shall be approved for listing on the
NYSE, subject only to official notice of issuance.
Notwithstanding anything to the contrary provided in this Agreement, (a) if
Fremont Euro-Summit Limited does not purchase the Fremont Units as set forth on
Exhibit E hereto, the number
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of Firm Units that the Underwriters shall be obligated to purchase from the
Partnership shall be reduced by ______ and all references to Firm Units in this
Agreement shall refer to such lesser number of Common Units; and (b) if Peter W.
Stott or an entity controlled by him does not purchase the Stott Units as set
forth on Exhibit F hereto, the number of Firm Units that the Underwriters shall
be obligated to purchase from the Partnership shall be reduced by ______ and all
references to Firm Units in this Agreement shall refer to such lesser number of
Common Units.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The
Partnership shall furnish to you conformed copies of such opinions,
certificates, letters and other documents in such number as you shall reasonably
request. If any of the conditions specified in this Section 5 shall not have
been fulfilled, when and as required by this Agreement, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, each Closing Date, by you. Any such cancellation shall be without
liability of the Underwriters to the Crown Entities or any of their affiliates.
Notice of such cancellation shall be given to the Partnership in writing, or by
telegraph or telephone and confirmed in writing.
6. INDEMNIFICATION. (a) The Crown Entities will, jointly and severally,
indemnify and hold harmless the Underwriters, the directors, officers, employees
and agents of the Underwriters and each person, if any, who controls the
Underwriters within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from and against any and all losses, claims, liabilities, expenses
and damages (including, but not limited to, any and all investigative, legal and
other expenses reasonably incurred in connection with, and any and all amounts
paid in settlement of, any action, suit or proceeding between any of the
indemnified parties and any indemnifying parties or between any indemnified
party and any third party, or otherwise, or any claim asserted), as and when
incurred, to which the Underwriters, or any such person, may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus or any amendment or supplement to the
Registration Statement or the Prospectus or in any documents filed under the
Exchange Act and deemed to be incorporated by reference into the Prospectus,
(ii) the omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading or (iii) any act or failure to act or any alleged act or failure to
act by the Underwriters in connection with, or relating in any manner to, the
Units or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, liability, expense or damage arising out of or
based upon matters covered by clause (i) or (ii) above (provided that the Crown
Entities shall not be liable under this clause (iii) to the extent it is finally
judicially determined by a court of competent jurisdiction that such loss,
claim, liability, expense or damage resulted directly from any such acts or
failures to act undertaken or omitted to be taken by the Underwriters through
its gross negligence or willful misconduct); provided that the Crown Entities
will not be liable to the extent that such loss, claim, liability, expense or
damage (A) arises from the sale of the Units in the public offering
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to any person by the Underwriters and is based on an untrue statement or
omission or alleged untrue statement or omission made in reliance on and in
conformity with information relating to the Underwriters furnished in writing to
the Partnership by or on behalf of the Underwriters expressly for inclusion in
the Registration Statement or the Prospectus or (B) results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, such prospectus, which untrue statement or omission was completely
corrected in the Prospectus (as then amended or supplemented) if the
Underwriters sold Units to the person alleging such loss, claim, liability,
expense or damage without sending or giving, at or prior to the written
confirmation of such sale, a copy of the Prospectus (as then amended or
supplemented) if the Crown Entities had previously furnished copies thereof to
the Underwriters within a reasonable amount of time prior to such sale or such
confirmation, and the Underwriters failed to deliver the corrected Prospectus.
This indemnity agreement will be in addition to any liability that the Crown
Entities might otherwise have.
(b) The Underwriters will indemnify and hold harmless the Crown
Entities, each person, if any, who controls the Crown Entities within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, each
director of a General Partner and each officer of the Partnership or any General
Partner who signed the Registration Statement to the same extent as the
foregoing indemnity from the Crown Entities to the Underwriters, but only
insofar as losses, claims, liabilities, expenses or damages arise out of or are
based on any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information relating to the
Underwriters furnished in writing to the Partnership by or on behalf of the
Underwriters expressly for use in the Registration Statement or the Prospectus.
This indemnity will be in addition to any liability that the Underwriters might
otherwise have.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties under this Section 6, notify each such
indemnifying party in writing of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement,
the indemnifying party will be entitled to participate in and, to the extent
that it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly notified, to assume
the defense of the action, with counsel satisfactory to the indemnified party,
and after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b)
hereof, shall use its reasonable best efforts to
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cooperate with the indemnifying party in the defense of such action or claim.
The indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm admitted to practice in such jurisdiction at any one time for
all such indemnified party or parties, which firm shall be designated in writing
by such indemnified party or parties. All such fees, disbursements and other
charges will be reimbursed by the indemnifying party promptly as they are
incurred. An indemnifying party will not be liable for any settlement of any
action or claim effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding
relating to the matters contemplated by this Section 6 (whether or not any
indemnified party is a party thereto), unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising or that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Crown Entities or the
Underwriters, the Crown Entities and the Underwriters will contribute to the
total losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted, but after deducting any contribution received by the Crown
Entities from persons other than the Underwriters, such as persons who control
the Crown Entities within the meaning of the Act, officers of the Crown Entities
who signed the Registration Statement and directors of the General Partners, who
also may be liable for contribution) to which the Crown Entities and the
Underwriters may be subject in such proportion as shall be appropriate to
reflect the relative benefits received by the Crown Entities on the one hand and
the Underwriters on the other. The relative benefits received by the Crown
Entities on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Partnership bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the
20
<PAGE>
Prospectus Supplement. If, but only if, the allocation provided by the
foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Crown Entities, on the one hand, and the Underwriters, on
the other, with respect to the statements or omissions which resulted in such
loss, claim, liability, expense or damage, or action in respect thereof, as well
as any other relevant equitable considerations with respect to such offering.
Such relative fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by the Crown Entities or
the Underwriters, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Crown Entities and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 6(d) were to be determined
by pro rata allocation or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim, liability,
expense or damage, or action in respect thereof, referred to above in this
Section 6(d) shall be deemed to include, for purpose of this Section 6(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 6(d), the Underwriters shall not
be required to contribute any amount in excess of the underwriting discounts and
commissions received by it and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(d), any person who controls a
party to this Agreement within the meaning of the Act will have the same rights
to contribution as that party, and each officer of the Crown Entities who signed
the Registration Statement will have the same rights to contribution as the
Crown Entities, subject in each case to the provisions hereof. Any party
entitled to contribution, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim for contribution may
be made under this Section 6(d), will notify any such party or parties from whom
contribution may be sought, but the omission so to notify will not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 6(d). Except for a settlement entered
into pursuant to the last sentence of Section 6(c) hereof, no party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Crown Entities contained
in this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of the Underwriters,
(ii) acceptance of the Units and payment therefor or (iii) any termination of
this Agreement.
7. TERMINATION. The obligations of the Underwriters under this Agreement
may be terminated at any time on or prior to the Closing Date (or, with respect
to the Option Units, on or prior to the Option Closing Date), without liability
on the part of the Underwriters to the Crown Entities, if, prior to delivery and
payment for the Firm Units (or the Option Units, as the case may
21
<PAGE>
be), in the sole judgment of the Underwriters, (i) trading in any of the equity
securities of the Partnership shall have been suspended by the Commission, the
NASD or by the New York Stock Exchange, (ii) trading in securities generally on
the New York Stock Exchange shall have been suspended or materially limited or
minimum or maximum prices shall have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall have been imposed upon trading in securities
generally by such exchange or by order of the Commission or the NASD or any
court or other governmental authority, (iii) a general banking moratorium shall
have been declared by either Federal or New York State authorities or (iv) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred the effect of any of which is such as to make it, in the sole judgment
of the Underwriters, impracticable or inadvisable to market the Units on the
terms and in the manner contemplated by the Prospectus.
8. SUBSTITUTION OF UNDERWRITERS. If any one or more of the Underwriters
shall fail or refuse to purchase any of the Firm Units which it or they have
agreed to purchase hereunder, and the aggregate number of Firm Units which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate number of Firm Units, the other
Underwriters shall be obligated, severally, to purchase the Firm Units which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase, in the proportions which the number of Firm Units which they have
respectively agreed to purchase pursuant to Section 1 bears to the aggregate
number of Firm Units which all such non-defaulting Underwriters have so agreed
to purchase; provided that in no event shall the maximum number of Firm Units
which any Underwriter has become obligated to purchase pursuant to Section 1 be
increased pursuant to this Section 8 by more than one-ninth of the number of
Firm Units agreed to be purchased by such Underwriter without the prior written
consent of such Underwriter. If any Underwriter or Underwriters shall fail or
refuse to purchase any Firm Units and the aggregate number of Firm Units which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of the Firm Units and
arrangements satisfactory to the Underwriters and the Partnership for the
purchase of such Firm Units are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Partnership for the purchase or sale of any
Units under this Agreement. In any such case, either the Underwriters or the
Partnership shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken pursuant to this Section 8 shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement.
9. MISCELLANEOUS. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and, unless otherwise specified, shall be mailed
or delivered (a) if to the Crown Entities, at the office of Crown Pacific
Partners, L.P., 121 S.W. Morrison Street, Suite 1500, Portland, Oregon 97204
Attention: President, or (b) if to the Underwriters, at the offices of
22
<PAGE>
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019,
Attention: Corporate Finance Department. Any such notice shall be effective
only upon receipt. Any notice under Section 7 hereof may be made by telex or
telephone, but if so made shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Crown Entities and of the controlling persons, directors and
officers referred to in Section 6, and their respective successors and assigns,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Units from the Underwriters.
All representations, warranties and agreements of the Crown Entities
contained herein or in certificates or other instruments delivered pursuant
hereto, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Underwriters or any of its controlling
persons and shall survive delivery of and payment for the Units hereunder.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
OF SUCH STATE.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
This Agreement may not be amended or otherwise modified or any provision
hereof waived except by an instrument in writing signed by the Crown Entities
and the Underwriters.
23
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Crown Entities and the Underwriters.
Very truly yours,
CROWN PACIFIC PARTNERS, L.P.
By: CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, its
Managing General Partner
By: HS CORP. OF OREGON, its
General Partner
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
CROWN PACIFIC, LTD.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
By: HS CORP. OF OREGON, its
General Partner
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
24
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
By: CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, its
General Partner
By: HS CORP. OF OREGON, its
General Partner
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
Confirmed and accepted as of
the date first above-mentioned
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY INC.
By: PAINEWEBBER INCORPORATED
Name:
---------------------
Title:
---------------------
25
<PAGE>
EXHIBIT A
CROWN PACIFIC PARTNERS, L.P.
PRICE DETERMINATION AGREEMENT
December __, 1998
PaineWebber Incorporated
Salomon Smith Barney Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated December __, 1998
(the "Underwriting Agreement"), among the Crown Entities, PaineWebber
Incorporated and Salomon Smith Barney Inc. (the "Underwriters"). The
Underwriting Agreement provides for the purchase by the Underwriters from Crown
Pacific Partners, L.P. (the "Partnership"), subject to the terms and conditions
set forth therein, of an aggregate of [2,250,000] Common Units representing
limited partner interests in the Partnership (the "Firm Units"). This Agreement
is the Price Determination Agreement referred to in the Underwriting Agreement.
Capitalized terms used herein but not defined shall have the meanings assigned
to such terms in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the undersigned agree
as follows:
The public offering price per Common Unit for the Firm Units shall be
$______________.
The purchase price per Common Unit for the Firm Units to be paid by the
Underwriters shall be $_______________ representing an amount equal to the
public offering price set forth above, less $___________ per Common Unit.
The Crown Entities represent and warrant to the Underwriters that the
representations and warranties of the Crown Entities set forth in Section 3 of
the Underwriting Agreement are accurate, in all material respects, as though
expressly made at and as of the date hereof.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
OF SUCH STATE.
A-1
<PAGE>
If the foregoing is in accordance with your understanding of the agreement
between the Crown Entities and the Underwriters, please sign and return to the
Partnership a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement between the Crown Entities and the Underwriters in accordance with its
terms and the terms of the Underwriting Agreement.
Very truly yours,
CROWN PACIFIC PARTNERS, L.P.
By: CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, its
Managing General Partner
By: HS CORP. OF OREGON, its
General Partner
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
CROWN PACIFIC, LTD.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
By: HS CORP. OF OREGON, its
General Partner
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
A-2
<PAGE>
CROWN PACIFIC LIMITED PARTNERSHIP
By: CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, its
General Partner
By: HS CORP. OF OREGON, its
General Partner
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
Confirmed and accepted as of
the date first above-mentioned
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY INC.
By: PAINEWEBBER INCORPORATED
Name:
--------------------
Title:
--------------------
A-3
<PAGE>
EXHIBIT B
OPINION OF ANDREWS & KURTH L.L.P.
(a) Each of the Partnership, the Operating Partnership and the
Managing General Partner has been duly formed and is validly existing in good
standing as a limited partnership under the Delaware Act, with all necessary
partnership power and authority to own or lease its properties and conduct its
business, in each case in all material respects as described in the Prospectus.
(b) The Managing General Partner and the Special General Partner
are the sole general partners of the Partnership with 0.99% and 0.01%,
respectively, general partner interests in the Partnership; such general partner
interests are duly authorized by the Partnership Agreement and were validly
issued to each General Partner; and, except as provided in the Purchase Rights
Agreement, the Managing General Partner owns its general partner interest in the
Partnership free and clear of all liens, encumbrances, security interests,
charges or claims (i) in respect of which a financing statement under the
Uniform Commercial Code of the State of Oregon naming the Managing General
Partner as a debtor is on file in the offices of the Secretary of State of the
State of Oregon or (ii) otherwise known to us, without independent
investigation, other than those created by or arising under the Delaware Act.
(c) The Managing General Partner is the sole general partner of
the Operating Partnership with a 1.0101% general partner interest in the
Operating Partnership; such general partner interest is duly authorized by the
Operating Partnership Agreement and was validly issued to the Managing General
Partner; and the Managing General Partner owns such general partner interest
free and clear of all liens, encumbrances, security interests, charges or claims
(i) in respect of which a financing statement under the Uniform Commercial Code
of the State of Oregon naming the Managing General Partner as a debtor is on
file in the offices of the Secretary of State of the State of Oregon or
(ii) otherwise known to us, without independent investigation, other than those
created by or arising under the Delaware Act.
(d) At the Closing Date after giving effect to the issuance of
the Firm Units, the capitalization of the Partnership will consist of
____________ Common Units and 5,773,088 Subordinated Units, representing a 99%
limited partner interest in the Partnership, a 0.99% general partner interest
held by the Managing General Partner and a 0.01% general partner interest held
by the Special General Partner. All of the outstanding Subordinated Units and
Common Units of the Partnership have been duly authorized by the Partnership
Agreement, are validly issued and are fully paid and nonassessable (except as
nonassessability may be affected by matters described in the Prospectus under
the caption "The Partnership Agreement -- Limited Liability"). The
_____________ Units to be issued and sold to the Underwriters by the Partnership
hereunder and the limited partner interests represented thereby are duly
authorized by the Partnership Agreement and, when issued and delivered against
payment therefor as provided in the Underwriting
B-1
<PAGE>
Agreement, will be validly issued, fully paid and nonassessable (except as such
nonassessability may be affected by matters described in the Prospectus under
the caption "The Partnership Agreement -- Limited Liability"). The Underwriters
will acquire the Units to be issued and sold by the Partnership free and clear
of any liens, encumbrances, security interests, charges or claims (i) in respect
of which a financing statement under the Uniform Commercial Code of the State of
Oregon naming the Managing General Partner, the Partnership or the Operating
Partnership is on file in the office of the Secretary of State of the State of
Oregon or (ii) otherwise known to us, without independent investigation, except
as created by this Agreement or by the Underwriters for any person who acquires
an interest in the Units through the Underwriters or as provided by the Delaware
Act.
(e) The Partnership and CP Acquisition are the sole limited
partners of the Operating Partnership, with limited partner interests of
98.1219% and 0.868%, respectively; such limited partner interest is duly
authorized by the Operating Partnership Agreement, was validly issued in
accordance with the Operating Partnership Agreement and is fully paid and
nonassessable (except as such nonassessability may be affected by matters
described in the Prospectus under the caption "The Partnership Agreement --
Limited Liability"); and the Partnership and CP Acquisition own such limited
partner interests in the Operating Partnership free and clear of all liens,
encumbrances, security interests, equities, charges or claims (i) in respect of
which a financing statement under the Uniform Commercial Code of the State of
Oregon naming the Partnership as a debtor is on file in the offices of the
Secretary of State of the State of Oregon or (ii) otherwise known to us, without
independent investigation, other than those created by or arising under the
Delaware Act.
(f) Except as described in the Prospectus or pursuant to the
Purchase Rights Agreement, there are no preemptive rights or other rights to
subscribe for or to purchase, nor any restriction upon the voting or transfer
of, any limited partner interests in the Partnership or the Operating
Partnership pursuant to either of the Partnership Agreements or, to our
knowledge, any agreement or other instrument to which the Partnership or the
Operating Partnership is a party or by which either of them may be bound. To
our knowledge, except as described in the Prospectus, neither the filing of the
Registration Statement nor the offering or sale of the Units as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any Units or other
securities of the Partnership. The Common Units and the Subordinated Units and
the Partnership Agreements conform in all material respects to the descriptions
thereof contained in the Prospectus. To our knowledge, except as disclosed in
the Prospectus, there are no outstanding options or warrants to purchase any
Common Units or Subordinated Units. The Partnership has all requisite power and
authority to issue, sell and deliver the Units to be sold by it, in accordance
with and upon the terms and conditions set forth in this Agreement and in the
Registration Statement and Prospectus. All action required to be taken by the
Partnership for the authorization, issuance, sale and delivery of the Units to
be sold by it has been validly taken.
B-2
<PAGE>
(g) This Agreement has been duly authorized, executed and
delivered by the Partnership and the Operating Partnership.
(h) The Partnership Agreement has been duly authorized, executed
and delivered by the General Partners and is a valid and legally binding
agreement of the General Partners, enforceable against the General Partners in
accordance with its terms; the Operating Partnership Agreement has been duly
authorized, executed and delivered by the parties thereto and is a valid and
legally binding agreement of such parties, enforceable against such parties in
accordance with its terms; PROVIDED THAT, with respect to each agreement
described in this paragraph (h), the enforceability thereof may be limited by
(i) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws relating to or affecting creditors' rights and remedies generally,
(ii) public policy, applicable law relating to fiduciary duties and the judicial
imposition of an implied covenant of good faith and fair dealing and
(iii) general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(i) Neither the issuance and sale by the Partnership of the
Units to be sold by it hereunder, nor the execution, delivery and performance of
this Agreement by the Partnership or the Operating Partnership, as the case may
be, nor the consummation of the transactions contemplated herein and therein at
any Closing Date, will conflict with or result in any violation of the
Partnership Agreement or the Operating Partnership Agreement, nor will such
action result in any violation of any law, statute, rule, regulation or, to our
knowledge, order of any court applicable to any of the Crown Entities or having
jurisdiction over any of them or any of their properties or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of the Crown Entities. No permit, consent, approval,
authorization or order under the Delaware Act or the Delaware General
Corporation Law is required in connection with the consummation by the Crown
Entities of the transactions contemplated hereby, except such as have been
obtained.
(j) None of the Crown Entities is (a) a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" thereof, within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or
(b) an "investment company" within the meaning of the Investment Company Act of
1940, and the rules and regulations thereunder.
(k) The Common Units are listed on the NYSE, and the Units have
been approved for listing on the NYSE, subject only to official notice of
issuance and evidence of satisfactory distribution.
(l) The Registration Statement was declared effective under the
Act on October 21, 1997; the Prospectus and Prospectus Supplement were filed
with the Commission pursuant to subparagraph (2) of Rule 424(b) of the Rules and
Regulations on December __, 1998; and to our knowledge no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been initiated or threatened by the Commission.
B-3
<PAGE>
(m) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Partnership prior to the
date hereof (other than the financial statements and related schedules and other
statistical data included therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements of the
Act and the Rules and Regulations.
(n) All summaries and descriptions of statutes, regulations and
case law in the sections of the Prospectus captioned "Conflicts of Interest and
Fiduciary Responsibility" and "The Partnership Agreement" are accurate in all
material respects and fairly present in all material respects the information
required to be shown. To our knowledge, the description of the investigation by
the United States Fish and Wildlife Service in the section of the Form 10-K
captioned "Business - Federal and State Regulation" is accurate in all respects
and fairly presents in all material respects the information required to be
shown. To our knowledge, there is no legal or governmental proceeding pending
or threatened to which the Partnership or the Operating Partnership is a party
or to which any of their respective properties is subject that is required to be
disclosed in the Prospectus and is not so disclosed.
(o) The statements contained in the Prospectus under the caption
"Tax Considerations," insofar as they describe federal statutes, rules and
regulations, constitute a fair summary thereof that is accurate in all material
respects. The opinion of Andrews & Kurth L.L.P. filed as Exhibit 8.1 to the
Registration Statement is confirmed and you may rely upon such opinion as if it
were addressed to you.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Crown Entities and
the independent public accountants of the Crown Entities and your
representatives, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such counsel is not
passing upon, and does not assume responsibility for the accuracy, completeness
or fairness of, any portion of the Registration Statement and the Prospectus, as
amended or supplemented (except to the extent specified in such counsel's
opinion), nothing has come to the attention of such counsel that cause such
counsel to believe that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Partnership prior to such Closing Date
(other than (i) the financial statements included or incorporated by reference
therein, including the notes and schedules thereto and the auditors' report
thereon, (ii) the other historical, pro forma and projected financial
information and the statistical and accounting information included or
incorporated by reference therein and (iii) the exhibits thereto, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that, as of its
date and as of the Closing Date, the Prospectus or any further amendment or
supplement thereto made by the Partnership prior to such Closing Date (other
than (i) the financial statements included or incorporated by reference therein,
including the notes and schedules thereto and the auditors' report thereon and
(ii) the other historical, pro forma and projected financial information and the
statistical and accounting information included or incorporated by reference
therein, as to which such counsel
B-4
<PAGE>
need express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may (i) rely in respect of
matters of fact upon certificates of the Partnership and the Operating
Partnership and of officers and employees of the General Partners and upon
information obtained from public officials, (ii) assume that the signatures on
all documents examined by such counsel are genuine and (iii) state that they
express no opinion with respect to state or local taxes or tax statutes to which
any of the limited partners of the Partnership, the General Partners, the
Partnership or the Operating Partnership may be subject, (iv) except to the
extent provided in paragraphs (b), (c), (d) and (e) hereof, with respect to
ownership of partnership interests, state that they express no opinion with
respect to the title of any of the General Partners, the Partnership or the
Operating Partnership to any real or personal property and that such counsel has
not made any review of specific property or facilities or title files relating
to any such properties, (v) state that their opinion is limited to federal laws,
the Delaware Act and the Delaware General Corporation Law and (vi) state that,
with respect to the factual matters on which its opinion in the second sentence
of Paragraph (n) is based, such counsel has relied solely on the facts disclosed
in the memorandum dated ________, 1998 to such counsel from Bogle & Gates,
L.L.P. Such counsel may also provide that the foregoing opinions are subject to
the effect of generally applicable rules of law that may, where less than all of
a contract may be enforceable, limit the enforceability of the balance of the
contract to circumstances in which the unenforceable portion is not an essential
part of the agreed exchange.
In rendering such opinion, such counsel shall state that all
references in their opinion to the Underwriting Agreement shall include the
Price Determination Agreement.
B-5
<PAGE>
EXHIBIT C
OPINION OF BALL JANIK LLP
(a) The Partnership is duly qualified or registered as a foreign
limited partnership for the transaction of business under the laws of the States
of Oregon and Idaho and to our knowledge, such jurisdictions are the only
jurisdictions in which the character of the business conducted by the
Partnership or the location of the properties owned or leased by it make such
qualification or registration necessary (except where the failure to so qualify
or register could not reasonably be expected to have a material adverse effect
on the condition (financial or otherwise), results of operations or business of
the Crown Entities, taken as a whole, or to subject the Partnership or the
limited partners of the Partnership to any material liability or disability).
(b) The Operating Partnership is duly qualified or registered as
a foreign limited partnership for the transaction of business under the laws of
the States of California, Colorado, Washington, Oregon, Montana, Utah, Idaho and
Arizona and to our knowledge, such jurisdictions are the only jurisdictions in
which the character of the business conducted by the Operating Partnership or
the location of the properties owned or leased by it make such qualification or
registration necessary (except where the failure to so qualify or register could
not reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), results of operations or business of the Crown
Entities, taken as a whole, or to subject the Operating Partnership or
Partnership to any material liability or disability).
(c) Each of the Special General Partner, HS Corp., CP
Acquisition and CP Air has been duly incorporated and is validly existing in
good standing as a corporation under the laws of the State of Oregon. Each of
the Managing General Partner and the Special General Partner has all necessary
partnership or corporate power and authority to own or lease its properties and
conduct its business and to execute and deliver this Agreement and perform its
obligations hereunder. The Managing General Partner is duly qualified or
registered as a foreign limited partnership for the transaction of business
under the laws of the States of California, Oregon, Utah, Washington, Montana
and Idaho; the Special General Partner is duly qualified or registered as a
foreign corporation for the transaction of business and is in good standing
under the laws of the State of Idaho; and to our knowledge, such jurisdictions
are the only jurisdictions in which the character of the business conducted by
the General Partners or the location of the properties owned or leased by them
make such qualification or registration necessary (except where the failure to
so qualify or register could not reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), results of operations
or business of the Crown Entities, taken as a whole, or to subject the
Partnership or the limited partners of the Partnership to any material liability
or disability).
(d) Except as provided in the Purchase Rights Agreement, the
Special General Partner owns its general partner interest in the Partnership
free and clear of all liens,
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<PAGE>
encumbrances, security interests, equities, charges or claims (other than those
created by or arising under the Delaware Act) known to us without independent
investigation other than a search for financing statements under the Uniform
Commercial Code of the State of Oregon on file in the offices of the Secretary
of State of the State of Oregon as of ___________, 1998, naming the Special
General Partner as a debtor.
(e) HS Corp. and Fremont Timber are the sole general partners of
the Managing General Partner with 0.3% and 0.7% general partner interests,
respectively; such general partner interests are duly authorized by the Second
Amended and Restated Agreement of Limited Partnership of the Managing General
Partner and were validly issued to each of HS Corp. and Fremont Timber; and,
except as provided in the Purchase Rights Agreement, HS Corp. owns its general
partner interest in the Managing General Partner free and clear of all liens,
encumbrances, security interests, equities, charges or claims (other than those
created by or arising under the Delaware Act) known to us without independent
investigation other than a search for financing statements under the Uniform
Commercial Code of the State of Oregon on file in the offices of the Secretary
of State of the State of Oregon as of _____________, 1998, naming HS Corp. as a
debtor.
(f) Fremont Timber, Stott and Krage are the sole limited
partners of the Managing General Partner, with 73.9%, 23.2% and 1.9% limited
partner interests, respectively; such limited partner interests are duly
authorized by the Second Amended and Restated Agreement of Limited Partnership
of the Managing General Partner, were validly issued in accordance therewith and
are fully paid; and, except as provided in the Purchase Rights Agreement, Stott
and Krage own their respective limited partner interests in the Managing General
Partner free and clear of all liens, encumbrances, security interests, equities,
charges or claims (other than those created by or arising under the Delaware
Act) known to us without independent investigation other than searches for
financing statements under the Uniform Commercial Code of the State of Oregon on
file in the offices of the Secretary of State of the State of Oregon as of
____________, 1998, naming either of Stott or Krage as a debtor.
(g) Except as provided in the Purchase Rights Agreement, all of
the outstanding capital stock of HS Corp. is owned by Stott and Krage free and
clear of all liens, encumbrances, security interests, equities, charges or
claims known to us without independent investigation other than searches for
financing statements under the Uniform Commercial Code of the State of Oregon on
file in the offices of the Secretary of State of the State of Oregon as of
___________, 1998, naming either of Stott or Krage as a debtor. All of the
outstanding capital stock of the Special General Partner is owned by Fremont,
Stott and Krage, is duly authorized and validly issued and is fully paid and
nonassessable. Except as provided in the Purchase Rights Agreement, all of the
outstanding capital stock of the Special General Partner owned by Stott and
Krage is owned by them free and clear of all liens, encumbrances, security
interests, equities, charges or claims known to us without independent
investigation other than searches for financing statements under the Uniform
Commercial Code of the State of Oregon on file in the offices of the Secretary
of State of the State of Oregon as of ___________, 1998, naming either of Stott
or Krage as a debtor.
C-2
<PAGE>
(h) All of the outstanding capital stock of CP Acquisition is
duly authorized, validly issued, fully paid and nonassessable and is owned by CP
Air free and clear of all liens, encumbrances, security interests, equities,
charges or claims known to us without independent investigation other than a
search for financing statements under the Uniform Commercial Code of the State
of Oregon on file in the offices of the Secretary of State of the State of
Oregon as of _____________, 1998, naming CP Air as a debtor. All of the
outstanding capital stock of CP Air is duly authorized, validly issued, fully
paid and nonassessable and is owned by the Partnership free and clear of all
liens, encumbrances, security interests, equities, charges or claims known to us
without independent investigation other than a search for financing statements
under the Uniform Commercial Code of the State of Oregon on file in the offices
of the Secretary of State of the State of Oregon as of ______________, 1998,
naming the Partnership as a debtor.
(i) Except as described in the Prospectus or pursuant to the
Purchase Rights Agreement, there are no preemptive rights or other rights to
subscribe for or to purchase, nor any restrictions upon the voting or transfer
of, any limited partner interests or shares in any of the Crown Entities
pursuant to either of the Partnership Agreements, any articles or certificates
of incorporation or other governing documents or, to our knowledge, any
agreement or other instrument to which any of the Crown Entities is a party or
by which any of them may be bound. To our knowledge, neither the filing of the
Registration Statement nor the offering or sale of the Units as contemplated by
this Agreement gives rise to any rights, other than those which have been waived
or satisfied, for or relating to the registration of any Units or other
securities of the Partnership. To our knowledge, except as disclosed in the
Prospectus, there are no outstanding options or warrants to purchase any Common
Units or Subordinated Units.
(j) This Agreement has been duly authorized, executed and
delivered by each of the General Partners.
(k) Neither the issuance and sale by the Partnership of the
Units to be sold by it hereunder nor the execution, delivery and performance of
this Agreement by the Crown Entities which are parties thereto, nor the
consummation of the transactions contemplated herein, will conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under (or an event which, with notice or lapse of time or
both, would constitute such a default), any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument known to us to which
any of the Crown Entities is a party or by which any of them is bound or to
which any of the property or assets of any of them is subject, nor will such
action result in any violation of the provisions of the certificate of
incorporation, bylaws, agreement of limited partnership (excluding the
Partnership Agreements), or other governing documents of any of the Crown
Entities or any law, statute, rule, regulation or, to our knowledge, order of
any court applicable to any of the Crown Entities or having jurisdiction over
any of them or any of their properties or result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of the
Crown Entities. Other than (i) permits, consents, approvals and similar
authorizations required under the Act and the securities or "Blue Sky" laws of
certain jurisdictions, (ii) such permits, consents, approvals and authorizations
which have been obtained and (iii) as set
C-3
<PAGE>
forth or contemplated in the Prospectus, no permit, consent, approval,
authorization or order of any court, governmental agency or body of the State of
Oregon or the United States is required in connection with the consummation by
the Crown Entities of the transactions contemplated hereby.
(l) To our knowledge, none of the Crown Entities is in
(i) breach or violation of the provisions of its agreement of limited
partnership, charter or bylaws or (ii) default (and no event has occurred which,
with notice or lapse of time or both, would constitute such a default) in the
due performance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of its properties is
subject, which default could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), results of operations or
business of the Crown Entities, taken as a whole.
(m) To our knowledge, other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending or threatened to which
any of the Crown Entities is a party or of which any of their respective
properties is the subject which, if determined adversely to such person,
(i) would individually or in the aggregate reasonably be expected to have a
material adverse effect on the condition (financial or otherwise), results of
operations or business of the Crown Entities, taken as a whole, or (ii) would
impair or call into question the validity of this Agreement, the performance by
any of the Crown Entities of their obligations under this Agreement or the
transactions contemplated hereby.
(n) Except as described in the Prospectus, to our knowledge,
the Crown Entities possess all certificates, authorizations or permits issued by
the appropriate local, state or federal regulatory agencies or bodies necessary
to conduct the businesses currently (or, as described or contemplated in the
Prospectus, to be) operated by them, except for such certificates,
authorizations or permits which, if not obtained, would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon the condition (financial or otherwise), results of operations or business
of the Crown Entities, taken as a whole; and, to our knowledge, none of the
Crown Entities has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would reasonably be expected to have a material adverse
effect upon the condition (financial or otherwise), results of operations or
business of the Crown Entities, taken as a whole.
(o) All summaries and descriptions of statutes and regulations
pertaining to log export restrictions, endangered species protection and
environmental protection and of governmental proceedings pertaining to the Crown
Entities' sourcing areas in the section of the Prospectus captioned "Risk
Factors -- Risks Inherent in the Partnership's Business," and in the section of
the Form 10-K captioned "Business -- Federal and State Regulation" are accurate
in all material respects and fairly present in all material respects the
information required to be shown. To our knowledge, there is no legal or
governmental proceeding pending or threatened to which any of the Crown Entities
is a party or to which any of their respective properties is subject that is
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<PAGE>
required to be disclosed in the Prospectus and is not so disclosed. To our
knowledge, there are no contracts or other documents that are required to be
summarized or described in the Prospectus or filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations that have not
been summarized or described in the Prospectus or filed as exhibits to the
Registration Statement.
In addition, such counsel shall state that it has participated in
conferences with officers and other representatives of the Crown Entities and
the independent public accountants of the Crown Entities and your
representatives, at which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although such counsel is not
passing upon, and does not assume responsibility for the accuracy, completeness
or fairness of, any portion of the Registration Statement and the Prospectus, as
amended or supplemented (except to the extent specified in such counsel's
opinion), nothing has come to the attention of such counsel that causes such
counsel to believe that as of its effective date, the Registration Statement or
any further amendment thereto made by the Partnership prior to each Closing Date
(other than (i) the financial statements included or incorporated by reference
therein, including the notes and schedules thereto and the auditors' report
thereon, (ii) the other historical, pro forma and projected financial
information and the statistical and accounting information included or
incorporated by reference therein and (iii) the exhibits thereto, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that, as of its
date and as of each Closing Date, the Prospectus or any further amendment or
supplement thereto made by the Partnership prior to such Closing Date (other
than (i) the financial statements included or incorporated by reference therein,
including the notes and schedules thereto and the auditors' report thereon and
(ii) the other historical, pro forma and projected financial information and the
statistical and accounting information included or incorporated by reference
therein, as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may (i) rely in respect of
matters of fact upon certificates of the Crown Entities and of officers and
employees of the General Partners and upon information obtained from public
officials, (ii) rely with respect to due qualification and good standing in
states other than Oregon on certificates of public officials of such states,
(iii) assume that all documents submitted to them as originals are authentic,
that all copies submitted to them conform to the originals thereof, and that the
signatures on all documents examined by such counsel are genuine, (iv) state
that their opinion is limited to federal laws (excluding, with respect to the
opinions contained in paragraphs (a) - (n) the federal securities laws), and the
laws of the State of Oregon, (v) rely wholly upon (without independent
investigation), and solely with respect to any matters covered by, the opinion
of Saltman & Stevens addressed to the Underwriters and such counsel with respect
to the opinion contained in paragraph (o) hereof relating to summaries and
descriptions of statutes and regulations pertaining to log export restrictions
and governmental proceedings pertaining to the Crown Entities' sourcing areas,
and (vi) state that any opinion which is given "to
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<PAGE>
their knowledge" is based solely upon matters actually known to attorneys of
their firm who are or have been regularly engaged in representation of the Crown
Entities and their predecessors and affiliates.
In rendering such opinion, such counsel shall state that all
references in their opinion to the Underwriting Agreement shall include the
Price Determination Agreement.
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<PAGE>
EXHIBIT D
[Letterhead of officer or director]
Crown Pacific Partners, L.P.
PUBLIC OFFERING OF COMMON UNITS
December __, 1998
PaineWebber Incorporated
Salomon Smith Barney Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among Crown Pacific
Partners, L.P., a Delaware limited partnership (the "Partnership"), Crown
Pacific, Ltd., Crown Pacific Management Limited Partnership, Crown Pacific
Limited Partnership and you (the "Underwriters"), relating to an underwritten
public offering of common units representing limited partner interests (the
"Common Units"), of the Partnership.
In consideration for the Underwriters entering into the Underwriting
Agreement, the undersigned hereby agrees that the undersigned will not, for a
period of 60 days after the date of the Prospectus (as defined in the
Underwriting Agreement), without the prior written consent of the Underwriters,
offer to sell, sell, contract to sell, grant any option to sell, or otherwise
dispose of, any Common Units or Subordinated Units.
If for any reason the Underwriting Agreement is terminated before the
Closing Date (as defined in the Underwriting Agreement), the agreement set forth
above shall likewise be terminated.
Yours very truly,
[Signature of officer or director]
[Name and address of officer or director]
D-1
<PAGE>
EXHIBIT E
PaineWebber Incorporated
Salomon Smith Barney Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among Crown Pacific
Partners, L.P., a Delaware limited partnership (the "Partnership"), Crown
Pacific, Ltd., Crown Pacific Management Limited Partnership, Crown Pacific
Limited Partnership, PaineWebber Incorporated and Salomon Smith Barney Inc.
(collectively with PaineWebber Incorporated, the "Underwriters"), relating to an
underwritten public offering (the "Offering") of common units representing
limited partner interests (the "Common Units"), of the Partnership.
Simultaneously with the closing of the Offering, the Underwriters agree,
severally, to sell to Fremont Euro-Summit Limited, and Fremont Euro-Summit
Limited agrees to purchase from the Underwriters, at a price of $ ___ per Unit
(which is the purchase price per Common Unit paid by the Underwriters to the
Partnership in the Offering), ________ Common Units (the "Fremont Units").
In consideration for the Underwriters entering into the Underwriting
Agreement, the undersigned hereby agrees that the undersigned will not, for a
period of 60 days after the date of the Prospectus (as defined in the
Underwriting Agreement), without the prior written consent of the Underwriters,
offer to sell, sell, contract to sell, grant any option to sell, or otherwise
dispose of, the Fremont Units, except to affiliates (as defined in Rule 405 of
the Act); provided that such affiliate agrees to execute a similar letter.
Fremont Euro-Summit Limited represents and warrants that it is purchasing the
Fremont Units for investment purposes only and has no present intention to
resell the Fremont Units.
Yours very truly,
FREMONT EURO-SUMMIT LIMITED
By:
Name:
Title:
E-1
<PAGE>
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY INC.
By: PAINEWEBBER INCORPORATED
Name:
Title:
E-2
<PAGE>
EXHIBIT F
PaineWebber Incorporated
Salomon Smith Barney Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement") among Crown Pacific
Partners, L.P., a Delaware limited partnership (the "Partnership"), Crown
Pacific, Ltd., Crown Pacific Management Limited Partnership, Crown Pacific
Limited Partnership, PaineWebber Incorporated and Salomon Smith Barney Inc.
(collectively with PaineWebber Incorporated, the "Underwriters"), relating to an
underwritten public offering (the "Offering") of common units representing
limited partner interests (the "Common Units"), of the Partnership.
Simultaneously with the closing of the Offering, the Underwriters agree,
severally, to sell to Peter W. Stott or an entity wholly owned by him, and
Peter W. Stott agrees to purchase from the Underwriters, at a price of $ ___ per
Unit (which is the purchase price per Common Unit paid by the Underwriters to
the Partnership in the Offering), ________ Common Units (the "Stott Units").
In consideration for the Underwriters entering into the Underwriting
Agreement, the undersigned hereby agrees that the undersigned will not, for a
period of 60 days after the date of the Prospectus (as defined in the
Underwriting Agreement), without the prior written consent of the Underwriters,
offer to sell, sell, contract to sell, grant any option to sell, or otherwise
dispose of, any Common Units (including the Stott Units) or Subordinated Units,
except to affiliates (as defined in Rule 405 of the Act); provided that such
affiliate agrees to execute a similar letter. Mr. Stott represents and warrants
that he is purchasing the Stott Units for investment purposes only and has no
present intention to resell the Stott Units.
Yours very truly,
PETER W. STOTT
------------------------------------------------
F-1
<PAGE>
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY INC.
By: PAINEWEBBER INCORPORATED
Name:
Title:
F-2
<PAGE>
<PAGE>
EXHIBIT 10.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACILITY LEASE (IDAHO)
Dated November 18, 1998
Between
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Trustee
under Crown Pacific Trust No. 981
Lessor
And
CROWN PACIFIC LIMITED PARTNERSHIP
Lessee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bonner's Ferry, Idaho
This Facility Lease and the rentals and other sums due and to become due
hereunder have been assigned to and are subject to a security interest in favor
of First Security Bank, National Association, as Indenture Trustee under a Trust
Indenture and Security Agreement dated as of October 15, 1998 between said
Indenture Trustee and the Owner-Trustee, as Debtor. Information concerning such
security interest may be obtained from the Indenture Trustee at its address set
forth in Section 20 of this Facility Lease.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION HEADING PAGE
<S> <C> <C>
SECTION 1. INTERPRETATION OF THIS LEASE . . . . . . . . . . . . . . . . . .
(a) Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Accounting Principles. . . . . . . . . . . . . . . . . . . . . .
(c) Directly or Indirectly . . . . . . . . . . . . . . . . . . . . .
SECTION 2. ACCEPTANCE OF LEASED PROPERTY. . . . . . . . . . . . . . . . . .
SECTION 3. TERM OF LEASE. . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 4. RENT PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Rent for Facility. . . . . . . . . . . . . . . . . . . . . . . .
(b) Rent for Site Lease Property . . . . . . . . . . . . . . . . . .
(c) Supplemental Rent. . . . . . . . . . . . . . . . . . . . . . . .
(d) Place and Manner of Payment. . . . . . . . . . . . . . . . . . .
(e) Overdue Payments . . . . . . . . . . . . . . . . . . . . . . . .
(f) Adjustment of Rent . . . . . . . . . . . . . . . . . . . . . . .
(g) Verification of Rental Adjustments . . . . . . . . . . . . . . .
SECTION 5. INDEMNITIES. . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 6. LESSEE'S COVENANTS . . . . . . . . . . . . . . . . . . . . . . .
Section 6.1. Nature of Business . . . . . . . . . . . . . . . . . . . . . . .
Section 6.2. Limitations on Current Debt and Funded Debt. . . . . . . . . . .
Section 6.3. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . .
Section 6.4. Mergers and Consolidations . . . . . . . . . . . . . . . . . . .
Section 6.5. Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . .
Section 6.6. Limitation on Harvesting . . . . . . . . . . . . . . . . . . . .
Section 6.7. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 6.8. Transactions with Affiliates . . . . . . . . . . . . . . . . . .
Section 6.9. Multiemployer Plan Liability and Termination of Pension
Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 6.10. Changes in Status of Subsidiaries. . . . . . . . . . . . . . . .
Section 6.11. Certain Notices. . . . . . . . . . . . . . . . . . . . . . . . .
Section 6.12. Section 6 Definitions. . . . . . . . . . . . . . . . . . . . . .
Section 6.13. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 7. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Required Insurance Coverages and Limits. . . . . . . . . . . . .
(b) Adjustment and Payment of Losses . . . . . . . . . . . . . . . .
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<PAGE>
(c) Evidence of Insurance. . . . . . . . . . . . . . . . . . . . . .
(d) Application of Insurance Proceeds. . . . . . . . . . . . . . . .
(e) Insurance for Own Account. . . . . . . . . . . . . . . . . . . .
SECTION 8. MAINTENANCE; MAINTENANCE COSTS AND WARRANTIES; REPLACEMENT
OF PARTS; ALTERATIONS; MODIFICATIONS AND ADDITIONS . . . . . . .
(a) Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Maintenance Costs and Warranties . . . . . . . . . . . . . . . .
(c) Replacement of Parts and Components. . . . . . . . . . . . . . .
(d) Required Alterations . . . . . . . . . . . . . . . . . . . . . .
(e) Optional Alterations . . . . . . . . . . . . . . . . . . . . . .
(f) Title to Parts . . . . . . . . . . . . . . . . . . . . . . . . .
(g) Option to Purchase Additional Parts and Optional
Alterations. . . . . . . . . . . . . . . . . . . . . . . . . .
(h) Reports of Alterations . . . . . . . . . . . . . . . . . . . . .
(i) Other Parties Not Obligated to Maintain or Repair. . . . . . . .
SECTION 9. LOCATION AND USE; NO ASSIGNMENT BY LESSEE. . . . . . . . . . . .
(a) Location and Use . . . . . . . . . . . . . . . . . . . . . . . .
(b) No Assignment by Lessee; Permitted Subleases . . . . . . . . . .
SECTION 10. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 11. OWNERSHIP AND MARKING. . . . . . . . . . . . . . . . . . . . . .
(a) Ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Facility Personal Property . . . . . . . . . . . . . . . . . . .
(c) Marking. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 12. DISCLAIMER OF WARRANTIES; NET LEASE. . . . . . . . . . . . . . .
(a) Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . .
(b) Net Lease; Non-Terminability . . . . . . . . . . . . . . . . . .
SECTION 13. CASUALTY OCCURRENCES; CONDEMNATION; EARLY
TERMINATION; ETC . . . . . . . . . . . . . . . . . . . . . . . .
(a) Casualty Occurrence. . . . . . . . . . . . . . . . . . . . . . .
(b) Certain Government Requisitions. . . . . . . . . . . . . . . . .
(c) Application of Payments with Respect to a Casualty
Occurrence . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) Early Termination. . . . . . . . . . . . . . . . . . . . . . . .
SECTION 14. ASSIGNMENT BY OWNER-TRUSTEE. . . . . . . . . . . . . . . . . . .
(a) Right to Assign. . . . . . . . . . . . . . . . . . . . . . . . .
(b) Obligation and Right of Assignee . . . . . . . . . . . . . . . .
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<PAGE>
(c) Amendments; Exercise of Remedies . . . . . . . . . . . . . . . .
SECTION 15. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Events of Default. . . . . . . . . . . . . . . . . . . . . . . .
(b) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 16. RETURN OF FACILITY TO OWNER-TRUSTEE. . . . . . . . . . . . . . .
(a) Surrender at Site. . . . . . . . . . . . . . . . . . . . . . . .
(b) Engineer's Report. . . . . . . . . . . . . . . . . . . . . . . .
(c) Environmental Report . . . . . . . . . . . . . . . . . . . . . .
(d) Storage. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 17. [INTENTIONALLY LEFT BLANK] . . . . . . . . . . . . . . . . . . .
SECTION 18. FINANCIAL STATEMENTS AND REPORTS; INSPECTION AND
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . .
SECTION 19. OPTIONS TO RENEW AND PURCHASE. . . . . . . . . . . . . . . . . .
(a) Determination of Fair Market Sales Value and Fair Market
Rental Value . . . . . . . . . . . . . . . . . . . . . . . . .
(b) End of Term Options to Purchase. . . . . . . . . . . . . . . . .
(c) End of Term Options to Renew . . . . . . . . . . . . . . . . . .
(d) Casualty Value During Renewal Term . . . . . . . . . . . . . . .
(e) Casualty Occurrence. . . . . . . . . . . . . . . . . . . . . . .
(f) Early Purchase Option. . . . . . . . . . . . . . . . . . . . . .
SECTION 20. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .
(a) No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Right of Owner-Trustee to Perform. . . . . . . . . . . . . . . .
(c) Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) Further Assurances . . . . . . . . . . . . . . . . . . . . . . .
(e) Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . .
(f) Successors and Assigns . . . . . . . . . . . . . . . . . . . . .
(g) Counterparts; Uniform Commercial Code. . . . . . . . . . . . . .
(h) GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . .
(i) Investment of Funds. . . . . . . . . . . . . . . . . . . . . . .
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
ATTACHMENTS TO FACILITY LEASE:
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Schedule 1 -- Schedule of Periodic Rent Percentages
Schedule 2 -- Schedule of Casualty Value
Schedule 3 -- Schedule of Termination Value
Schedule 4 -- Schedule of the Early Purchase Date, Early Purchase Price
and Installment Amounts and Dates
Schedule 5 -- Funded Debt and Capitalized Rentals of the Lessee
Exhibit A -- Description of Major Components of the Facility
Exhibit B -- Intentionally Omitted
Exhibit C -- Description of the Site
Exhibit D -- Pricing Assumptions
Exhibit E -- Form of Lease Supplement
Exhibit F -- Subordination Provisions
Annex I -- Definitions
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FACILITY LEASE (IDAHO)
THIS FACILITY LEASE (IDAHO), dated November 18, 1998, is between
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual
capacity but solely as trustee (the "OWNER-TRUSTEE") under Crown Pacific Trust
No. 98-1, as lessor hereunder, and CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware
limited partnership (the "LESSEE").
SECTION 1. INTERPRETATION OF THIS LEASE.
(a) DEFINITIONS. The capitalized terms used in this Lease shall have
the respective meanings indicated in Annex I hereto unless elsewhere defined
herein or the context hereof shall otherwise require.
(b) 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 Lease, this shall be done in accordance with generally accepted
accounting principles at the time in effect, to the extent applicable, except
where such principles are inconsistent with the requirements of this Lease.
(c) DIRECTLY OR INDIRECTLY. Where any provision in this Lease 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 2. ACCEPTANCE OF LEASED PROPERTY.
The Owner-Trustee does hereby lease and let the Leased Property to the
Lessee and the Leased Property is hereby accepted by the Lessee hereunder and
declared to be and constitute the property leased hereunder, all for the Rent
and the Term hereinafter stipulated and upon the terms and conditions herein set
forth.
SECTION 3. TERM OF LEASE.
The basic term of this Lease (the "BASIC TERM") shall commence on the
Closing Date and shall expire on the twelfth anniversary of the Closing Date,
subject to earlier termination pursuant to Sections 13, 15 and 19.
SECTION 4. RENT PAYMENTS.
The Lessee agrees to pay the Owner-Trustee the following rents hereunder:
(a) RENT FOR FACILITY. The Lessee hereby agrees to pay the
Owner-Trustee Rent for the Facility (the "PERIODIC RENT") payable for the
Basic Term in consecutive semiannual installments (other than the first
Periodic Rent payment, which shall be in respect of the period from the
Closing Date to the first Rent Payment Date), each in an amount equal to
the product of the Adjusted Facility Cost multiplied by the Periodic Rent
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percentage set forth opposite each Rent Payment Date on Schedule 1,
payable in advance or arrears as and to the extent set forth in Schedule 1
on each such Rent Payment Date.
(b) RENT FOR SITE LEASE PROPERTY. The Lessee agrees to pay the
Owner-Trustee rent for the Site Lease Property (the "PERIODIC SITE RENT")
payable for the Term in consecutive semiannual installments (other than
the first Site Lease Rent payment, which shall be in respect of the period
from the Closing Date to the first Rent Payment Date), each in an amount
equal to the Periodic Site Rent Amount, payable in arrears on each Rent
Payment Date; PROVIDED THAT, so long as the Lessee shall be the Landlord
under the site Lease, the Lessee's obligation to make Periodic Site Rent
payments shall be satisfied by its concurrent right to receive Site Rent
under the Site Lease.
(c) SUPPLEMENTAL RENT. The Lessee agrees to pay to the
Owner-Trustee, or to whosoever shall be entitled thereto, any and all
Supplemental Rent promptly as the same shall become due and owing, and in
the event of any failure on the part of the Lessee to pay any Supplemental
Rent, the Owner-Trustee shall have all rights, powers and remedies
provided for herein or by law or equity or otherwise in the case of
nonpayment of Periodic Rent. Lessee will also pay, as Supplemental Rent,
(i) in the case of the termination of this Lease pursuant to Section
13(d), on the Termination Date, an amount equal to the Make-Whole Amount,
if any, with respect to the principal amount of each Series B Note to be
prepaid as a result of such termination, (ii) in the case of the purchase
of the Facility pursuant to Section 19(f), unless Lessee shall have
assumed the Series B Notes as provided in the Participation Agreement, on
such date of purchase, an amount equal to the Make-Whole Amount, if any,
with respect to the principal amount of each Series B Note to be prepaid
as a result of such purchase, and (iii) in the case of any refinancing of
the Series B Notes pursuant to Section 13 of the Participation Agreement,
on the Refunding Date, an amount equal to the Make-Whole Amount, if any,
with respect to the aggregate principal amount of the Series B Notes being
prepaid. Lessee shall also pay, as Supplemental Rent, on the date any
amount is required to be paid by the Indenture Trustee pursuant to clause
(A) or (B) of Section 3.06(d)(ii) of the Indenture from the Account in
respect of the Facility, an amount equal to the difference, if any,
between (y) the amount in such Account, and (z) the amount so required to
be paid.
(d) PLACE AND MANNER OF PAYMENT. All payments to be made by the
Lessee under this Lease shall be made as follows:
(i) Each installment of Periodic Rent shall be paid to the
Owner-Trustee by wire transfer to the principal office of the
Owner-Trustee at the address thereof provided for payments in
Section 20(c); PROVIDED that until the Lessee shall have received
notice from the Indenture Trustee that all Secured Indebtedness has
been fully paid and satisfied, all such payments shall be made by
wire transfer to the office of the Indenture Trustee designated in
Section 20(c) or as otherwise designated from time to time in
writing by the Indenture Trustee;
(ii) The entire amount of any payment of Casualty Value or
Termination Value pursuant to Section 13, of any payment of the
purchase price
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<PAGE>
of the Facility pursuant to Section 19(b) or Early Purchase Price
pursuant to Section 19(f), and any payment pursuant to Section 15
hereof shall be paid to the Owner-Trustee by wire transfer to the
principal office of the Owner-Trustee at the address thereof
provided for payments in Section 20(c); PROVIDED that until the
Lessee shall have received notice from the Indenture Trustee that
all Secured Indebtedness has been fully paid and satisfied, all such
payments shall be made by wire transfer to the office of the
Indenture Trustee designated in Section 20 or as otherwise
designated from time to time in writing by the Indenture Trustee;
(iii) The amount of any payment owing to the Owner-Trustee or
the Owner Participant pursuant to Section 6 or 8 of the
Participation Agreement (and by incorporation by reference herein,
Section 5 hereof) and Section 7 (but, in the case of Section 7, only
with respect to public liability insurance) shall be made directly
to the party to receive the same without regard to the assignment of
this Lease pursuant to Section 14; and
(iv) All payments other than those above specified shall be
made by the Lessee directly to the party entitled to receive the
same.
The Lessee agrees that it will make payments due hereunder by wire
transfer where specified above in immediately available funds consisting
of lawful currency of the United States of America no later than 10:00
A.M. Portland, Oregon time on the date due to the party to whom such
payment is to be made to such account in any United States bank as such
party may from time to time direct in writing, and where not so specified,
such payment shall be made by check of the Lessee drawn on a bank located
in the continental United States and mailed to the party to receive the
same at the address herein provided or at such other address as the Lessee
shall have been previously advised in writing.
(e) OVERDUE PAYMENTS. The amount of any installment of Periodic
Rent or Periodic Site Rent or any payment of Supplemental Rent remaining
unpaid after the due date thereof shall bear interest at the Late Rate
from and after the due date of such installment or payment and such
interest shall be paid by the Lessee, on demand as Supplemental Rent.
(f) ADJUSTMENT OF RENT. The Periodic Rent percentage, Casualty
Value, Termination Value and Early Purchase Date and Early Purchase Price
tables attached hereto as Schedules 1, 2, 3 and 4 respectively, have been
calculated on the assumptions (the "PRICING ASSUMPTIONS") set forth in
Exhibit D hereto.
If for any reason the Closing Date or the Transaction Costs related
to the Facility set forth in Exhibit D hereto shall prove to be incorrect,
then the Owner Participant acting in good faith shall, prior to the first
Rent Payment Date, recompute the factors for Periodic Rent, the Casualty
Value and Termination Value tables and the Early Purchase Date and Early
Purchase Price in order to provide the Owner Participant with the same Net
Economic Return as if such assumptions were accurate; PROVIDED, that such
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<PAGE>
adjustments shall comply with the Guidelines and all provisions of the
Code and the Treasury Regulations thereunder, in each case as in effect on
the date of such adjustment, including, without limitation, Section 467 of
the Code and the Treasury Regulations thereunder, in each case as in
effect on the date of such adjustment; and PROVIDED, FURTHER, that (i)
each installment of Periodic Rent shall be in an amount sufficient to pay
on each installment date the principal of, and interest on, the Series B
Notes due on such date without acceleration, (ii) the Casualty Value and
Termination Value as of any date shall be sufficient to pay the aggregate
unpaid principal amount of, and interest on, the Series B Notes
outstanding as of such date and (iii) the Early Purchase Price shall at
all times exceed the appraiser's estimated fair market value for the Early
Purchase Date. Such recomputation shall be based upon the assumptions and
methods of calculation utilized by the Owner Participant in computing the
amounts thereof originally set forth in this Lease. On or before the
first Rent Payment Date, the Owner-Trustee and the Lessee shall execute
and deliver a Lease Supplement, substantially in the form of Exhibit E
hereto, reflecting any revisions to Schedules 1, 2, 3 and 4 hereto, and
the adjustments shall be effective as of said first Rent Payment Date.
(g) VERIFICATION OF RENTAL ADJUSTMENTS. Each notice to the Lessee
from the Owner Participant setting forth the results of any calculation or
recalculation pursuant to paragraph (f) above shall be accompanied by a
letter from the Owner Participant setting forth the reasons for such
calculation or recalculation and stating that such calculation or
recalculation was made using the same methods and, except as to the change
or changes in circumstance giving rise to such adjustment, the same
assumptions as were used in computing the factors for Periodic Rent,
Casualty Values and Termination Values and the Early Purchase Date and
Early Purchase Price in effect prior to such adjustment.
SECTION 5. INDEMNITIES.
The Lessee's indemnity obligations are set forth in Sections 6 and 8 of
the Participation Agreement, which Sections are incorporated herein by reference
as though fully set forth in this Section 5. The Lessee's indemnity obligations
contained in Sections 6 and 8 of the Participation Agreement shall survive the
termination of any of this Lease and the other Operative Agreements and shall
survive the transfer of any Note or the Beneficial Interest and payment of any
or all Notes and the extinguishment of the Beneficial Interest.
SECTION 6. LESSEE'S COVENANTS.
SECTION 6.1. NATURE OF BUSINESS. Neither the Lessee 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 Lessee 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
Lessee and its Restricted Subsidiaries on the date of this Lease and described
in the Private Placement Memorandum and other businesses incidental or
reasonably related thereto.
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<PAGE>
SECTION 6.2. LIMITATIONS ON CURRENT DEBT AND FUNDED DEBT. (a) The
Lessee 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:
(i) Funded Debt evidenced by the 1997 Notes;
(ii) Funded Debt of the Lessee outstanding on the June 30, 1998 and
described in Schedule 5;
(iii) Current Debt and Funded Debt of the Lessee 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;
(iv) additional Current Debt and Funded Debt of the Lessee and
Funded Debt of a Restricted Subsidiary secured by Purchase Money Liens,
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:
(A) 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
(B) 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;
(v) unsecured Subordinated Funded Debt of the Lessee to the
General Partner or any Affiliate of the 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
(vi) Current Debt or Funded Debt of a Restricted Subsidiary to the
Lessee 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 6.2(a) shall constitute
the issuance of additional Current Debt or Funded Debt which is, in turn,
subject to the limitations of the applicable provisions of this Section 6.2,
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 6.2.
(c) Any business entity which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of this Section 6.2 be deemed to have
created, assumed or incurred at the
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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 6.3. DISTRIBUTIONS. The Lessee 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 Lessee will not authorize or make any Distribution (a) on any date
other than a Business Day, (b) in Property other than cash, (c) which is payable
more than 60 days after the date of authorization or declaration, or (d) in an
amount which, together with all previous Distributions made by the Lessee 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 6.4. MERGERS AND CONSOLIDATIONS. The Lessee 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:
(a) 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 Lessee or any Wholly-owned Restricted Subsidiary so
long as in any merger or consolidation involving the Lessee, the Lessee
shall be the surviving or continuing entity; and
(b) the Lessee 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 Lessee's assets are sold (the
"SURVIVING ENTITY") shall be either the Lessee 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 Lessee is not
the Surviving Entity or in the case of any such sale, the Surviving
Entity shall (A) expressly assume in writing the due and punctual
performance and observance of all of the covenants in the Operative
Agreements to be performed or observed by the Lessee, and (B)
furnish to the OwnerTrustee, the Indenture Trustee and each
Participant 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 the
OwnerTrustee and the Indenture Trustee;
(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 Lessee immediately prior to such
consolidation or merger or such sale; and
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(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
6.2(a)(iv).
SECTION 6.5. SALES OF ASSETS. (a) The Lessee 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 6.5) of the
assets of the Lessee and its Restricted Subsidiaries, except as permitted by
Section 6.4; PROVIDED, HOWEVER, that:
(i) any Restricted Subsidiary may sell, lease or otherwise dispose
of any substantial part of its assets to the Lessee or any Wholly-owned
Restricted Subsidiary;
(ii) the Lessee or any Restricted Subsidiary may sell Properties
constituting a substantial part of the assets of the Lessee and its
Restricted Subsidiaries if (A) 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; (B) after giving effect to such sale, no
Default or Event of Default shall have occurred and be continuing; (C) 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 6.5(b)) are either:
(1) applied within the Application Period to pay Senior
Funded Debt of the Lessee or any Restricted Subsidiary (other than
Senior Funded Debt of a Restricted Subsidiary to the Lessee or
another Restricted Subsidiary) selected by the Lessee; 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
(2) deposited and held in a separate trust account with a
bank or trust company satisfactory to the OwnerTrustee and the
Indenture Trustee (which account may be invested in Permitted
Investments) and such Net Proceeds shall be either (x) applied
within such Application Period to the acquisition of productive
assets useful in the Lessee's business, or (y) committed, pursuant
to a binding written contract entered into by the Lessee during such
Application Period, to be applied to the acquisition of productive
assets useful in the Lessee's business (in either 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
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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
(D) within ten Business Days after any sale pursuant to this clause (ii),
the Lessee shall have delivered to the OwnerTrustee, the Indenture Trustee
and each Participant a certificate of the Board of Control certifying that
such sale was for fair market value received by the Lessee 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
(1) the application pursuant to this clause (ii) of the Net Proceeds of
any sale or (2) the last day of any Application Period with respect to any
sale, the Lessee shall have delivered to the OwnerTrustee, the Indenture
Trustee and each Participant 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 (ii);
(iii) the Lessee 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 Lessee shall have delivered to the OwnerTrustee, the
Indenture Trustee and each Participant a description of such exchange in
sufficient detail to establish compliance with the foregoing requirements;
and
(iv) the Lessee may sell not more than 25,000 acres in the
aggregate of timberlands owned by the Lessee designated in good faith by a
Responsible Officer for a higher and better use, PROVIDED that ten
Business Days after any such sale, the Lessee shall have delivered to the
OwnerTrustee, the Indenture Trustee and each Participant a certificate of
a Responsible Officer notifying the OwnerTrustee, the Indenture Trustee
and each Participant of such sale and certifying as to the number of acres
sold pursuant to this clause (iv) and the amount of gross proceeds from
such sale and establishing compliance herewith.
(b) As used in this Section 6.5, 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 Lessee 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 Lessee and its Restricted Subsidiaries (other than
pursuant to clauses (i) through (iv) above) (A) during the 12-month period
ending with the date of such sale, lease or other disposition, exceeds
$10,000,000 or (B) since December 22, 1994, exceeds $52,900,000, PROVIDED that
each such amount shall be adjusted annually from December 30, 1997 for the
percentage increase or decrease from the prior calendar year in the Consumer
Price Index.
SECTION 6.6. LIMITATION ON HARVESTING. The Lessee 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 Lessee,
140% of the Planned Volume during any period of two consecutive fiscal
years of the Lessee,
130% of the Planned Volume during any period of three consecutive fiscal
years of the Lessee, and
120% of the Planned Volume during any period of four consecutive fiscal
years of the Lessee;
PROVIDED, HOWEVER, that the Lessee and its Restricted Subsidiaries may harvest
timber from their timberlands exceeding the limitations set forth above (the
"EXCESS HARVEST") if (a) after giving effect to such Excess Harvest, no Default
or Event of Default shall have occurred and be continuing, (b) the Net Proceeds
of the sale of such Excess Harvest (based upon the average price received by the
Lessee and its Restricted Subsidiaries for timber sold during such period) are
either:
(i) applied within the Application Period to pay Senior Funded
Debt of the Lessee or any Restricted Subsidiary (other than Senior Funded
Debt of a Restricted Subsidiary to the Lessee or another Restricted
Subsidiary) selected by the Lessee, or
(ii) deposited and held in a separate trust account with the bank
or trust company satisfactory to the OwnerTrustee and the Indenture
Trustee (which account may be invested in Permitted Investments) and such
Net Proceeds shall be either (A) applied by the Lessee within the
Application Period to the acquisition of timber or timberland or (B)
committed, pursuant to a binding written contract entered into by the
Lessee during such 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
(c) within ten Business Days after any Excess Harvest, the Lessee shall have
delivered to the OwnerTrustee, the Indenture Trustee and each Participant 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 (i) the application
of the Net Proceeds as set forth clause (b) of this Section 6.6 or (ii) the last
day of any Application Period with respect to any Excess Harvest, the Lessee
shall have delivered to the OwnerTrustee, the Indenture Trustee and each
Participant 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 (b) of this Section 6.6.
SECTION 6.7. GUARANTIES. The Lessee will not become or be liable in
respect of any Guaranty except (a) Guaranties by the Lessee which are limited in
amount to a stated maximum
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dollar exposure, (b) Guaranties of obligations incurred by any Restricted
Subsidiary in compliance with the provisions of this Lease and (c) bonds posted
by the Lessee in the ordinary course of business in connection with timber
harvest contracts, permits for road construction or work in respect of
environmental remediation.
SECTION 6.8. TRANSACTIONS WITH AFFILIATES. The Lessee 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 Lessee's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Lessee 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 Lessee shall be entitled to reimburse the General Partner for
Specified Expenses. The General Partner shall determine the Specified Expenses
that are allocable to the Lessee in any reasonable manner determined by the
General Partner.
SECTION 6.9. MULTIEMPLOYER PLAN LIABILITY AND TERMINATION OF PENSION
PLANS. The Lessee 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 Lessee and its Restricted Subsidiaries,
taken as a whole. The Lessee 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
Lessee or any Subsidiary pursuant to Section 4068 of ERISA.
SECTION 6.10. 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 the OwnerTrustee, the Indenture Trustee and each
Participant, designate a previously Unrestricted Subsidiary as a Restricted
Subsidiary, PROVIDED that immediately after such designation and after giving
effect thereto (a) no Default or Event of Default shall have occurred and be
continuing and (b) the Lessee could incur at least $1.00 of additional Funded
Debt under the provisions of Section 6.2(a)(iv).
Any notice of designation pursuant to this Section 6.10 shall be
accompanied by a certificate signed by the chief financial officer of the Lessee
stating that the provisions of this Section 6.10 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 6.11. CERTAIN NOTICES.
(a) LIENS. Upon the attachment of an aggregate amount of $250,000 or
more of Liens on 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
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Liens and the full particulars thereof unless the same shall have been removed
or discharged by the Lessee.
(b) 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 Site or the Facility under, any Applicable Law.
(c) PLANS AND SPECIFICATIONS; OPERATING MANUALS. The Lessee shall
maintain or cause its Affiliates to maintain throughout the Site Lease Term, and
keep on file at its office, a complete set of plans and specifications,
including "asbuilt" 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 Alterations made
pursuant to Section 8 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 Alteration made within thirty
(30) days prior to such date). Upon the expiration of the 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.
(d) ENVIRONMENTAL EVENT. The Lessee shall promptly, but in any case
within five (5) Business Days, notify the Lessor if (i) any event has occurred
or any 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 an
Environmental Claim or has knowledge of any conditions or occurrences at the
Leased Property that could reasonably form the basis of a material Environmental
Claim, in either case that could reasonably be expected to result in any ordered
remediation or corrective action or other liability related to an 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, or (iii) any material
and actual or imminent restriction on the ownership, occupancy, use,
productivity or transferability of the Leased Property arising in connection
with any Release, threatened Release or disposal of a Hazardous Material or any
breach or violation of any Environmental Law, or (iv) any other environmental,
natural resource, health or safety condition which could materially and
adversely affect the ability of the Lessee to perform its obligations under the
Operative Agreements (each of (i) through (iv) 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
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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 (i) 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 (ii) 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, 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 6.12. SECTION 6 DEFINITIONS. The following terms shall have
the following meanings for all purposes of this Section 6:
"ACQUISITION" shall mean any transaction in which the Lessee 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 Lessee and its Restricted Subsidiaries, taken as a
whole, from the operating capacity of the Lessee and its Restricted
Subsidiaries, taken as a whole, existing immediately prior to such transaction.
"ACQUISITION CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement dated as of July 31, 1996, as amended, with Bank of America National
Trust and Savings Association and the other banks named therein.
"ACQUISITION FACILITY" shall mean the facility pursuant to which not less
than $150,000,000 shall be made available to the Lessee in order to fund future
acquisitions by the Lessee of timberlands and related assets under the
Acquisition Credit Agreement, as from time to time renewed, extended, amended
and supplemented.
"APPLICATION PERIOD" shall mean, with respect to any sale of assets
pursuant to Section 6.5(a)(ii), the 180-day period following the date of such
sale; and, with respect to any
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sale of harvested timber subject to Section 6.6, the 180-day period following
the last day of the fiscal year of the Lessee in which such Excess Harvest
occurred.
"AVAILABLE CASH" shall mean, with respect to any fiscal quarter of the
Lessee and without duplication,
(a) the sum of:
(i) all cash receipts of the Lessee 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
(b) the sum of:
(i) all cash disbursements of the Lessee 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 General Partner determines in its reasonable discretion to be
necessary or appropriate (A) to provide for the proper conduct of
the business of the Lessee, (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 Lessee is a party or by which any of its assets are subject,
PROVIDED that Available Cash shall reflect (1) 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 1994 Notes, the 1995
Notes, the 1996 Notes and the 1997 Notes on the next interest
payment date, and (2) in the third fiscal quarter immediately
preceding each fiscal quarter in which any scheduled principal
payment is due with respect to the 1994 Notes, the 1995 Notes, the
1996 Notes and/or the 1997 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 1994 Notes, 1995 Notes, 1996
Notes and 1997 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 1994 Notes, 1995 Notes,
1996 Notes and 1997 Notes in such principal payment quarter; and in
the calendar quarter immediately preceding a principal payment
quarter, a reserve equal to at least
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75% of the aggregate amount of all principal to be paid in respect
of such 1994 Notes, 1995 Notes, 1996 Notes and 1997 Notes in such
principal payment quarter.
So long as the Lessee is not a taxpaying entity, taxes paid by the Lessee
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 Lessee 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 General Partner, so long as the Lessee is not a taxpaying
entity, such taxes (if pertaining to all Partners) may be considered to be cash
disbursements of the Lessee which reduce Available Cash, but the payment or
withholding thereof shall not be deemed to be a distribution of Available Cash
to such Partners.
"AVERAGE TREASURY RATE" at any date for any period shall mean the bidside
yield to maturity for actively traded marketable U.S. Treasury fixed interest
rate noncallable securities (adjusted to constant maturities equal to such
period), as quoted on pages 7677 or 500 of Telerate U.S. Treasury and Money
Markets (or any successor or alternate publication then reporting yields on such
Treasury securities) two Business Days prior to such date. If no possible
maturity exactly corresponds to such period, yields for the two most closely
corresponding published maturities shall be calculated pursuant to the
immediately preceding sentence and the Average Treasury Rate shall be
interpolated from such yields on a straightline basis, rounding in each of such
relevant periods to the nearest month.
"CAPITAL ADDITIONS AND IMPROVEMENTS" shall mean (a) additions or
improvements to the capital assets owned by the Lessee or any Restricted
Subsidiary or (b) 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 Lessee and its Restricted Subsidiaries, taken as a whole, from
the operating capacity of the Lessee and its Restricted Subsidiaries, taken as a
whole, existing immediately prior to such addition, improvement, acquisition or
construction.
"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.
"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 Lessee 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 81/3% 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 Lessee for comparable timber sold during such
period, and (b) in the case of any acquisition of any other
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productive asset by the Lessee 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 Lessee shall certify in writing to the
Owner-Trustee, the Indenture Trustee and each Participant (i) specified cost
savings that can be effected by the Lessee in the operation of such productive
asset or (ii) the net additional resources to be allocated to increase
productivity of such asset, PLUS (to the extent deducted in determining
Operations Cash) (A) all cash debt service payments of the Lessee and its
Restricted Subsidiaries during such period, (B) all cash capital expenditures
(except capital expenditures relating to Acquisitions and Capital Additions and
Improvements) of the Lessee and its Restricted Subsidiaries during such period,
and (C) 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 (A) or (B).
"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.
"CURRENT DEBT" of any Person shall mean, as of the date of any
determination thereof, (a) all Indebtedness of such Person for borrowed money or
for the acquisition of assets, other than Funded Debt of such Person and (b)
Guaranties by such Person of Current Debt of others.
"DISTRIBUTION" in respect of the Lessee 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 General Partner or any payment on account of the purchase,
redemption or other retirement thereof.
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"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.
"EXCESS HARVEST" is defined in Section 6.6.
"FOUR QUARTER PERIOD" shall mean a period of four full consecutive
quarterly fiscal periods of the Lessee, taken together as one accounting period.
"FUNDED DEBT" of any Person shall mean (a) 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, (b) all Capitalized
Rentals of such Person, and (c) all Guaranties by such Person of Funded Debt of
others.
"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
joint venture and of a partner in connection with a partnership), by such
Person: (a) to purchase such Indebtedness or obligation or any Property
constituting security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness or obligation or (ii) 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,
(c) 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 (d) 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 the Operative
Agreements, 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.
"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 (a) obligations of such Person for borrowed money, (b) 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, (c) 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
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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 (c) shall not include obligations of
such Person in respect of Operating Leases, (d) Capitalized Rentals of such
Person, and (e) Guaranties by such Person of Indebtedness of others.
"INTEREST EXPENSE" for any period shall mean all interest (including the
interest component of Rentals payable by the Lessee 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 Lessee and its Restricted Subsidiaries for which such calculations are
being made.
"INTERIM CAPITAL TRANSACTIONS" shall mean (a) borrowings, refinancings or
refundings of Current Debt and Funded Debt of the Lessee 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 Lessee or any Restricted Subsidiary, (b) sales of Equity
Interests by the Lessee and (c) sales or other voluntary or involuntary
dispositions of any assets of the Lessee or any Restricted Subsidiary (other
than (i) 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 (ii) 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 Lessee.
"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.
"MEASUREMENT DATE VALUE" means, as to any amount received or to be
received after the last day of the termination of the Basic Term, the value of
such amount discounted on a semiannual compounded basis to such last day on the
basis of the sum of 1.00% and the Average Treasury Rate for the period, from the
date of the receipt, or scheduled receipt, thereof to such last day.
"NET PROCEEDS" shall mean the gross proceeds of the disposition or sale of
Property, LESS (a) all reasonable expenses incurred in connection with such
disposition or sale of such Property and (b) 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 Lessee issued under and pursuant to the Note Purchase Agreement
dated as of December 1, 1994 among the Lessee and the purchasers listed in
Schedule I thereto.
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"1995 NOTES" shall mean the $25,000,000 9.60% Senior Notes due December 1,
2009 of the Lessee issued under and pursuant to the Note Purchase Agreement
dated as of March 15, 1995 among the Lessee and the purchasers listed in
Schedule I thereto.
"1996 NOTES" shall mean the $91,000,000 Senior Notes due 2006 to 2013 of
the Lessee issued under and pursuant to the Note Purchase Agreement dated as of
August 1, 1996 among the Lessee and the purchasers listed in Schedule I thereto.
"1997 NOTES" shall mean the $95,000,000 Senior Notes, Series A, B and C,
due 2010 to 2018 of the Lessee issued under and pursuant to the Note Purchase
Agreement dated as of December 15, 1997 among the Lessee and the purchasers
listed in Schedule I thereto.
"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 Lessee 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
Lessee; 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:
(i) all cash operating expenditures of the Lessee and its
Restricted Subsidiaries during such period (including, without limitation,
(A) cash operating expenditures of Restricted Subsidiaries prior to the
acquisition thereof by the Lessee, (B) taxes, if any, paid by the Lessee
as an entity and by its Restricted Subsidiaries, and (C) amounts owed to
the General Partner as reimbursement for Specified Expenses);
(ii) all cash debt service payments of the Lessee and its
Restricted Subsidiaries during such period (other than payments or
prepayments of principal and premium (A) 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 (B) 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 General
Partner, to be refunded or refinanced by any Indebtedness incurred or to
be incurred by the Lessee 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);
(iii) all cash capital expenditures of the Lessee and its Restricted
Subsidiaries during such period, except capital expenditures (including
associated transaction costs) relating to (A) Acquisitions, (B) Capital
Additions and Improvements and (C) Interim Capital Transactions;
(iv) the amount, if any, by which cash reserves outstanding as of
the end of such period that the General Partner has determined in its
reasonable discretion to be
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necessary or appropriate in order to provide funds for the future cash
payment of items of the type referred to in clauses (i) through (iii)
above exceeds such cash reserves outstanding at the beginning of such
period;
(v) the amount, if any, by which any cash reserves outstanding at
the end of such period that the 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
(vi) any cash receipts of any Restricted Subsidiary which for any
reason (including pursuant to its organizational documents) is unavailable
for distribution to the Lessee 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 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 Lessee is not a taxpaying entity, taxes paid by the Lessee
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 Lessee that
reduce Operations 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 General Partner, so long as the Lessee is not a taxpaying
entity, such taxes (if pertaining to all Partners) may be considered to be cash
operating expenditures of the Lessee which reduce Operations Cash, but the
payment or withholding thereof shall not be deemed to be a distribution of
Available Cash to such Partners.
"PERMITTED INVESTMENTS" shall mean:
(a) Investments in commercial paper maturing in 270 days or less
from the date of issuance which, at the time of acquisition by the Lessee
or any Restricted Subsidiary, is rated at least A1 by Standard & Poor's
Ratings Group, a division of McGraw-Hill, Inc., or P1 by Moody's Investors
Service, Inc. or, if such commercial paper is not rated by either Standard
& Poor's Ratings Group, a division of McGrawHill, 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 OwnerTrustee and the Indenture Trustee;
(b) 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; and
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(c) 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 OwnerTrustee and the Indenture Trustee.
"PLANNED VOLUME" shall mean, as of December 30, 1997, 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 81/3% 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 Lessee and its Restricted Subsidiaries during such
Determination Period shall exceed the number of board feet of timber sold
or otherwise disposed of by the Lessee 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 Lessee
and its Restricted Subsidiaries during such Determination Period shall
exceed the number of board feet of timber acquired by the Lessee 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 6.6.
"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 Lessee and its Restricted
Subsidiaries on such determination date to (b) Funded Debt of the Lessee
and its Restricted Subsidiaries on a consolidated basis on such
determination date.
"DETERMINATION PERIOD" shall mean the period from and including the
December 30, 1997 to and including December 31, 1998 and each calendar
year thereafter.
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"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 Lessee and its
Restricted Subsidiaries as of the first day of the Determination Period
for which such Annual Timber Decrease occurred.
"PRO FORMA INTEREST EXPENSE" for any Four Quarter Period shall mean the
Interest Expense payable by the Lessee and its Restricted Subsidiaries during
such Four Quarter Period on all Current Debt and Funded Debt of the Lessee 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 (a)
any Current Debt and Funded Debt to be issued on the date of determination of
Pro Forma Interest Expense and (b) the Current Debt or Funded Debt issued after
the end of such Four Quarter Period and prior to such date of determination, in
each case, giving effect as of the beginning of such Four Quarter Period (i) to
the incurrence of all such Current Debt and Funded Debt described in clauses (a)
and (b), and (ii) 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 Lessee 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, 2011, in respect of scheduled principal payments and all Interest
Expense with respect to all Current Debt and Funded Debt of the Lessee 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 (a) 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, (b) 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 (c)
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 (c), the
Lessee 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 provided
for therein commencing at the expiration of the period during which the
Acquisition Facility is revolving in nature.
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"PURCHASE MONEY LIENS" shall mean Liens incurred in connection with the
acquisition of any fixed asset useful and intended to be used in carrying on the
business of the Lessee or a Restricted Subsidiary, including Liens existing on
such fixed asset at the time of acquisition by the Lessee 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 (a)
the Lien shall attach solely to the fixed asset acquired or purchased, (b) 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
Lessee 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 December
30, 1997 (including such fixed asset) shall not exceed the following amounts:
<TABLE>
<CAPTION>
<S> <C>
On or before November 30, 1999 $25,000,000
December 1, 1999 to November 30, 2004 $50,000,000
December 1, 2004 and thereafter $100,000,000,
</TABLE>
(c) all such Indebtedness shall have been incurred within the applicable
limitations provided in Section 6.2, and (d) after giving effect to such
acquisition no Default or Event of Default shall have occurred and be
continuing.
"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.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary (a) which is organized
under the laws of the United States or Canada or any state or province thereof;
(b) which conducts substantially all of its business and has substantially all
of its assets within the United States or Canada; (c) of which (i) in the case
of any corporation, more than 50% of the Voting Stock is beneficially owned,
directly or indirectly by the Lessee, or (ii) 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
Lessee; and (d) which is designated as a Restricted Subsidiary in the most
recent written notice with respect to such Subsidiary given by the Lessee
pursuant to Section 6.10.
"SENIOR FUNDED DEBT" shall mean all Funded Debt other than Subordinated
Funded Debt.
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"SPECIFIED EXPENSES" shall mean (a) all reasonable direct and indirect
expenses the General Partner incurs or payments it makes on behalf of the Lessee
(including, without limitation, salary, bonus, incentive compensation, and other
amounts paid to any Person to perform services for the Lessee or for the General
Partner in the discharge of its duties to the Lessee), and (b) all other
necessary or appropriate reasonable expenses allocable to the Lessee or
otherwise reasonably incurred by the General Partner in connection with
operating the Lessee's business (including without limitation reasonable
expenses allocated to the General Partner by its affiliates and, for so long as
Fremont Group, Inc. owns an interest in the 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
Lessee which shall contain or have applicable thereto subordination provisions
substantially in the form set forth in Exhibit F attached hereto providing for
the subordination thereof to other Funded Debt of the Lessee.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a
Restricted Subsidiary.
"VOTING EQUITY INTEREST" shall mean Voting Stock and General Partnership
Interests.
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean (a)
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 Lessee and/or one or more of
its Wholly-owned Subsidiaries, and (b) in the case of any partnership shall mean
a Subsidiary of which all of the outstanding General Partnership Interests are
owned by the General Partner and all of the Limited Partnership Interests and
all Indebtedness shall be owned by the Lessee and/or one or more of its
Wholly-owned Subsidiaries.
"WORKING CAPITAL CREDIT AGREEMENT" shall mean the Amended and Restated
Facility B Credit Agreement dated as of July 31, 1996, as amended, 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
Lessee (subject to certain conditions precedent set forth therein) not less than
$40,000,000 for working capital and general partnership purposes of the Lessee.
"WORKING CAPITAL FACILITY" shall mean the facility made available to the
Lessee 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
entered into by the Lessee 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 6.13. CERTAIN PAYMENTS. (a) PAYMENT REQUIRED. On the date
which is 120 days after the last day of the Basic Term (the "MEASUREMENT DATE"),
the Lessee shall pay to the
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Owner Participant if, but only if, the Owner Participant is the original Owner
Participant, the amount, if any, by which the total Amount Generated (as defined
in Section 6.13(b)) shall be less than $786,798.42 PROVIDED, HOWEVER, that no
amount shall be payable under this Section 6.13 unless the Owner Participant
shall receive on or prior to the last day of the Basic Term, an opinion of
independent tax counsel selected by the Owner Participant, at the Owner
Participant's expense, to the effect that neither the existence nor the
operation of this Section 6.13 will result in any adverse tax consequences to
the Owner Participant, and PROVIDED FURTHER, that the foregoing requirement with
respect to obtaining a tax opinion may not be waived by the Owner Participant.
It shall be a condition to the right of the Owner Participant to receive any
amounts pursuant to the preceding sentence that the Owner Participant shall have
made all reasonable efforts to maximize the total Amount Generated. In no event
shall the Lessee have any tax liability with respect to any payment or
nonpayment to the Owner Participant pursuant to this Section 6.13.
(b) TOTAL AMOUNT GENERATED. The total Amount Generated shall be:
(i) if the Facility has been sold by the Lessor (other than to the
Lessee pursuant to Section 19) on or after the last day of the Basic Term
(including a sale pursuant to Section 15(b) hereof), the Measurement Date
Value of the sum of (i) the net sales price received by the Lessor for the
Facility and (ii) any rents (including Renewal Term Rent received pursuant
to Section 19) received by the Lessor with respect to the Facility after,
and with respect to periods after, the last day of the Basic Term;
(ii) if the Facility is being leased by the Lessor on the
Measurement Date, the sum of (i) the Measurement Date Value of any rents
(including Renewal Term Rent received pursuant to Section 19) received by
the Lessor on or before the Measurement Date after, and with respect to
periods after, the last day of the Basic Term, (ii) the Measurement Date
Value of any rents scheduled to be received by the Lessor after the
Measurement Date and (iii) the Measurement Date Value of the Fair Market
Sales Value at the end of such lease (not including the terms of any
renewal options not yet irrevocably exercised); or
(iii) if the Facility is owned by the Lessor on the Measurement
Date, and not then being leased by the Lessor, the sum of (i) the
Measurement Date Value of any rents (including Renewal Rent received
pursuant to Section 19) received by the Lessor on or before the
Measurement Date after, and with respect to periods after, the last day of
the Basic Term and (ii) the Measurement Date Value of the Fair Market
Sales Value on the Measurement Date.
(c) NOTICE; VERIFICATION. The Owner Participant shall notify the Lessee
of any amount the Owner Participant believes is due pursuant to Section 6.13(a)
and shall provide the Lessee appropriate information as to the computation of
such amount. Any such notice shall include a certification by an Authorized
Officer of the Owner Participant that the Owner Participant has complied with
the penultimate sentence of Section 6.13(a). If the Lessee shall disagree with
any such amount, the verification procedures contained in Section 4(g) shall be
applicable to such disagreement.
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<PAGE>
(d) SURVIVAL. Notwithstanding anything herein or in any other Operative
Agreement, this Section 6.13 shall survive the termination of this Lease.
SECTION 7. INSURANCE.
(a) REQUIRED INSURANCE COVERAGES AND LIMITS. The Lessee agrees that it
will at its own cost and expense at all times during the Term:
(i) Keep the Leased Property insured against all physical loss
including by fire, windstorm, explosion, flood, subsidence, earthquake,
earth movement and collapse and with all-risk coverage and against all
such other risks as are insured against by the Lessee with respect to
property of a similar character owned or leased by the Lessee, in an
amount not less than the greater of (A) the replacement value of the
Facility and (B) the Casualty Value of the Facility as of the next
preceding Rent Payment Date, which insurance shall (v) cover all
materials, equipment, tools and supplies stored on the Site and to become
part of the Leased Property, (w) cover all portions of the Leased Property
while in transit, (x) include boiler and machinery insurance, (y) include
coverage against loss caused by explosion and breakdown and (z) waive any
condition requiring that the Leased Property be in use or ready for use,
(ii) Maintain comprehensive general public liability insurance with
respect to the Leased Property including liability coverage for
premise-operations, contractual liability (including liability pursuant to
Section 8 of the Participation Agreement), product liability, and owned,
non-owned and hired car auto liability, which coverage shall be against
damage because of bodily injury, including death, or damage to property of
others, such insurance to afford protection to the limit of not less than
$15,000,000 combined single limit in respect of bodily injury, death and
damage to property of others, and
(iii) Maintain such other insurance covering such risks and in such
amounts as is customary by corporations owning, operating or leasing
property or engaged in the same or similar business, similarly situated
with the Leased Property and/or the Lessee, to the extent available on
commercially reasonable terms.
The Lessee agrees to maintain all insurance provided for under this
Section 7 with good and responsible insurance companies of recognized national
reputation approved by the OwnerTrustee and the Participants. Any policies of
insurance carried in accordance with this Section 7 and any policies taken out
in substitution or replacement for any of such policies (1) shall name the
Insured Parties as additional insureds, (2) shall provide that in respect of the
interest of the Insured Parties in such policies the insurance shall not be
invalidated by any action or inaction of the Lessee or any other Person and
shall insure the Insured Parties' interests as they appear, regardless of any
breach or violation of any warranty, declaration or condition contained in such
policies by the Lessee or any other Person, (3) shall provide that, if such
insurance is cancelled for any reason whatsoever, or any substantial change is
made in the coverage which affects the interest of any Insured Party or if such
insurance is allowed to lapse for nonpayment of premium, such cancellation,
change or lapse shall not be effective as to such
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Insured Party for 30 days after receipt by such Insured Party of written notice
from such insurers of such cancellation, change or lapse, (4) shall provide that
no Insured Party shall have any obligation or liability for premiums in
connection with such insurance, (5) shall provide that such insurance shall be
primary without right of contribution from any other insurance which may be
carried by any Insured Party with respect to its interest as such in the Leased
Property, (6) shall provide that the insurers shall waive any rights of
subrogation against the Insured Parties, except for claims as shall arise from
the willful misconduct or gross negligence of any such Insured Party, and (7)
shall provide that such insurers shall waive any right of setoff, counterclaim
or any other deduction, whether by attachment or otherwise, in respect of any
liability of any Insured Party. Each liability policy shall expressly provide
that all of the provisions thereof, except the limits of liability, shall
operate in the same manner as if there were a separate policy covering each
insured. Each policy covering casualty insurance required to be carried by
paragraph (a)(i) of this Section shall provide either (y) that any payments for
any loss or damage to the Leased Property shall be paid to the Indenture Trustee
(or, if the Secured Indebtedness shall have been fully paid and satisfied, to
the OwnerTrustee), as loss payee, or (z) that (i) any payments for any loss or
damage to the Leased Property constituting a total or constructive loss or a
Casualty Occurrence shall be paid to the Indenture Trustee (or, if the Secured
Indebtedness shall have been fully paid and satisfied, to the OwnerTrustee), as
loss payee, (ii) any payments for any loss or damage to the Leased Property
which do not constitute a total or constructive loss or a Casualty Occurrence
and are not in excess of $500,000 shall be paid to the Lessee (unless the
insurer shall have received notice of a Default or Event of Default, in which
case such payments shall be paid to the Indenture Trustee (or, if the Secured
Indebtedness shall have been fully paid and satisfied, to the OwnerTrustee), as
loss payee, and (iii) any payments for any loss or damage to the Leased Property
which do not constitute a total or constructive loss or a Casualty Occurrence
and are in excess of $500,000 shall be paid to the Indenture Trustee (or, if the
Secured Indebtedness shall have been fully paid and satisfied, to the
OwnerTrustee), as loss payee), in each case under a standard mortgage loss
payable clause (which clause specifies payment solely to the Indenture Trustee
or, if the Secured Indebtedness shall have been fully paid and satisfied, solely
to the OwnerTrustee, and which clause acknowledges that the loss payee shall
have no obligation for unpaid premiums) satisfactory to the Indenture Trustee.
Any such insurance may be carried under blanket policies maintained by the
Lessee so long as such policies otherwise comply with the provisions of this
Section 7(a). If general public liability insurance shall be carried under any
blanket policy which is subject to aggregate annual claim limitations, the
Lessee shall keep the OwnerTrustee advised from time to time of the amount of
any such limitations and the amounts of claims which reduce the available policy
limits.
(b) ADJUSTMENT AND PAYMENT OF LOSSES. The loss, if any, under any
casualty insurance required to be carried by paragraph (a)(i) of this Section
shall be adjusted with the insurance companies by the Lessee, or otherwise
collected, including the filing of proceedings deemed advisable by the Lessee,
subject to the approval of the Owner-Trustee (and the Indenture Trustee unless
the Secured Indebtedness shall have been fully paid and satisfied) if the loss
exceeds $500,000. The loss so adjusted shall be paid in accordance with the
antipenultimate sentence of Section 7(a). Losses covered by liability insurance
shall be adjusted by and paid to the Person suffering such loss. All such
policies shall provide that the loss, if any, under such insurance shall be
adjusted and paid as provided in this Lease.
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<PAGE>
(c) EVIDENCE OF INSURANCE. The Lessee shall, on or before the Closing
Date, furnish the Owner-Trustee and the Indenture Trustee with certificates or
other satisfactory evidence of maintenance of the insurance required hereunder
and shall with respect to any renewal policy or policies, furnish certificates
evidencing such renewal not less than ten days prior to the expiration date of
the original policy or policies. Each such certificate or other evidence of
insurance shall identify the insurance carrier, the type of insurance, the
coverage limits, annual aggregate limits, if any, and the policy term. Within
the period provided in Section 18(a)(ii) the Lessee shall provide, or cause to
be provided, to the Owner-Trustee, the Indenture Trustee and each Participant a
report by Aon Risk Services, Inc. of Oregon or another firm of independent
insurance brokers (which may be the Lessee's regular insurance agency) chosen by
the Lessee and satisfactory to the Owner-Trustee and the Indenture Trustee
setting forth the insurance obtained by the Lessee pursuant to this Section 7
and then in effect (or to be in effect, in the case of renewals) and stating
whether, in the opinion of such firm, such insurance complies with the
requirements of this Section 7. The Lessee will cause such firm to advise each
Insured Party in writing promptly of any default in the payment of any premium
and of any other act or omission on the part of the Lessee of which such firm
has knowledge and which might invalidate or render unenforceable, in whole or in
part, any insurance on the Leased Property. The Lessee will also cause such
firm to advise each Insured Party in writing promptly upon such firm acquiring
knowledge that an interruption or reduction of any insurance carried and
maintained on the Leased Property pursuant to this Section 7 will occur.
(d) APPLICATION OF INSURANCE PROCEEDS. All insurance proceeds from
policies required to be maintained hereunder received by or payable to the
Owner-Trustee on account of any damage to or destruction of the Leased Property
or any part thereof (less the actual costs, fees and expenses incurred in the
collection thereof) shall be applied or dealt with as follows:
(i) All such proceeds actually received on account of any such
damage or destruction other than a Casualty Occurrence shall be paid over
to the Lessee or as it may direct from time to time as restoration,
replacement and rebuilding of the Leased Property ("RESTORATION") progress
to pay (or reimburse the Lessee for) the cost of Restoration, if the
amount of such proceeds received by the Owner-Trustee, together with such
additional amounts, if any, theretofore expended by the Lessee out of its
own funds for Restoration are sufficient to pay the estimated cost of
completing Restoration, but only upon a written application of the Lessee
accompanied by an Officer's Certificate of the Lessee stating that no
Default or Event of Default has occurred and is continuing under the Lease
and showing, in reasonable detail, (A) the nature of Restoration, (B) that
such Restoration is intended to restore the Facility to Design Capacity
(normal wear and tear excepted), (C) the actual cash expenditures made to
date for Restoration, and (D) the estimated cost (which, if requested by
the Owner-Trustee, shall be verified by an accompanying certificate of an
engineer or architect not an employee of the Lessee) to complete
Restoration. Upon the written request of the Lessee, accompanied by
evidence satisfactory to the Owner-Trustee that Restoration has been
completed and the costs thereof paid in full, that the Facility is capable
of operating at Design Capacity (normal wear and tear excepted) and that
there are no mechanics' or similar liens for labor or materials supplied
in connection therewith, the balance, if any, of such proceeds shall be
paid over or assigned to the Lessee or as it may direct.
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(ii) All such proceeds received or payable on account of a Casualty
Occurrence shall be paid over or assigned to the Lessee or as it may
direct upon termination of this Lease and receipt by the Owner-Trustee of
the Casualty Value of the Facility and all other payments due hereunder.
(iii) Pending application pursuant to subparagraph (i) or (ii)
above, all such proceeds held from time to time by the Owner-Trustee shall
be invested and reinvested by the Owner-Trustee in accordance with the
provisions of Section 20(i).
(e) INSURANCE FOR OWN ACCOUNT. Nothing in this Section 7 shall limit or
prohibit the OwnerTrustee, any Participant or the Lessee from obtaining, at its
own expense, additional insurance for its own account and any proceeds payable
thereunder shall be payable in accordance with the insurance policy relating
thereto, PROVIDED that no such insurance may be obtained which would limit or
otherwise adversely affect the coverage of any insurance required to be
maintained pursuant to this Section 7, and PROVIDED, FURTHER, that nothing in
this clause (e) shall impose any obligation on the OwnerTrustee, any Participant
or the Lessee to obtain any such additional insurance.
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT.
Any amount referred to in this Section 7 which is payable to or retainable by
the Lessee shall not be paid to or retained by the Lessee if at the time of such
payment or retention a Default or Event of Default shall have occurred and be
continuing, but shall be held by or paid over to the OwnerTrustee (or, so long
as the Secured Indebtedness shall not have been fully paid and satisfied, the
Indenture Trustee) as security for the obligations of the Lessee under this
Lease and, if a Default or Event of Default shall have occurred and be
continuing, applied against the Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to the Lessee in accordance with the
foregoing provisions of this Section 7 to the extent not previously applied in
accordance with the preceding sentence.
SECTION 8. MAINTENANCE; MAINTENANCE COSTS AND WARRANTIES; REPLACEMENT OF PARTS;
ALTERATIONS; MODIFICATIONS AND ADDITIONS.
(a) MAINTENANCE. The Lessee at its sole cost and expense shall
maintain, service and repair the Leased Property to keep it (i) in as good
operating condition and as capable of operating at Design Capacity as when new
in accordance with the Plans, (ii) in such condition so as to have the capacity
and functional ability to perform, on a daily basis in commercial operation, the
functions for which it was designed, in accordance with the Plans, and (iii) in
such condition as the Lessee would, in the prudent management of its own
properties, maintain, service and repair similar property owned by the Lessee
and in any event, to the extent required to maintain the Leased Property in good
repair in a manner consistent with prudent industry practice and in compliance
in all material respects with all Applicable Laws, rules and regulations,
noncompliance with which might result in the imposition of a penalty on any
Indemnified Party or materially adversely affect the Leased Property or the
operation thereof. The Lessee shall comply with such repair and maintenance
standards and schedules as are required to enforce warranty claims against the
manufacturers and suppliers of the Leased
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Property or which are otherwise established by such manufacturers and suppliers
as recommended operating procedures and any standards imposed by any insurance
policies in effect with respect to the Leased Property. The Lessee shall
maintain at its principal place of business a maintenance log with respect to
the Leased Property, which shall include the dates and details of all material
maintenance and repairs performed on the Leased Property. In the event of any
damage to or destruction of the Leased Property, or any part thereof, by fire or
other casualty, unless this Lease shall be terminated pursuant to Section 13,
the Lessee shall, at its own expense, with reasonable promptness, repair,
restore or rebuild the same so that upon the completion of such repair,
restoration or rebuilding the Leased Property shall be in the condition required
by the provisions of this Section 8(a) and so that the value and utility of the
Leased Property shall be at least equal to the value and utility of the Leased
Property immediately prior to the occurrence of such casualty assuming that the
Leased Property was then in the condition required to be maintained by the terms
of this Lease.
(b) MAINTENANCE COSTS AND WARRANTIES. The Lessee agrees to pay all
costs, expenses, fees and charges incurred in connection with (i) the use and
operation of the Leased Property by the Lessee during the Term hereof, including
but not limited to repairs, maintenance, storage and servicing as provided in
this Section 8 and (ii) the preserving and protecting of the Leased Property,
and the repairing, maintaining and servicing of the Leased Property as provided
in this Section 8, during the period after a termination of the Lessee's right
of possession of the Facility and the Site pursuant to Section 15 and prior to
the interest of the Owner-Trustee in the Leased Property being leased or sold to
a third person (not the Owner-Trustee, the Indenture Trustee, or any
Participant, or any Affiliate of any thereof, in connection with the exercise of
their rights in the Leased Property under the Operative Agreements) by the
Owner-Trustee (or the Indenture Trustee or any Participant, or any Affiliate
thereof, in connection with the exercise of their rights under the Operative
Agreements). So long as no Event of Default has occurred and is continuing, the
Owner-Trustee hereby constitutes the Lessee the agent and attorney-in-fact of
the Owner-Trustee for the purpose of exercising and enforcing, and with full
right, power and authority to exercise and to enforce, all of the right, title
and interest of the Owner-Trustee in, under and to the warranties and
obligations of any supplier of goods or services in respect of the Leased
Property and agrees to execute and deliver such further instruments as may be
necessary to enable the Lessee to obtain goods or services furnished for the
Leased Property by said suppliers. The Owner-Trustee shall have no other
obligation or duty with respect to any of such matters. Any proceeds obtained
by the Lessee from the enforcement of the warranties and obligations of any
supplier of goods or services in respect of the Facility shall be held by the
Lessee and applied from time to time to the repair and maintenance of the
Facility, and any balance thereof remaining at the expiration of the Term shall
be paid over to the Owner-Trustee or as it may direct.
(c) REPLACEMENT OF PARTS AND COMPONENTS. The Lessee at its sole cost
and expense, will, with reasonable promptness, replace all appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature:
(i) which may from time to time constitute a part of the Facility
(herein for the purpose of this Section 8 collectively called "PARTS"),
and
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(ii) which may from time to time be incorporated or installed in or
attached to the Site Lease Property (herein for the purpose of this
Section 8 collectively called "COMPONENTS")
and which may from time to time become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for use
for any reason whatsoever. All replacement Parts and Components shall be free
and clear of all Liens and rights of others except Permitted Encumbrances and
shall be in as good operating condition as, and shall have a current and
residual value, useful life and utility at least equal to, the Parts or
Components replaced, assuming that such replaced Parts or Components were in the
condition required to be maintained by the terms hereof, and shall be in the
condition and repair required to be maintained by the terms hereof.
All Parts owned by the Owner-Trustee at any time removed from the Facility
shall remain the property of the Owner-Trustee, no matter where located, until
such time as such Parts shall be replaced by Parts which have been incorporated
or installed in or attached to the Facility and which meet the requirements for
replacement Parts specified above. Immediately upon any such replacement Part
becoming incorporated or installed in or attached to the Facility as above
provided, without further act, (A) title to the removed Part shall thereupon
vest in the Lessee or such person as shall be designated by the Lessee, free and
clear of all rights of the Owner-Trustee, and shall no longer be deemed a Part
hereunder, (B) title to such replacement Part shall thereupon vest in the
OwnerTrustee, free and clear of all Liens (other than Permitted Encumbrances)
and (C) such replacement Part shall become subject to this Lease and be deemed
part of the Facility for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to such Facility.
(d) REQUIRED ALTERATIONS. The Lessee, at its sole cost and expense,
shall, with reasonable promptness, make such repairs, alterations,
modifications, reconfigurations, improvements and additions (herein for the
purpose of this Section 8 collectively called "ALTERATIONS") to the Leased
Property as may be required from time to time to meet the requirements of
Applicable Law or of any insurance policies in effect with respect to the Leased
Property unless prior to the time at which such Alterations became required
pursuant to such Applicable Law or insurance policies the Lessee shall have
given the Owner-Trustee notice of the termination of this Lease pursuant to
Section 13(d). If the Lessee determines in good faith that the cost of any
Alteration required under this Section 8(d) is greater than $1,000,000, the
Lessee may, upon less than 90 days' prior written notice to the OwnerTrustee,
elect to close the Facility and either purchase the Facility or terminate the
Lease pursuant to the next succeeding paragraph.
Such written notice shall be accompanied by an Officer's Certificate of
the Lessee specifying the required Alteration, the Lessee's good faith
determination of the cost of such Alteration and that, as a result of such cost,
the Lessee has elected to close the Facility. Such written notice shall specify
either (i) that the Lessee has elected to and shall purchase the Facility
pursuant to Section 19(f), PROVIDED that the Early Purchase Date for purposes of
Section 19(f) shall be the next succeeding Rent Payment Date that is at least 90
days after the date of such written notice and the Early Purchase Price for
purposes of Section 19(f) shall be the
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Termination Value on such Early Purchase Date, or (ii) that the Lessee has
elected to and shall terminate the Lease pursuant to Section 13(d) as of the
next succeeding Rent Payment Date that is at least 180 days after the date of
such written notice.
(e) OPTIONAL ALTERATIONS. (i) The Lessee, at its sole cost and expense,
may from time to time make such Alterations to the Facility as the Lessee may
deem desirable in the proper conduct of its business and which are not
inconsistent with, and would not impair, the continuing operation of the
Facility in accordance with its original functional purpose; PROVIDED, that any
such Alteration made by the Lessee pursuant to this paragraph shall not diminish
the value, utility, condition or remaining economic useful life and estimated
residual value of the Facility to the Owner-Trustee below the value, utility,
condition, remaining economic useful life and estimated residual value thereof
to the Owner-Trustee immediately prior to such Alteration assuming that the
Facility was then in the condition required to be maintained by the terms of
this Lease. At the Owner-Trustee's request, the Lessee will remove any readily
removable Alterations under this paragraph prior to the end of the Term at the
Lessee's sole cost and expense.
(ii) The Lessee, at its own expense shall have the right to erect, alter
or abandon structures, improvements, personal property, ramps, ditches,
roadways, drainage and sanitary systems, supply lines for materials and
utilities on the Site Lease Property, to grant licenses, rights, and easements
respecting the same and otherwise to affect the Site Lease Property in any
manner which the Lessee shall deem necessary or advisable for the operation of
the Facility or the Site Lease Property as originally erected or from time to
time altered by the Lessee; PROVIDED that there shall be no interference with or
impairment of the operation of the Leased Property and no adverse effect on the
current or residual value, useful life or utility of the Leased Property
resulting therefrom, and that all such licenses, rights and easements granted
pursuant to this sentence shall be subject and subordinate to this Lease and the
Site Lease. Provided that the foregoing conditions have been met and subject to
all other provisions of this Lease, including, without limitation, maintenance
requirements, the Owner-Trustee agrees to accept such structures, improvements,
personal property, ramps, ditches, roadways, drainage and sanitary systems,
supply lines for materials and utilities thereon, in an "as-is" condition at the
time the Lessee's rights under this Lease of possession and use of the Facility
and the Site shall cease.
(f) TITLE TO PARTS. (i) Title to all Parts and Alterations
incorporated or installed in or attached to the Facility shall without further
act vest in the Owner-Trustee free and clear of all Liens (other than Permitted
Encumbrances) and shall be deemed to constitute a part of the Facility and be
subject to this Lease in the following cases:
(A) such Part or Alteration is in replacement of or in
substitution for, and not in addition to, any Part constituting a part of
the Facility at the time of the acceptance thereof hereunder or any such
original part;
(B) such Part or Alteration is required to be incorporated or
installed in or attached to the Facility pursuant to the terms of
paragraphs (a), (c) or (d) of this Section; or
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(C) such Part or Alteration cannot be readily removed from the
Facility without (1) impairing the continuing operation of the Facility in
accordance with its original functional purpose, (2) materially damaging
the Facility, or (3) materially diminishing the value of the Facility or
diminishing the utility, condition, remaining economic useful life or
estimated residual value, below the value, utility, condition, remaining
economic useful life and estimated residual value thereof immediately
prior to such removal, assuming that the Facility was then in the
condition required to be maintained by the terms of this Lease and (except
in the case of a Part or Alteration referred to in clause (A) or (B)
above) such Part had not been added, or such Alteration made, to the
Facility.
(ii) Title to any other Parts and Alterations shall remain with the
Lessee and such Parts and Alterations shall not be deemed to constitute part of
the Facility in determining either the fair market sales value or the fair
market rental value of the Facility; PROVIDED, HOWEVER, that any such part which
is not removed by the Lessee prior to the termination of this Lease shall become
the property of the Owner-Trustee.
(g) OPTION TO PURCHASE ADDITIONAL PARTS AND OPTIONAL ALTERATIONS.
The Owner-Trustee shall have the option upon the expiry or earlier
termination of the Term hereunder to purchase any right, title or interest of
the Lessee (to the extent that such right, title or interest is transferable)
in and to any Part that remains the property of the Lessee pursuant to
Section 8(f)(ii) for the fair market sales value thereof as of such date.
The Owner-Trustee shall give the Lessee written notice at least 60 days prior
to the expiry or earlier termination of the Term as to its election to
exercise the purchase option provided for in the preceding sentence; PROVIDED
HOWEVER, that if the Lease is terminated due to the occurrence of an Event of
Default hereunder, only 15 days prior written notice prior to the return of
the Leased Property shall be required.
(h) REPORTS OF ALTERATIONS. On or before the date each property report
is delivered by the Lessee to the Owner-Trustee pursuant to Section 18(d) and on
the date on which the Term of this Lease expires, by limitation or otherwise,
the Lessee shall furnish the Owner-Trustee with a report describing in
reasonable detail all Alterations to the Facility of the character referred to
in this Section 8 involving, in any case, a cost to the Lessee in excess of
$200,000 for any one Alteration, or $500,000 in the aggregate for all
Alterations, which have been made during the period from the Closing Date in the
case of the first such report, or during the period from the last previous
report, in the case of all subsequent reports.
(i) OTHER PARTIES NOT OBLIGATED TO MAINTAIN OR REPAIR. The
Owner-Trustee, the Indenture Trustee and each Participant shall not under any
circumstances be required to make any repairs, replacements, Alterations or
renewals of any nature or description to the Leased Property, make any
expenditure whatsoever in connection with this Lease or maintain the Leased
Property in any way. The Lessee waives any right to (i) require the
Owner-Trustee, the Indenture Trustee or any Participant to maintain or repair
all or any part of the Facility or (ii) make repairs at the expense of the
Owner-Trustee, the Indenture Trustee or any Participant pursuant to any
Applicable Law, contract, agreement, or covenant, condition or restriction in
effect at any time during the Term.
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SECTION 9. LOCATION AND USE; NO ASSIGNMENT BY LESSEE.
(a) LOCATION AND USE. (i) The Lessee agrees that the Facility will be
used solely in the conduct of its business and solely by qualified personnel and
will at all times be and remain in the exclusive possession and control of the
Lessee at the Site, PROVIDED that the Lessee may deliver possession of any part
or portion of the Facility to any manufacturer, contractor or supplier
designated by the Lessee for purposes of realizing the benefits of any warranty
or in order to comply with the obligations and rights of the Lessee under
Section 8, but the rights of any such party in possession of such part or
portion of the Facility shall be subject and subordinate to the terms of this
Lease, including without limitation, the right of the Owner-Trustee to take
possession of the Facility pursuant to Section 15. In the event that pursuant
to the foregoing sentence hereof any part or portion of the Facility having a
value in excess of 1% of the then Casualty Value is removed from Boundary
County, Idaho, the Lessee shall give the Owner-Trustee not less than 30 days'
prior written notice of such removal and shall deliver to the Owner-Trustee
promptly after such removal, and in any event within 10 days thereafter, the
opinion of the Lessee's counsel that such removal shall not impair or adversely
affect the ownership of such part or portion of the Facility by the
Owner-Trustee, that all necessary recordings and filings under Applicable Law
have been duly made in the public offices wherein such recordings or filings are
necessary to protect the validity and effectiveness of this Lease and the
Indenture (including the maintenance of the perfection of security interest
thereof in the removed part or portion) and that all fees, taxes and charges
payable in connection therewith have been paid in full by the Lessee. The
Lessee shall not change the use of the Leased Property as a sawmill without the
Owner-Trustee's prior, written consent. The Lessee will not do or permit any
act or thing that may impair the value of the Leased Property or any part
thereof or that materially increases the dangers, or poses an unreasonable risk
of harm, to third parties (on or off the Leased Property) arising from
activities thereon, or that constitutes a public or private nuisance or waste to
the Leased Property or any part thereof. The Lessee agrees that it will not use
the Leased Property if it has failed to procure or maintain insurance to the
extent required by Section 7 herein.
(ii) The Lessee agrees that the Leased Property will at all times be
maintained, used and operated under and in compliance in all material
respects with all Applicable Laws (other than CERCLA) and in all respects
with CERCLA; PROVIDED, HOWEVER, that the Lessee may contest the application
of any such rule, regulation or order in good faith and by appropriate
proceedings, but only so long as such proceedings do not involve any danger
of criminal liability or a material danger of civil liability of the
Owner-Trustee, the Indenture Trustee or any Participant, or a material danger
of the sale, forfeiture or loss of the Leased Property, any portion thereof
or any interest of the Owner-Trustee, the Indenture Trustee or any
Participant therein. The Lessee and the Leased Property shall comply in all
material respects with all applicable Environmental Laws and the Lessee shall
obtain and maintain in good standing all Governmental Approvals required for
the operations of the Facility by any applicable Environmental Law. The
Lessee shall not (A) own or operate on the Site any (1) underground storage
tank, (2) material amounts of asbestos containing building material, or (3)
landfill or dump, (B) use, generate, treat, store or dispose of Hazardous
Materials at or on the Site in quantities materially greater than that which
is customary for operations similar to those of the Lessee at the Site, or
(C) conduct any activity on the Site or use the Leased Property in any manner
(1) which would cause the Leased Property to
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become a hazardous waste treatment, storage or disposal facility within the
meaning of, or otherwise bring the Leased Property within the ambit of, RCRA
or any similar state law or local ordinance, (2) so as to cause a Release or
threat of Release of any Hazardous Material from or at the Site, to cause the
Site to become a site on or nominated for the National Priority List
promulgated pursuant to CERCLA or any state priority list promulgated
pursuant to any similar state law, or otherwise to bring the Leased Property
within the ambit of, CERCLA, or any similar state law or local ordinance or
any other Environmental Law or (3) so as to cause a discharge of pollutants
or effluents into any water source or system, or the discharge into the air
of any emissions, which would require a permit under the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ., or the Clean Air Act,
42 U.S.C. Section 741, ET SEQ., or any similar state law or local ordinance,
unless such a permit shall be in full force and effect and such discharge
shall be in full compliance therewith. At its sole expense (but without
thereby waiving any claims it may have against third parties), the Lessee
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 Site in accordance with any applicable
Environmental Law and any order or directive from a Governmental Authority
having jurisdiction, except to the extent the Lessee is diligently contesting
any applicable Environmental Law or any order or directive from a
Governmental Authority, so long as such contest is in good faith and by
appropriate proceedings, but only so long as reserves deemed by the Lessee to
be adequate are maintained and such proceedings do not involve any danger of
criminal liability or a material danger of civil liability of the
Owner-Trustee, the Indenture Trustee or any Participant, or a material danger
of the sale, forfeiture or loss of the Leased Property, any portion thereof
or any interest of the Owner-Trustee, the Indenture Trustee or any
Participant therein.
(b) NO ASSIGNMENT BY LESSEE; PERMITTED SUBLEASES. The Lessee agrees
that, without the prior written consent of the Owner-Trustee and the Indenture
Trustee, the Lessee will not assign, transfer (except a transfer in accordance
with Section 6.4 or Section 6.5) or sublease its right in respect of the Leased
Property under this Lease, or permit its rights or interest hereunder to be
subject to any Lien other than Permitted Encumbrances. Any sublease consented
to by the Owner-Trustee and the Indenture Trustee pursuant to the foregoing
sentence shall be subject to the conditions that (i) the sublessee shall agree
in writing to comply with all of the terms and provisions of this Lease during
the period of said sublease, (ii) the rights of any person who receives
possession of the Leased Property shall be subject and subordinate to all the
terms of this Lease, (iii) such sublease shall be expressly subject and
subordinate to the terms of this Lease, including, without limitation, all of
the Owner-Trustee's rights pursuant to Section 15, (iv) no such sublease shall
extend beyond the remaining Term of this Lease, and (v) such sublease shall
expressly prohibit by its terms any sublease by the sublessee thereunder. No
assignment or sublease of any of the rights of the Lessee hereunder shall
relieve the Lessee of any of its obligations, liabilities or duties hereunder
which shall be and remain those of a principal and not a guarantor.
SECTION 10. LIENS.
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The Lessee agrees that it will keep the Leased Property free and clear of
any and all Liens other than Permitted Encumbrances. Lessee shall promptly, at
its own expense, take such action as may be necessary to duly discharge any such
Lien if the same shall arise at any time.
SECTION 11. OWNERSHIP AND MARKING.
(a) OWNERSHIP. The Lessee acknowledges and agrees that it does not and
will not have or obtain any title to the Facility, nor any property right or
interest, legal or equitable, therein except its right and interest as lessee
hereunder and subject to all the terms hereof. The Lessee understands and
acknowledges that the Facility is owned by the Owner-Trustee, and mortgaged to
the Indenture Trustee pursuant to the Indenture.
(b) FACILITY PERSONAL PROPERTY. It is the intent of the parties hereto
that the Facility shall be and remain personal property notwithstanding the
manner in which the Facility may be attached or affixed to realty. Further, the
Lessee and the Owner-Trustee agree that the Facility shall for purposes of the
laws of the State of Idaho be personal property and not real property. The
Lessee covenants and warrants that it will take no action which would cause the
Facility to become real property or fixtures under Applicable Law. In the event
that, notwithstanding the foregoing, a court of competent jurisdiction shall
make a final determination that some part or portion of the Facility constitutes
real property under Applicable Law, then this Lease shall be deemed to be and
shall be construed as a divisible and severable contract between the
Owner-Trustee and the Lessee for the leasing of, respectively, (i) the part or
portion of the Facility so determined to constitute real property under
Applicable Law and (ii) the remainder of the Facility, all to the same extent
and with the same force and effect as though a separate lease had been entered
into by the Owner-Trustee and the Lessee in respect of the part or portion of
the Facility so determined to constitute real property and the remainder of the
Facility, and the amount of each installment of Rent payable in respect of the
part or portion of the Facility so determined to constitute real property shall
bear the same relationship to the aggregate amount of such installment of Rent
as the cost to the Owner-Trustee of such part or portion of the Facility so
determined to constitute real property shall bear to the Adjusted Facility Cost.
There shall be no merger of this Facility Lease nor of the leasehold
estate created hereby with any other estate in the Facility or the Site, or any
part thereof, by reason of the fact that the same Person may acquire or own such
estates, directly or indirectly.
(c) MARKING. The Lessee shall promptly cause each major component of
the Facility (such components being identified in Exhibit A hereto) to be
plainly, permanently and conspicuously marked by stenciling or by a metal tag or
plate affixed thereto, setting forth the following legend:
THIS FACILITY IS OWNED BY WILMINGTON TRUST COMPANY AS
OWNER-TRUSTEE UNDER CROWN PACIFIC TRUST NO. 981, IS
LEASED BY SAID OWNER-TRUSTEE TO CROWN PACIFIC LIMITED
PARTNERSHIP, AND IS SUBJECT TO A SECURITY INTEREST
GRANTED TO FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS
INDENTURE TRUSTEE.
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The Lessee covenants and agrees to replace any stenciling, tag or plate and sign
or marker which may be removed or destroyed or become illegible and to indemnify
each Indemnified Party against any liability, loss or expense incurred by any of
them as a result of the failure to maintain such markings.
SECTION 12. DISCLAIMER OF WARRANTIES; NET LEASE.
(a) DISCLAIMER OF WARRANTIES. Without waiving any claim the Lessee or
the Owner-Trustee may have against any seller, supplier or manufacturer, the
Lessee acknowledges and agrees that (i) the Leased Property is of a design,
capacity and manufacture selected by the Lessee, (ii) the Lessee is satisfied
that the Leased Property is suitable for its purposes, (iii) the Owner-Trustee
is not a manufacturer nor a dealer in property of such kind, (iv) the Leased
Property is leased hereunder subject to the rights of any parties in possession
of the Site and the state of the title to the Site and the rights of ownership
in the Site at the time the Leased Property becomes subject to this Lease and to
all applicable zoning regulations, restrictions, laws and ordinances, building
restrictions, and other laws and governmental regulations now in effect or
hereafter adopted and in the state and condition of every part thereof when the
same first becomes subject to this Lease, without representation or warranty of
any kind by the Owner-Trustee, and (v) THE OWNER-TRUSTEE LEASES THE LEASED
PROPERTY AS-IS WITHOUT WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED AS
TO (A) THE FITNESS FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR
QUALITY OF THE LEASED PROPERTY, (B) THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, (C) THE OWNER-TRUSTEE'S TITLE THERETO OR
INTEREST THEREIN, (D) THE LESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF, OR (E)
ANY OTHER MATTER WHATSOEVER. It is agreed that, as between the Indemnified
Parties and the Lessee, all risks incident to the matters discussed in the
preceding sentence are to be borne by the Lessee. The provisions of this
Section 12 have been negotiated by the Owner-Trustee and the Lessee and are
intended to be a complete exclusion and negation of any representations or
warranties of the Indemnified Parties, express or implied, with respect to the
Leased Property that may arise pursuant to any law now or hereafter in effect,
or otherwise.
(b) NET LEASE; NON-TERMINABILITY. (i) This Lease is a net lease, and
it is intended that the Lessee shall pay all costs and expenses of every
character, whether seen or unforeseen, ordinary or extraordinary or structural
or non-structural, in connection with the use, operation, maintenance, repair
and reconstruction of the Leased Property by the Lessee, including the costs and
expenses particularly set forth in this Lease. The Rent which the Lessee is
obligated to pay shall be paid without notice or demand and without set-off
(other than with respect to Periodic Site Rent as expressly provided in Section
4(b)), counterclaim, abatement, suspension, deduction or defense.
(ii) Except as otherwise expressly provided, this Lease shall not
terminate, nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated to pay hereunder, nor shall the obligations hereunder of the
Lessee be affected, by reason of (A) any defect in the condition,
merchantability, design, construction, operation, durability, quality or fitness
for use of the Leased Property or any portion thereof or the failure of the
Leased Property to comply with all
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Applicable Laws, including any inability to use the Leased Property by reason of
such non-compliance; (B) any defect in title or rights to the Leased Property,
or the existence of any Liens with respect to the Leased Property or any part
thereof; (C) any damage to, removal, abandonment, salvage, loss, theft,
contamination of, scrapping or destruction of the Leased Property or any portion
thereof; (D) the taking of the Leased Property or any portion thereof by
condemnation, confiscation, requisition, eminent domain or otherwise; (E) any
prohibition, limitation, restriction, prevention, interruption, cessation or
curtailment of or interference with any use or possession of the Leased Property
or any portion thereof, or any eviction by paramount title or otherwise; (F) the
termination or loss of the Owner-Trustee's interest under the Site Lease or any
other lease, sublease, right-of-way, easement or other interest in personal or
real property upon or to which any portion of the Leased Property is located,
attached or appurtenant or in connection with which any portion of the Leased
Property is used or which otherwise affects or may affect the Owner-Trustee's
ownership of or right to use the Leased Property or any portion thereof; (G) the
inadequacy or incorrectness of the description of any portion of the Leased
Property or the failure of this Lease to demise to the Lessee the Leased
Property or any portion thereof; (H) the Lessee's acquisition or ownership of
all or any part of the Leased Property otherwise than pursuant to an express
provision of this Lease; (I) any change, waiver, extension, indulgence or other
action or omission or breach in respect of any obligation or liability of or by
the OwnerTrustee, the Indenture Trustee or any Participant; (J) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation or
other like proceedings relating to the Lessee, the OwnerTrustee, the Indenture
Trustee, any Participant or any other Person, or any action taken with respect
to this Lease by any trustee or receiver of the Lessee, the OwnerTrustee, the
Indenture Trustee, any Participant or any other Person, or by any court in any
such proceeding; (K) any setoff, counterclaim, recoupment, defense or other
right or claim that the Lessee has or might have against any Person, including
without limitation the OwnerTrustee, the Indenture Trustee, any Participant or
any vendor, manufacturer, contractor of or for the Leased Property for any
reason whatsoever; (L) any failure on the part of the Owner-Trustee or any other
Person to perform or comply with any of the terms of this Lease, of any other
Operative Agreement or of any other agreement or any breach of any
representation or warranty of, or any act or omission of the Lessee, the
OwnerTrustee, the Indenture Trustee or any Participant under this Lease or any
of the other Operative Agreements, or any claims, rights or remedies occurring
or arising as a result of any other business dealings between or among the
Lessee and any of the OwnerTrustee, the Indenture Trustee and any Participant;
(M) any invalidity or unenforceability or illegality or disaffirmance of this
Lease against or by the Lessee or any provision hereof or any of the other
Operative Agreements or any provision of any thereof or any lack of right, power
or authority of the Lessee the OwnerTrustee, the Indenture Trustee or any
Participant to enter into any Operative Agreement or any of the transactions
contemplated thereby; (N) the impossibility or illegality of performance by the
Lessee, the OwnerTrustee, the Indenture Trustee, any Participant or any of them;
(O) any action by any court, administrative agency or other Governmental
Authority; or (P) any other cause or circumstances whether similar or dissimilar
to the foregoing and whether or not the Lessee shall have notice or knowledge of
any of the foregoing, it being the intention of the parties hereto that the
obligations of the Lessee shall be absolute and unconditional and shall be
separate and independent covenants and agreements and shall continue unaffected
unless and until the covenants have been terminated pursuant to an express
provision of this Lease.
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Each Rent payment made pursuant to this Lease by Lessee shall be final
and Lessee will not seek to recover all or any part of such payment from the
OwnerTrustee, the Indenture Trustee or any Participant for any reason
whatsoever. If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein or as otherwise agreed, Lessee nonetheless agrees to pay to the
OwnerTrustee or to whomsoever shall be entitled thereto, an amount equal to each
Rent payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. The obligation of Lessee in the immediately preceding sentence shall
survive the expiration or termination of this Lease other than in accordance
with its terms. Nothing contained in this Section 12(b) shall be construed to
otherwise limit the right of Lessee to make any claim it might have against the
OwnerTrustee or any other Person or to pursue such claim in such manner as
Lessee shall deem appropriate.
The Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or avoid
this Lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting the Owner-Trustee or the Owner Participant or any assignee
of the Owner-Trustee or the Owner Participant or any other action with respect
to this Lease which may be taken in any such proceeding by any trustee or
receiver of the Owner-Trustee or of any assignee of the Owner-Trustee or by any
court or any of the foregoing actions which may be taken by or against any of
the Owner-Trustee's predecessors in interest in the Facility.
Except as expressly provided herein, the Lessee waives all rights now or
hereafter conferred by law (y) to quit, terminate, rescind or surrender this
Lease or the Leased Property or any part thereof, or (z) to any abatement,
suspension, deferment, return or reduction of the Rent.
SECTION 13. CASUALTY OCCURRENCES; CONDEMNATION; EARLY TERMINATION; ETC.
(a) CASUALTY OCCURRENCE. In the event of a Casualty Occurrence, the
Lessee shall promptly and fully inform the Owner-Trustee and the Indenture
Trustee in writing in regard thereto and shall, on the Casualty Termination
Date, pay the Owner-Trustee an amount equal to the sum of (i) the Casualty Value
of the Facility determined as of the Casualty Termination Date, (ii) if the
Casualty Termination Date is a Rent Payment Date, the Periodic Rent (other than
Periodic Rent payable "in advance" on such date) and the Periodic Site Rent due
on the Casualty Termination Date, and (iii) all other Supplemental Rent then
due. Notwithstanding such Casualty Occurrence, the Lessee's obligation to pay
Rent hereunder due and payable as to the Facility on or prior to the payment
date of such Casualty Value shall continue. Upon receipt by the Owner-Trustee
of such payments and all other sums then due and payable by the Lessee under
this Lease and the other Operative Agreements, this Lease shall terminate, and
the Owner-Trustee will transfer to the Lessee all the Owner-Trustee's right,
title and interest, if any, in and to the Leased Property on an "as-is",
"where-is" basis, without recourse or warranty, express or implied, except for a
warranty against Lessor's Liens attributable to the OwnerTrustee or Wilmington
Trust Company.
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(b) CERTAIN GOVERNMENT REQUISITIONS. In the event that during the Term
the use of the Leased Property is requisitioned or taken by any Governmental
Authority under the power of eminent domain or otherwise under circumstances
which do not constitute a Casualty Occurrence in respect thereof, the Lessee's
duty to pay Periodic Rent, Periodic Site Rent and Supplemental Rent shall
continue for the duration of such requisition or taking. Unless a Default or
Event of Default shall have occurred and be continuing, the Lessee shall be
entitled to receive and retain for its own account all sums payable for any such
period by such Governmental Authority as compensation for requisition or taking
of possession. If a Default or Event of Default shall have occurred and be
continuing, the Lessee shall be deemed to the extent of any such compensation so
received to be the agent of the Owner-Trustee in collecting and receiving the
same and shall segregate and hold in trust and promptly remit any such
compensation so received to the Owner-Trustee for crediting against any sums
then due and owing hereunder to the Owner-Trustee, its successors and assigns.
(c) APPLICATION OF PAYMENTS WITH RESPECT TO A CASUALTY OCCURRENCE. The
Owner-Trustee shall receive the entire amount payable by any Governmental
Authority or instrumentality or agency thereof or other Person with respect to a
Casualty Occurrence (other than proceeds of insurance maintained by the Lessee,
the application of which shall be governed by Section 7 hereof). Such amount,
after deducting all expenses, including attorneys' fees, incurred by the
Owner-Trustee in or as a result of such condemnation proceedings shall be
applied promptly as follows: so much of such payments as shall not exceed the
Casualty Value required to be paid by the Lessee pursuant to Section 13 shall be
applied in reduction of the Lessee's obligation to pay such Casualty Value, if
not already paid by the Lessee, or, if already paid by the Lessee and no Default
or Event of Default exists, shall be applied to reimburse the Lessee for its
payment of such Casualty Value. The balance, if any, of such payments shall be
retained by the Owner-Trustee.
(d) EARLY TERMINATION. So long as no Default or Event of Default shall
have occurred and be continuing, the Lessee may, upon not less than 180 days'
prior written notice to the Owner-Trustee (which notice shall not be revocable
without the consent of the Owner Participant), terminate this Lease as of
January 2, 2006 (or, if earlier, the date referred to in clause (ii) of the
second paragraph of Section 8(d)) or as of any succeeding Rent Payment Date if
the Facility, in the good faith judgment of the Lessee as determined by the
Board of Control, shall have become uneconomic, obsolete or surplus to the needs
of the Lessee so as to be no longer useful in the conduct of Lessee's business.
Such written notice shall designate the date on which termination is to become
effective (the "TERMINATION DATE") and shall be accompanied by a certified copy
of the resolutions of the Board of Control making such determination and by an
Officer's Certificate of the Lessee setting forth the determination that the
Facility has become uneconomic, obsolete or surplus to the needs of Lessee and a
statement in reasonable detail of the basis for such determination. For the
purposes of this Section 13(d), interest rates payable by the Lessee on its
indebtedness for borrowed money or finance charges payable by the Lessee in
connection with the acquisition of its equipment under conditional sale
contracts, leases or other arrangements for deferred payment shall be
disregarded in the determination of any right of termination provided herein.
Following the giving of such notice, the Lessee, as agent for the OwnerTrustee,
shall dispose of the Facility and transfer all of the OwnerTrustee's right,
title and interest in and to the Site Lease on the Termination Date for the best
price
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obtainable unless the Owner Participant shall notify the Lessee that it elects
to retain ownership of the Facility in accordance with and to the extent
permitted by the last paragraph of this Section 13(d), PROVIDED that no such
disposition shall be to the Lessee or any Affiliate of the Lessee. The Lessee
shall certify to the Owner-Trustee in writing the amount of each bid so received
and the name and address of the party submitting such bid promptly upon receipt
thereof. The Owner-Trustee may obtain bids, but shall be under no duty to
solicit bids, inquire into the efforts of the Lessee to obtain bids or otherwise
take any action in connection with arranging such dispositions. Prior to such
disposition and after such termination, the Facility shall not be used by the
Lessee or any Affiliate of the Lessee.
Any disposition pursuant to this Section 13(d) shall be on an "as-is",
"where-is" basis, without recourse, representation or warranty, express or
implied, except for a warranty against Lessor's Liens attributable to the
OwnerTrustee or Wilmington Trust Company. In disposing of the Facility, the
Lessee shall take such action as the Owner-Trustee shall reasonably request to
terminate any contingent liability which the Owner-Trustee or the Owner
Participant might have arising out of such disposition. The Lessee shall remain
liable under all provisions of this Lease (other than its obligation to pay
Periodic Rent and Periodic Site Rent for the period after the Rent Payment Date
as of which Termination Value is determined) as if this Lease were in full force
and effect, until such time as the Facility shall have been disposed of in
accordance with the provisions of this Section 13(d). If, on the Termination
Date, (x) the Owner Participant shall not have elected to retain the Facility,
(y) the Facility shall have not been sold pursuant to and in accordance with the
provisions of this Section 13(d) or (z) the Lessee does not make all payments
required pursuant to and in accordance with the provisions of this Section
13(d), Lessee's notice of termination shall be deemed to be withdrawn as of such
date and this Lease shall continue in full force and effect with respect to the
Facility and the Lessee shall pay the reasonable costs, expenses and liabilities
incurred by the OwnerTrustee, the Indenture Trustee and the Participants as a
result of Lessee's having given such notice of termination.
Any proceeds from the disposition of the Facility pursuant to this Section
13(d) shall be paid to and retained by the OwnerTrustee (or, so long as the
Secured Indebtedness shall not have been fully paid and satisfied, the Indenture
Trustee). In the case of a disposition of the Facility pursuant to this Section
13(d), on the Termination Date, the Lessee shall pay to the OwnerTrustee (or, so
long as the Secured Indebtedness shall not have been fully paid and satisfied,
the Indenture Trustee) (i) all payments of Periodic Rent (other than Periodic
Rent payable "in advance" on the Termination Date) and Periodic Site Rent
through and including the Termination Date, (ii) the excess, if any, of (A) the
Termination Value of the Facility as of the Termination Date, over (B) the net
cash proceeds from the disposition of the Facility pursuant to this Section
13(d) (after the deduction of all costs and expenses of the Lessee, the
OwnerTrustee, the Indenture Trustee and the Participants that have not been
previously paid by the Lessee in connection with such disposition) received by
the OwnerTrustee (or, so long as the Secured Indebtedness shall not have been
fully paid and satisfied, the Indenture Trustee) and the Persons entitled
thereto, (iii) an amount equal to the Make-Whole Amount, if any, in respect of
the principal amount of the Series A Notes to be prepaid in accordance with
Section 2.10(b) of the Indenture and (iv) all other sums then due and payable by
the Lessee under this Lease and the other Operative Agreements. Any amount of
such net proceeds in excess of such payments by the Lessee shall be retained by
the Owner-Trustee or the Indenture Trustee, as the case may be.
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Owner-Trustee may, at any time prior to 45 days prior to the Termination
Date, give written notice to Lessee and the Indenture Trustee that Owner-Trustee
elects irrevocably to terminate this Lease with respect to the Facility on the
Termination Date. On the Termination Date the Owner Participant shall pay to
the Indenture Trustee sufficient funds to enable Owner-Trustee to pay in full
the aggregate unpaid principal amount of all Series B Notes then outstanding,
together with accrued interest thereon to such Termination Date, plus Make-Whole
Amount, if any, thereon and all other sums due and payable on such Termination
Date to the holders of the Series B Notes under the Operative Agreements other
than the Series A Notes (but without relieving Lessee of its obligations to make
all payments of Supplemental Rent owed by Lessee in connection therewith under
the last sentence of Section 4(c)). Effective on full payment to the Indenture
Trustee of all the foregoing amounts and on Lessee's full payment of the
installment of Periodic Rent (other than Periodic Rent payable "in advance" on
the Termination Date) and Periodic Site Rent due on such Termination Date plus
all other amounts of Rent due on or prior to such Termination Date including,
without limitation, Supplemental Rent in the amount of the Make-Whole Amount, if
any, due to the Indenture Trustee under the preceding sentence, this Lease shall
terminate; PROVIDED that this Lease, notwithstanding anything else to the
contrary contained herein, shall continue in full force and effect unless such
amounts are paid in full. If, after giving an irrevocable notice, the Owner
Participant fails to make the required payment on the Termination Date, the
Owner-Trustee shall have no further rights to make the election provided for
under this paragraph.
SECTION 14. ASSIGNMENT BY OWNER-TRUSTEE.
(a) RIGHT TO ASSIGN. This Lease and all rent and all other sums due or
to become due hereunder may be assigned as collateral in whole or in part by the
Owner-Trustee without the consent of the Lessee, but the Lessee shall be under
no obligation to any assignee of the Owner-Trustee (other than the Indenture
Trustee) except upon written notice of such assignment from the Owner-Trustee.
Upon notice to the Lessee of any such assignment, the rent and other sums
payable by the Lessee which are the subject matter of the assignment shall be
paid to or upon the written order of the assignee. Such notice is hereby given
of the assignment of this Lease and certain of the Rent and other sums due and
to become due to the Indenture Trustee under and pursuant to the Indenture, and
the Lessee agrees to make all payments of Rent hereunder in accordance with the
provisions of Section 4.
(b) OBLIGATION AND RIGHT OF ASSIGNEE. Any assignee pursuant to this
Section 14 shall not be obligated to perform any duty, covenant or condition
required to be performed by the Owner-Trustee under any of the terms hereof, but
on the contrary, the Lessee and the Owner-Trustee by their respective executions
hereof each acknowledge and agree that notwithstanding any such assignment each
and all of such duties, covenants or conditions required to be performed by the
Owner-Trustee shall survive any such assignment and shall be and remain the sole
liability of the Owner-Trustee. Without limiting the foregoing, the Lessee
acknowledges and agrees that the rights of such assignee in and to the Rent
shall not be subject to any abatement whatsoever, and shall not be subject to
any defense, setoff, counterclaim or recoupment or reduction of any kind for any
reason whatsoever whether by reason of failure of or defect in the Owner-
Trustee's title or any interruption from whatsoever cause in the use, operation
or possession of the Leased Property or any part thereof or any damage to or
loss or
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destruction of the Leased Property or any part thereof or by reason of any other
indebtedness or liability, howsoever and whenever arising, of the Owner-Trustee
or of any other Person to the Lessee or to any other Person, or for any cause
whatsoever, it being the intent hereof that the Lessee shall be unconditionally
and absolutely obligated to pay such assignee all of the Rent, subject only to
the provisions of the Indenture relating to Excepted Property.
(c) AMENDMENTS; EXERCISE OF REMEDIES. Unless and until the Lessee shall
have received written notice from the Indenture Trustee that the Lien of the
Indenture has been released (i) no amendment or modification of, or waiver by or
consent or approval of the Owner-Trustee in respect of, any of the provisions of
this Lease shall be effective unless the Indenture Trustee shall have joined in
such amendment, modification, waiver or consent or shall have given its prior
written consent thereto, and (ii) except as otherwise provided in the Indenture,
the Indenture Trustee shall have the sole right to exercise all rights,
privileges and remedies and to make elections, demands or the like and to take
any other discretionary action (either in its own name or in the name of the
Owner-Trustee for the use and benefit of the Indenture Trustee) which by the
terms of this Lease or by Applicable Law are permitted or provided to be
exercised by the Owner-Trustee.
SECTION 15. DEFAULTS.
(a) EVENTS OF DEFAULT. The following events shall constitute Events of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) The Lessee shall default in the payment when due of any
installment of Periodic Rent or of Periodic Site Rent or of any Casualty
Value or Termination Value payable pursuant to Section 13 or Early
Purchase Price payable pursuant to Section 19 and such default shall
continue for a period of five Business Days; or
(ii) The Lessee shall default in the payment of any Supplemental
Rent (other than Casualty Value, Termination Value or Early Purchase
Price) and such default shall continue for a period of five Business Days
after written notice thereof shall have been received by the Lessee; or
(iii) The Lessee shall default in the observance or performance of
any covenant required to be observed or performed by the Lessee under
Section 6.2 through Section 6.6, both inclusive, or Section 10 (which in
the case of a default under Section 10 shall have been continuing for a
period of five Business Days) shall default in the maintenance of the
insurance coverage required by Section 7 or shall make or permit any
unauthorized assignment or transfer of this Lease, or of the Lessee's
interest in the Leased Property, or any portion thereof; or
(iv) The Lessee shall default in the observance or performance of
any other covenant required to be observed or performed by the Lessee
hereunder or under any other Lessee Agreement (except the Other Facility
Lease) and such default shall continue
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for more than 30 days after the earlier of (A) the day on which the Lessee
first obtains knowledge of such default, or (B) the day on which written
notice thereof shall have been received by the Lessee, or such longer
period, not to exceed 90 days, as may be necessary to cure any such
default that can be cured within such period, so long as the Lessee is
diligently proceeding to cure such default and such default does not
involve any material danger of the sale, forfeiture or loss of any part of
the Leased Property; or
(v) Any representation or warranty made by the Lessee herein or
in any other Lessee Agreement (except the Other Facility Lease and Tax
Indemnity Agreement) or in any statement or certificate furnished by the
Lessee to the Owner-Trustee or the Indenture Trustee or any Participant in
connection with the transactions contemplated by the Operative Agreements
or furnished by the Lessee pursuant hereto proves untrue in any material
respect as of the date of issuance or making thereof; or
(vi) Final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Lessee or any Restricted Subsidiary (each as defined in Section 6.12) 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
(vii) 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 or Current
Debt (each as defined in Section 6.12) of the Lessee 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
(viii) 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 Lessee 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
(ix) A custodian, liquidator, trustee, receiver or similar
official is appointed for the Lessee 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
(x) The Lessee, any Restricted Subsidiary or the General Partner
becomes insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors, or the
Lessee or any Restricted Subsidiary or the General Partner applies for or
consents to the appointment of a custodian, liquidator, trustee, receiver
or similar official for the Lessee, such Restricted Subsidiary or the
General Partner or for the major part of the Property of any of them; or
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(xi) 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 Lessee, any Restricted Subsidiary or the General Partner and,
if instituted against the Lessee, any Restricted Subsidiary or the General
Partner, are consented to or are not dismissed within 60 days after such
institution; or
(xii) The Lessee, or any Person on behalf of the Lessee, shall
contest or deny the validity or enforceability of this Lease or the other
Lessee Agreements or its obligations hereunder or thereunder; or
(xiii) An order or decree requiring a split-up or divestiture of the
Lessee is outstanding against the Lessee and such order or decree remains
unstayed and in effect for more than 30 consecutive days; or
(xiv) An Event of Default under the Other Facility Lease shall have
occurred and be continuing.
(b) REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter so long as the same shall be continuing, the Owner-Trustee may,
at its option, declare this Lease to be in default by a written notice to the
Lessee (provided that no such written notice shall be required with respect to
any Event of Default under Section 15(a)(ix), (x) or (xi)) and at any time
thereafter, so long as the Lessee shall not have remedied all outstanding Events
of Default, the Owner-Trustee may do one or more of the following as the
Owner-Trustee in its sole discretion shall elect, to the extent permitted by,
and subject to compliance with any mandatory requirements of, Applicable Law
then in effect:
(i) the Owner-Trustee may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by the Lessee
of the applicable covenants and terms of this Lease or to recover damages
for the breach thereof;
(ii) the Owner-Trustee may terminate this Lease, and, whether or
not this Lease has been so terminated, enter upon the Site and take
immediate possession of the Facility and the Site and remove all or any
part of the Facility by summary proceedings or otherwise, all without
liability to the Lessee 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;
(iii) the Owner-Trustee may sell the Facility and its interest in
the Site Lease Property or any part thereof at public or private sale, as
the Owner-Trustee may determine, free and clear of any rights of the
Lessee and without any duty to account to the Lessee with respect to such
sale or for the proceeds thereof (except to the extent required by
paragraph (vi) below if the Owner-Trustee elects to exercise its rights
under said paragraph), in which event the Lessee's obligation to pay
Periodic Rent and Periodic Site Rent hereunder for the period commencing
on the date of such sale shall terminate (except to the extent that
Periodic Rent or Periodic Site Rent, as the case may
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be, is to be included in computations under paragraph (v) or paragraph
(vi) below if the Owner-Trustee elects to exercise its rights under either
of said paragraphs);
(iv) the Owner-Trustee may hold, keep idle or lease to others the
Leased Property or any part thereof, as the Owner-Trustee 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 proceeds with respect thereto, except that the
Lessee's obligation to pay Periodic Rent and Periodic Site Rent for the
period commencing when the Lessee shall have been deprived of possession
pursuant to this Section 15 shall be reduced by the net proceeds, if any,
received by the Owner-Trustee from leasing the Leased Property or such
part to any person other than the Lessee for any period during the Term;
(v) whether or not the Owner-Trustee shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph
(i), (ii), (iii) or (iv) above, the Owner-Trustee, by written notice to
the Lessee specifying a payment date which shall be not earlier than 10
days after the date of such notice, may demand that the Lessee pay to the
Owner-Trustee, and the Lessee shall pay to the Owner-Trustee, on the
payment date specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Periodic Rent and Periodic
Site Rent due after the Rent Payment Date coinciding with or immediately
preceding the payment date specified in such notice), any unpaid Periodic
Rent and Periodic Site Rent and any and all unpaid Supplemental Rent due
hereunder before or during the exercise of remedies hereunder, including,
without limitation, all legal fees and other costs and expenses incurred
by the OwnerTrustee, the Indenture Trustee or any Participant by reason of
the occurrence of any Event of Default or the exercise of remedies with
respect thereto, plus whichever of the following amounts the
Owner-Trustee, in its sole discretion, shall specify in such notice
(together with interest on such amount at the Late Rate from the payment
date specified in such notice to the date of actual payment): (A) an
amount equal to the excess, if any, of the Casualty Value (plus interest
at the Specified Rate on such Casualty Value from the Rent Payment Date as
of which such Casualty Value was calculated to the payment date specified
in such notice) computed as of the Rent Payment Date coinciding with or
immediately preceding the payment date specified in such notice, over the
fair market rental value (computed as hereafter in this Section provided)
of the Facility for the remainder of the then current Term after
discounting such fair market rental value to present worth as of the
payment date specified in such notice at a discount rate equal to the
Specified Rate in effect on the date of such notice, compounded
semiannually on the Rent Payment Dates; or (B) an amount equal to the
excess, if any, of the Casualty Value (plus interest at the Specified Rate
on such Casualty Value from the Rent Payment Date as of which such
Casualty Value was calculated) computed as of the payment date specified
in such notice over the fair market sales value of the Facility (computed
as hereafter in this Section provided) as of the payment date specified in
such notice;
(vi) if the Owner-Trustee shall have sold the Facility and its
interest in the Site Lease Property pursuant to paragraph (iii) above, the
Owner-Trustee, in lieu of exercising its rights under paragraph (v) above,
may, if it shall so elect, demand that the Lessee pay
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to the Owner-Trustee, and the Lessee shall pay to the Owner-Trustee, as
liquidated damages for loss of a bargain and not as a penalty, any unpaid
Periodic Rent and Periodic Site Rent due for periods up to and including
the Rent Payment Date next following the date of such sale and any and all
unpaid Supplemental Rent due hereunder before or during the exercise of
remedies hereunder, including, without limitation, all legal fees and
other costs and expenses incurred by the OwnerTrustee, the Indenture
Trustee or any Participant by reason of the occurrence of any Event of
Default or the exercise of remedies with respect thereto, plus the amount
of any deficiency between the net proceeds of such sale and the Casualty
Value of the Facility, computed as of the Rent Payment Date next following
the date of such sale, together with interest at the Late Rate on the
amount of such deficiency from the Rent Payment Date as of which such
Casualty Value is computed until the date of actual payment;
(vii) In lieu of exercising its rights under paragraph (v) above,
the OwnerTrustee may by notice to the Lessee require the Lessee to pay on
demand to the OwnerTrustee, and the Lessee hereby agrees that it will so
pay to the OwnerTrustee, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Periodic Rent and Periodic Site Rent due
after the Rent Payment Date next succeeding the date of such notice) any
unpaid Periodic Rent and Periodic Site Rent due for all periods up to and
including the Rent Payment Date next succeeding the date of such notice
and any and all unpaid Supplemental Rent due hereunder before or during
the exercise of remedies hereunder, including, without limitation, all
legal fees and other costs and expenses incurred by the OwnerTrustee, the
Indenture Trustee or any Participant by reason of the occurrence of any
Event of Default or the exercise of remedies with respect thereto, plus an
amount equal to Casualty Value computed as of the Rent Payment Date next
succeeding the date of such notice (or if such date is a Rent Payment
Date, then computed as of such Rent Payment Date), together with interest,
to the extent permitted by law, at the Late Rate on such amount of
Casualty Value from the date as of which such Casualty Value was computed
to the date of actual payment; and upon such payment of liquidated damages
and the payment of all other Rent then due hereunder, the OwnerTrustee
shall assign and transfer the Facility and its interest in the Site Lease
Property to Lessee, asis, whereis, without recourse or warranty, express
or implied, except for a warranty against Lessor's Liens attributable to
the OwnerTrustee or Wilmington Trust Company, and the OwnerTrustee shall
execute and deliver such documents evidencing such assignment and transfer
as the Lessee shall reasonably request. In addition, promptly after the
Lessee makes the payment of Casualty Value as aforesaid, the fair market
sales value of the Facility as of the date of which Casualty Value was
determined will be determined. If the fair market sales value of the
Facility as of such date is determined to exceed the Casualty Value paid
pursuant to the first sentence of this paragraph (vii), the Lessee shall,
within 30 days after such determination, pay the amount of such excess to
the OwnerTrustee; and
(viii) the Owner-Trustee may exercise any other right or remedy
which may be available to it under Applicable Law.
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In addition, the Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Rent due hereunder before or during the exercise
of any of the foregoing remedies and for all legal fees and other costs and
expenses incurred by the Owner-Trustee, the Indenture Trustee or any Participant
by reason of the occurrence of any Event of Default or the exercise of the
Owner-Trustee's remedies with respect thereto, including all costs and expenses
incurred in connection with the surrender of the Leased Property or redelivery
of the Facility in accordance with Section 16 hereof or in placing the Leased
Property in the condition required by said Section and any premium payable on
the Series B Notes. For the purpose of paragraphs (v) and (vii) above, the
"FAIR MARKET RENTAL VALUE" or the "FAIR MARKET SALES VALUE" of the Leased
Property shall mean such value as determined by the Owner-Trustee. Such fair
market sales value and such fair market rental value shall be determined on the
basis specified in Section 19, except that the assumptions set forth in clause
(i) of Section 19(a) shall not be made (unless the Facility is still located at
the Site, in which case the then remaining Site Lease Term shall be considered),
but such determination shall instead be made on an "asis, whereis" basis, taking
into account the actual condition and location of the Facility. At any sale
pursuant to this Section, any Participant may bid for and purchase the Facility
and the Owner-Trustee's interest in the Site Lease Property. To the extent
permitted by Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Owner-Trustee
to sell, lease or otherwise use the Leased Property in mitigation of the
Lessee's damages as set forth in this Section or which may otherwise limit or
modify any of the Owner-Trustee's rights and remedies in this Section.
SECTION 16. RETURN OF FACILITY TO OWNER-TRUSTEE.
(a) SURRENDER AT SITE. Except in the event that the Facility shall be
sold to a third party pursuant to Section 13 or the Lessee shall purchase the
Facility pursuant to Section 19, the Lessee will at its own expense surrender
possession of the Leased Property to the Owner-Trustee at the Site at the end of
the Term hereof.
At the time of such surrender,
(i) the Lessee shall also surrender to the Owner-Trustee one copy
of the Plans and all other logs, catalogs, software, documents,
instruments, plans, maps, surveys, blueprints, as built diagrams,
specifications, manuals, technical drawings and other materials relating
to the Leased Property and the Technology;
(ii) all lines, hoses, ducts and other similar items which are
part of the Facility shall be air, steam or fluid tight, as the case may
be;
(iii) each Ordinary Wear Part shall be returned with a remaining
useful life of at least 50% of its original useful life;
(iv) all equipment which is part of the Facility shall be properly
lubricated and all surfaces and components shall be properly coated with a
protective coating from the elements;
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(v) the Leased Property shall be free from all Liens except those
for which the Owner-Trustee or the Owner Participant is responsible under
Section 7 of the Participation Agreement, Liens described in clause (g) of
the definition of "Permitted Encumbrances" and the exceptions to title
described in Schedule B to the Title Policy issued on the Closing Date to
the Owner-Trustee;
(vi) the Facility shall be immediately capable of being operated
at the Site by an operator other than the Lessee or any Affiliate of the
Lessee without the need for any Alterations;
(vii) the Facility shall be in compliance in all material respects
with all then existing Applicable Laws governing its use, operation and
sale;
(viii) any Hazardous Materials, other than those used in the normal
operation of the Facility and used and stored in compliance with
Environmental Laws, shall have been removed from the Leased Property by a
licensed waste disposal firm, provided that upon the written request of
the OwnerTrustee, the Lessee shall also remove Hazardous Materials used in
the normal operation of the Facility which have been used and stored in
compliance with Environmental Laws to the extent that such Hazardous
Materials are not salable; and
(ix) the Leased Property shall be in at least the operating
condition required by the terms hereof, including, without limitation, the
provisions of Section 8(a).
(b) ENGINEER'S REPORT. Not less than 90 days and not more than 180 days
prior to the last day of the Term (or the date on which the Facility is
otherwise returned to the OwnerTrustee), the Lessee shall provide to the
OwnerTrustee an inspection report prepared by a qualified independent engineer
selected by the Lessee and reasonably satisfactory to the OwnerTrustee
certifying whether or not the Facility is (i) in good working order, (ii)
capable of performing substantially at the original manufacturer's performance
specifications at the time the Facility was originally designed and (iii)
capable of performing at its Design Capacity. In the event that such report
indicates that the Facility does not satisfy the requirements of clause (i),
(ii) or (iii) of the preceding sentence, the OwnerTrustee may elect either (A)
to deem that the Leased Property is not returned until the earlier of (1) the
date on which the Facility is properly repaired to satisfy such requirements and
(2) one year after the last day of the Term, in which case the Lessee shall
continue to be obligated under all the terms and conditions of this Lease
(including without limitation the provisions relating to insurance,
indemnification and risk of loss), except that, other than set forth in Section
16(e) below, the Lessee shall not be required to pay Periodic Rent and Periodic
Site Rent after the expiration of the Basic Term or any Renewal Term, as the
case may be, but the Lessee shall pay to the OwnerTrustee as liquidated damages,
and not as a penalty, for the failure of the Lessee to return the Leased
Property to the OwnerTrustee at the expiration of the Term as required by the
provisions of this Section 16, an amount equal to 120% of the daily equivalent
of (y) the arithmetic average of the Periodic Rent during the Basic Term, or (z)
if the failure to return occurs after a Renewal Term, the arithmetic average of
the Periodic Rent during such Renewal Term, or (B) to terminate this Lease, in
which case the Lessee shall pay to the OwnerTrustee the Termination Value. If
the OwnerTrustee
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elects the option specified in clause (A) above and the Facility has not been
properly repaired one year after the last day of the Term, the Lessee shall pay
to the OwnerTrustee the Termination Value for the Facility and title to the
Facility shall vest in the Lessee upon such payment.
(c) ENVIRONMENTAL REPORT. Not less than 90 days and not more than 180
days prior to the last day of the Term (or the date on which the Facility is
otherwise returned to the OwnerTrustee), the Lessee shall provide to the
OwnerTrustee an inspection report prepared by a reputable environmental
consulting firm selected by the OwnerTrustee certifying whether or not the Site
and the Facility are in compliance with CERCLA and in all material respects with
all other then existing Environmental Laws. In the event that such report
indicates that the Site or the Facility is not in compliance with all then
existing Environmental Laws, the OwnerTrustee may elect either (A) to deem that
the Leased Property is not returned until the earlier of (1) the date on which
the Site and the Facility are in compliance with all then existing Environmental
Laws and (2) one year after the last day of the Term, in which case the Lessee
shall continue to be obligated under all the terms and conditions of this Lease
(including without limitation the provisions relating to insurance,
indemnification and risk of loss), except that, other than set forth in Section
16(e) below, the Lessee shall not be required to pay Periodic Rent and Periodic
Site Rent after the expiration of the Basic Term or any Renewal Term, as the
case may be, but the Lessee shall pay to the OwnerTrustee as liquidated damages,
and not as a penalty, for the failure of the Lessee to return the Leased
Property to the OwnerTrustee at the expiration of the Term as required by the
provisions of this Section 16, an amount equal to 120% of the daily equivalent
of (y) the arithmetic average of the Periodic Rent during the Basic Term, or (z)
if the failure to return occurs after a Renewal Term, the arithmetic average of
the Periodic Rent during such Renewal Term, or (B) to terminate this Lease, in
which case the Lessee shall pay to the OwnerTrustee the Termination Value for
the Facility and title to this Facility shall vest in the Lessee upon such
payment. If the OwnerTrustee elects the option specified in clause (A) above
and the Facility has not been properly repaired one year after the last day of
the Term, the Lessee shall pay to the OwnerTrustee the Termination Value for the
Facility.
(d) STORAGE. Following the surrender of the Facility as provided in
Section 16(a) above, the Lessee agrees to store the Facility at the Site in the
condition requested by the Owner-Trustee at the risk and expense of the Lessee
for a period of one year. The Owner-Trustee may during the storage period
obtain bids for purchase of the Facility on an "as-is", "where is" a basis, and
at its sole option, may elect to accept or reject any such bids for the
Facility. The Lessee shall continue to be obligated under all the terms and
conditions of this Lease (including without limitation the provisions relating
to insurance, indemnification and risk of loss) during the storage period set
forth above, except that, other than set forth in Section 16(e) below, the
Lessee shall not be required to pay Periodic Rent and Periodic Site Rent after
the expiration of the Basic Term or any Renewal Term, as the case may be.
Neither the Lessee nor any Affiliate shall be entitled to use the Facility
during such period.
SECTION 17. [INTENTIONALLY LEFT BLANK].
SECTION 18. FINANCIAL STATEMENTS AND REPORTS; INSPECTION AND CERTIFICATES.
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(a) REPORTS AND RIGHTS OF INSPECTION. The Lessee will keep, and will
cause each Subsidiary to keep, proper books of record and account in which full
and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Lessee or such Subsidiary, in
accordance with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to the OwnerTrustee, the Indenture Trustee and
each Participant pursuant to this Section 18(a) and concurred in by the
independent public accountants referred to in Section 18(a)(ii) hereof), and
will furnish to the OwnerTrustee, the Indenture Trustee and each Participant (in
duplicate if so specified below or otherwise requested), and in the case of the
financial statements delivered pursuant to Section 18(a)(ii), to the Securities
Valuation Office, National Association of Insurance Commissioners, 195 Broadway,
Suite 1903, New York, New York 10007:
(i) 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:
(A) consolidated balance sheets of the Lessee 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
(B) consolidated statements of income and cash flows of the
Lessee 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 Lessee;
(ii) ANNUAL STATEMENTS. As soon as available and in any event
within 120 days after the close of each fiscal year of the Lessee,
duplicate copies of:
(A) consolidated balance sheets of the Lessee and its
Restricted Subsidiaries as of the close of such fiscal year, and
(B) consolidated statements of income and cash flows of the
Lessee 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 Lessee 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 Lessee and its Restricted Subsidiaries and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally
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accepted auditing standards and accordingly, includes such tests of the
accounting records and such other auditing procedures as were considered
necessary in connection therewith;
(iii) SEC AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Lessee to all holders of Equity Interests in the
Lessee generally and of each regular or periodic report, and any
registration statement or prospectus filed by the Lessee, 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 Lessee or any of its Subsidiaries is a party,
issued by any governmental agency, Federal or state, having jurisdiction
over the Lessee or any of its Subsidiaries, other than reports or licenses
granted by any such governmental agency with respect to the timber;
(iv) NOTICE OF DEFAULT OR CLAIMED DEFAULT. Immediately upon
becoming aware of the existence of a Default or an Event of Default or
that the OwnerTrustee has given notice or taken any other action with
respect to an Event of Default or a claimed default under this Lease, or a
default in the payment of the principal, premium, if any, sinking fund or
interest with respect to indebtedness for borrowed money, or an event of
default with respect to any indebtedness for borrowed money or in the
instrument under which such indebtedness is outstanding permitting the
holders thereof to accelerate the maturity thereof, a written notice
specifying the nature of the Default, Event of Default, default or claimed
default and any such notice given or action taken by the OwnerTrustee and
what action the Lessee is taking or proposes to take with respect thereto;
(v) 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 Lessee 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 PBGC with
respect thereto: (A) a Reportable Event with respect to any employee
benefit plan; (B) the institution of any steps by the Lessee, any ERISA
Affiliate, the PBGC or any other Person to terminate any employee benefit
plan pursuant to Sections 4041(c) or 4042 of ERISA; (C) the institution of
any steps by the Lessee 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 Lessee and its Restricted Subsidiaries taken as a whole; (D) 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
Lessee and its Restricted Subsidiaries, taken as a whole; or (E) any
increase in the liability of the Lessee 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
Lessee and its Restricted Subsidiaries, taken as a whole; and
(vi) NOTICE OF LITIGATION. Prompt written notice, and in any
event within five Business Days after the Lessee first obtains knowledge
thereof, with respect to the institution of any suit or proceeding against
the Lessee or any Restricted Subsidiary
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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 financial condition
of the Lessee or any Restricted Subsidiary.
(vii) INFORMATION IN RESPECT OF DAMAGES AND TAXES. Such
information and data as the OwnerTrustee, the Indenture Trustee or any
Participant may from time to time request as to location and the existence
and status of any claims for damages (whether against the Leased Property
or against the OwnerTrustee or the Lessee) arising out of the use,
operation or condition of the Leased Property, the taxes of the nature
provided to be paid by the Lessee under Section 6 of the Participation
Agreement which have been assessed and the amount of such taxes paid, and
such other data pertinent to the Leased Property and the condition, use,
repair and operation thereof as any such party from time to time may
reasonably request. Without limiting the foregoing, the Lessee agrees
that, without any such request, it will furnish the OwnerTrustee, the
Indenture Trustee and each Participant with prompt written notice of (A)
any claim for damages arising out of the use, operation or condition of
the Leased Property if the amount of such claim exceeds $500,000 and (B)
any damage, loss, theft or destruction, partial or complete, of any of the
Leased Property, if the amount thereof exceeds $500,000; and
(viii) REQUESTED INFORMATION. With reasonable promptness, such
other data and information as the OwnerTrustee, the Indenture Trustee or
any Participant may reasonably request including, without limitation, any
information required to be provided to such Note Purchaser or a
prospective purchaser of the Series B Notes by Rule 144A(d)(4) under the
Securities Act.
(b) OFFICER'S CERTIFICATES. Within the periods provided in Sections
18(a)(i) and 18(a)(ii), the Lessee shall deliver to the OwnerTrustee, the
Indenture Trustee and each Participant a certificate signed by the chief
financial officer of the Lessee stating that such officer has reviewed the
provisions of this Lease and the other Operative Agreements and setting forth:
(i) the information and computations (in sufficient detail) required in order to
establish whether the Lessee was in compliance with the requirements of Section
6.2 through Section 6.6, inclusive, at the end of the period covered by the
financial statements then being furnished (including with respect to Section
6.5(a)(ii) and Section 6.6, a certification as to the application of any Net
Proceeds (as defined in Section 6.12) 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 Lessee is taking and proposes to take with
respect thereto.
(c) ACCOUNTANT'S CERTIFICATES. Within the period provided in Section
18(a)(ii), the Lessee shall deliver to the OwnerTrustee, the Indenture Trustee
and each Participant a letter, addressed to the OwnerTrustee, the Indenture
Trustee and each Participant, of the accountants who render an opinion with
respect to such financial statements, stating that they have reviewed this Lease
and stating further that nothing came to their attention that caused them to
believe that
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the Lessee was not in compliance with any of the provisions of Section 6.2
through Section 6.6, inclusive, 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 the Lessee with any of the terms or provisions of this Lease.
(d) PROPERTY REPORT. Each set of financial statements of the Lessee
delivered pursuant to Section 18(a)(ii) will be accompanied by a report of an
officer of the Lessee familiar with the status and condition of the Leased
Property which describes the status, condition and location of the Leased
Property, describing any repair to the Facility having a cost exceeding
$500,000, any warranty claim in an amount exceeding $250,000 against any
supplier of goods or services in connection with the Leased Property, any period
of 45 or more consecutive days during which the Facility was not in operation
and any material violation of governmental rules or regulations involving the
Facility or the operation thereof, in each case during the period since the
previous report (or, in the case of the first such report, since the date of
this Lease), and describing the circumstances thereof, and stating whether any
Leased Property is then in the condition required by this Lease and, if not,
what the Lessee is doing or intends to do in connection therewith.
(e) INSPECTION. Without limiting the foregoing, the Lessee will permit
the OwnerTrustee, the Indenture Trustee and each Participant (or such Persons as
the OwnerTrustee, the Indenture Trustee or such Participant may designate) to
visit and inspect the Leased Property and any of the other Properties of the
Lessee or any Restricted 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 Lessee authorizes said accountants to discuss with the OwnerTrustee, the
Indenture Trustee, such Participant or such Person so designated the finances
and affairs of the Lessee and its Subsidiaries with or without an officer or
employee of the Lessee 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, the OwnerTrustee, the Indenture Trustee and such Participant shall
give the Lessee at least 10 days' prior written notice of any such visit. The
Lessee shall not be required to pay or reimburse the OwnerTrustee, the Indenture
Trustee or such Participant 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 19. OPTIONS TO RENEW AND PURCHASE.
(a) DETERMINATION OF FAIR MARKET SALES VALUE AND FAIR MARKET RENTAL
VALUE. Not more than 18 months nor less than 14 months prior to the expiration
of the Basic Term and any Renewal Term, the Lessee may notify the Owner-Trustee
in writing that the Lessee desires a determination of the fair market sales
value of the Facility as of the end of such Term and the fair market rental
value of the Facility for a permitted Renewal Term, as specified in Section
19(c), commencing upon the expiration of the then current Term and the fair
market sales value of the Facility as of the end of such Renewal Term.
Thereafter, the Owner-Trustee and the Lessee shall consult for the purpose of
determining such fair market sales values and fair market rental value
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and any values agreed upon in writing shall constitute such fair market sales
values and fair market rental value. If the Owner-Trustee and the Lessee fail
to agree upon such values within 90 days after the Lessee's notice pursuant to
the first sentence of this paragraph, the Lessee may request that such values be
determined by the Appraisal Procedure. Such fair market sales values and fair
market rental value shall be determined on the basis of the value which would
obtain in an arm's-length transaction between an informed and willing buyer-user
or lessee (other than a lessee currently in possession) and an informed and
willing seller or lessor under no compulsion to sell, buy or lease. Any such
determination shall be made (i) on the assumption that the Facility has been
installed at the site of the purchaser or lessee with no expense being borne by
such purchaser or lessee for costs of removal, storage, transportation or
reinstallation of the Facility at such site, and that the Facility is in the
condition and state of repair required by this Lease, and, in the case of fair
market rental value, shall give effect to the then remaining Site Lease Term,
(ii) as respects fair market rental value, on the basis of a lease having terms
and conditions (other than Rent) similar to the terms and conditions of this
Lease, and (iii) giving effect to the removal of any Parts and Alterations which
remain the property of the Lessee under the provisions of Section 8 hereof. The
Lessee's request for a determination of fair market values shall not obligate
the Lessee to exercise any of the options provided in this Section 19. All
costs and expenses of any Appraisal Procedure pursuant to this Section 19 shall
be borne by the Lessee.
(b) END OF TERM OPTIONS TO PURCHASE. So long as no Default under clause
(ix), (x) or (xi) of Section 15(a) or Event of Default has occurred and is
continuing, the Lessee shall have the right on the date of the expiration of the
Basic Term to purchase the Facility at a price equal to the fair market sales
value determined as of the end of such Basic Term pursuant to Section 19(a).
The Lessee shall give to the Owner-Trustee irrevocable written notice at least
one year prior to the end of the Basic Term of its election to exercise the
purchase option provided for in the preceding sentence. Payment of the purchase
price shall be made on the date of purchase at the place of payment specified in
Section 4(d) hereof in immediately available funds, against delivery of a
quitclaim deed or bill of sale transferring and assigning to the Lessee all
right, title and interest of the OwnerTrustee in and to the Facility on an
"as-is" "where-is" basis without recourse or warranty, express or implied,
except for a warranty against Lessor's Liens attributable to the OwnerTrustee or
Wilmington Trust Company. The Owner-Trustee shall not otherwise be required to
make any representation or warranty as to the condition of the Leased Property
or any other matters. Upon expiration of each Renewal Term, so long as no
Default under clause (ix), (x) or (xi) of Section 15(a) or Event of Default has
occurred and is continuing, the Lessee shall have the right to purchase the
Facility at a price equal to the fair market sales value thereof determined as
of the end of such Renewal Term pursuant to Section 19(a). The Lessee shall
give the Owner-Trustee irrevocable written notice at least one year prior to the
end of such Renewal Term of its election to exercise the purchase option
provided for in the preceding sentence. Following such notice, the Lessee shall
purchase the Facility on the terms and conditions set forth in this Section
19(b). In the event of any purchase of the Facility by the Lessee pursuant to
this Section 19(b), the Owner-Trustee shall, concurrently with such purchase,
transfer its right, title and interest in and to the Site Lease to the Lessee on
an "as-is" "where-is" basis without recourse or warranty, express or implied,
except for a warranty against Lessor's Liens attributable to the OwnerTrustee or
Wilmington Trust Company.
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(c) END OF TERM OPTIONS TO RENEW. So long as no Default or Event of
Default shall have occurred and be continuing, and assuming that the Lease has
not been earlier terminated, the Lessee shall have the right to renew this Lease
for no more than two Renewal Terms of one year each, commencing at the
expiration of the Basic Term or the preceding Renewal Term, as the case may be.
All of the provisions of this Lease shall be applicable during each Renewal Term
except that the Casualty Values shall be determined in accordance with Section
19(d) and Periodic Rent shall be the fair market rental value of the Facility
for such Renewal Term, determined in accordance with Section 19(a). The Lessee
shall give to the Owner-Trustee irrevocable written notice at least one year
prior to the end of the Term of its election to exercise the renewal option
provided for in this Section for a Renewal Term commencing upon the expiration
of such Term.
(d) CASUALTY VALUE DURING RENEWAL TERM. The Casualty Value as of the
commencement of each Renewal Term shall be the fair market sales value of the
Facility as of the end of the Basic Term or the preceding Renewal Term, as the
case may be (determined in accordance with Section 19(a)), and on each Casualty
Termination Date during such Renewal Term shall decline on a straight-line basis
to a value for the final Casualty Termination Date for such Renewal Term equal
to the fair market sales value of the Facility as of the end of such Renewal
Term (determined in accordance with Section 19(a)).
(e) CASUALTY OCCURRENCE. Notwithstanding any request by the Lessee for
a determination of fair market sales value pursuant to this Section 19, the
provisions of Section 13 shall continue in full force and effect until the date
of purchase and the passage of ownership of the Facility unless the Lessee shall
have exercised the option by irrevocable written notice to purchase pursuant to
Section 19(b), in which event the amount of "CASUALTY VALUE" shall equal the
greater of (i) the option purchase price and (ii) the Casualty Value which would
have applied but for the exercise of such purchase option.
(f) EARLY PURCHASE OPTION. So long as no Default or Event of Default
shall have occurred and be continuing, the Lessee may, upon not less than 90
days' prior written notice to the OwnerTrustee, elect to purchase the Facility
on the Early Purchase Date at a price equal to the Early Purchase Price. Such
written notice shall be irrevocable. On the Early Purchase Date, the Lessee
shall pay to the OwnerTrustee (or, so long as the Secured Indebtedness shall not
have been fully paid and satisfied, the Indenture Trustee) at the place of
payment specified in Section 4(d) hereof in immediately available funds (i) all
payments of Periodic Rent (other than Periodic Rent payable "in advance" on the
Early Purchase Date) and Periodic Site Rent through and including such Early
Purchase Date, (ii) the Early Purchase Price, (iii) an amount equal to the
Make-Whole Amount, if any, in respect of the principal amount of the Series B
Notes to be prepaid in accordance with Section 2.10(d) of the Indenture and (iv)
all other sums then due and payable by the Lessee under this Lease and the other
Lessee Agreements, against delivery of a quitclaim deed or bill of sale
transferring and assigning to the Lessee all right, title and interest of the
OwnerTrustee in and to the Facility on an "as-is" "where-is" basis without
recourse or warranty, express or implied, except for a warranty against Lessor's
Liens attributable to the OwnerTrustee or Wilmington Trust Company. The
OwnerTrustee shall not otherwise be required to make any representation or
warranty as to the condition of the Leased Property or any other matters. In
the event of any such purchase and receipt by the OwnerTrustee and the
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Indenture Trustee of all of the amounts provided in this Section 19(f) the
obligation of the Lessee to pay Periodic Rent and Periodic Site Rent hereunder
shall cease and the Term shall end. In the event the Lessee exercises its
option to assume the Series B Notes in accordance with Section 12 of the
Participation Agreement, the principal amount of such Series B Notes so assumed
shall be deducted from the amounts payable by the Lessee hereunder. If, on the
Early Purchase Date, the Lessee shall fail to pay all amounts required to be
paid pursuant to this Section 19(f), Lessee's notice of early purchase shall be
deemed to be withdrawn as of such date and this Lease shall continue in full
force and effect with respect to the Facility and the Lessee shall pay the
reasonable costs, expenses and liabilities incurred by the OwnerTrustee, the
Indenture Trustee and the Participants as a result of Lessee's having given such
notice. The Lessee may elect to pay the Early Purchase Price in installments in
the amounts (subject to reduction in the case of the first installment if the
Lessee elects to assume the Series B Notes in accordance with Section 12 of the
Participation Agreement) and on the dates set forth in Schedule 4; PROVIDED
HOWEVER, if the Lessee does not elect to assume the Series B Notes in accordance
with Section 12 of the Participation Agreement, after giving effect to the
payment and application of the first installment of the Early Purchase Price the
Series B Notes shall been paid in full; PROVIDED FINALLY, that if the Lessee so
elects to pay the Early Purchase Price in installments, the Lessee (a) unless
the Lessee shall have assumed the Series B Notes in accordance with Section 12
of the Participation Agreement, shall grant the Owner-Trustee a lien and
security interest in the Leased Property pursuant to agreements satisfactory in
scope, form and substance to the Owner Participant, securing the unpaid amount
of the Early Purchase Price, (b) shall provide a letter of credit in the amount
of the unpaid Early Purchase Price, in scope, form and substance satisfactory to
the Owner Participant, issued by a bank or trust company organized under the
laws of the United States or any State thereof, the long term debt of which bank
or trust company is rated A2 by Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., and A by Moody's Investors Service, Inc., or (c) shall grant
the Owner-Trustee a lien and security interest in Property of the Lessee
reasonably acceptable to Owner Participant (other than the Leased Property)
pursuant to agreements satisfactory in scope, form and substance to the Owner
Participant, securing the unpaid amount of the Early Purchase Price. In the
event of any purchase of the Facility by the Lessee pursuant to this Section
19(f), the Owner-Trustee shall, concurrently with such purchase, transfer its
right, title and interest in and to the Site Lease to the Lessee on an "as-is"
"where-is" basis without recourse or warranty, express or implied, except for a
warranty against Lessor's Liens attributable to the OwnerTrustee or Wilmington
Trust Company.
SECTION 20. MISCELLANEOUS.
(a) NO WAIVER. No delay or omission to exercise any right, power or
remedy accruing to the Owner-Trustee upon any breach or default by the Lessee
under this Lease shall impair any such right, power or remedy of the
Owner-Trustee, nor shall any such delay or omission be construed as a waiver of
any breach or default, or of any similar breach or default hereafter occurring;
nor shall any waiver of a single breach or default be deemed a waiver of any
subsequent breach or default. All waivers under this Lease must be in writing,
but any breach or default, once waived in writing, shall not be deemed to be
continuing for any purpose of the Operative Agreements. All remedies either
under this Lease or by law afforded to the Owner-Trustee shall be cumulative and
not alternative. Any provision of this Lease prohibited by any
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law now or hereafter in effect shall be ineffective to the extent of such
provision without invalidating the remaining provisions hereof.
(b) RIGHT OF OWNER-TRUSTEE TO PERFORM. If the Lessee shall fail to
comply with the covenants herein contained, the Owner-Trustee may, but shall not
be obligated to, (i) make advances to perform the same, and (ii) enter upon the
Leased Property to perform any and all acts required by the Lessee's covenants
herein contained and to take all such action thereon as in the Owner-Trustee's
opinion may be necessary or appropriate therefor. All payments so made by the
Owner-Trustee and all costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) incurred in connection therewith shall
be payable by the Lessee upon demand as additional rent hereunder, with interest
at the Late Rate. No entry shall be deemed an eviction of the Lessee or a
repossession of the Leased Property, and no such advance, performance or other
act shall be deemed to relieve the Lessee from any default hereunder.
(c) NOTICES. All communications under this Lease shall be in writing or
by facsimile and any such notice shall become effective (i) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (ii) upon receipt thereof, in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, or (iii)
upon confirmation of receipt thereof, in the case of notice by facsimile,
provided such transmission is promptly further confirmed in writing by either of
the methods set forth in clause (i) or (ii) above, in each case addressed to the
parties hereto at the following addresses as follows:
If to the Owner-Trustee: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
with a copy to the Owner Participant
If to the Lessee: CROWN PACIFIC LIMITED PARTNERSHIP
121 S.W. Morrison Street
Portland, Oregon 97204
Attention: Roger L. Krage
If to the Owner Participant: ICX CORPORATION
3 Summit Park Drive, Suite 200
Cleveland, Ohio 44131
Attention: General Counsel and
Chief Financial Officer
If to the Noteholders: At their respective addresses
for notices set forth in the
Register referred to in the
Indenture
-62-
<PAGE>
If to the Indenture Trustee: FIRST SECURITY BANK,
NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
or at such other place as any such party may designate by notice given in
accordance with this Section. Any notice so addressed and mailed shall be
deemed to be given when so mailed.
(d) FURTHER ASSURANCES. The Lessee will at its own expense, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, transfers and assurances as the Owner-Trustee or the Indenture
Trustee may reasonably request in order to protect the right, title and interest
of the Owner-Trustee hereunder or under the Site Lease or the perfection or
protection of the Lien granted by the Indenture. Without limiting the
foregoing, the Lessee agrees at its own expense to cause this Lease and all
supplements and amendments hereto, the Site Lease and all supplements and
amendments thereto and the Indenture and all supplements and amendments thereto
and all financing and continuation statements and similar notices required by
Applicable Law at all times to be kept recorded and filed in such manner and in
such places as the Owner-Trustee or the Indenture Trustee may request in order
to protect the right, title and interest of the Owner-Trustee hereunder or under
the Site Lease or to protect the rights of the Indenture Trustee under the
Indenture. No such recording or filing shall constitute an acknowledgment or
implication by the Lessee that this Lease constitutes a chattel mortgage or
security agreement or creates a lien or security interest under Applicable Law.
(e) OPINIONS OF COUNSEL. The Lessee agrees at its own expense to
furnish to the Owner-Trustee and the Indenture Trustee promptly after the
execution and delivery of any supplement and amendment hereto, promptly after
the execution and delivery of any supplement and amendment to the Site Lease and
promptly after the execution and delivery of any supplement and amendment to the
Indenture, an opinion of counsel satisfactory to the Owner-Trustee and the
Indenture Trustee (who may be independent counsel to the Lessee) stating that in
the opinion of such counsel, such supplement or amendment to this Lease or such
supplement or amendment to the Site Lease or such supplement or amendment to the
Indenture (or a financing statement, continuation statement or similar notice
thereof if and to the extent required by Applicable Law) has been properly
recorded or filed for record in all public offices in which such recording or
filing is necessary to protect the right, title and interest of the
Owner-Trustee hereunder or under the Site Lease or, as the case may be, to
perfect the Lien provided by the Indenture as a valid lien and security interest
in the Collateral.
(f) SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and shall
inure to the benefit of, and shall be enforceable by, the Owner-Trustee and the
Lessee and their respective successors and assigns.
(g) COUNTERPARTS; UNIFORM COMMERCIAL CODE. This Lease may be executed
in any number of counterparts, each counterpart constituting an original but all
together one Lease; PROVIDED, HOWEVER, that to the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code) no security interest in this Lease may be created
-63-
<PAGE>
through the transfer or possession of any counterpart hereof other than the
counterpart bearing the receipt therefor executed by the Indenture Trustee on
the signature page hereof, which counterpart shall constitute the only
"original" hereof for purposes of the Uniform Commercial Code.
(h) GOVERNING LAW. THIS LEASE SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
(i) INVESTMENT OF FUNDS. The Owner-Trustee shall, upon the written
direction of the Lessee, invest and reinvest any funds from time to time held by
the Owner-Trustee which constitute proceeds of insurance held by the
Owner-Trustee pursuant to Section 7 (referred to in this paragraph as "FUNDS")
in such direct obligations of the United States of America or obligations for
which the full faith and credit of the United States is pledged to provide for
the payment of principal and interest, maturing not more than 90 days from the
date of such investment, as may be specified in any such direction. Upon any
sale or payment of any such investment, the proceeds thereof, plus any interest
received by the Owner-Trustee thereon shall be held by the Owner-Trustee as part
of the Fund from which such investment was made or application as a part of such
Fund. If such proceeds (plus such interest and earned discount) shall be less
than the cost of such investment, the Owner-Trustee will not more than three
Business Days thereafter notify the Lessee of the amount of such deficiency and
the Lessee will promptly pay to the Owner-Trustee an amount equal to such
deficiency. Any payment in respect of such deficiency shall be held and applied
by the Owner-Trustee as part of the Fund from which such investment was made.
The Lessee will pay all expenses incurred by the Owner-Trustee in connection
with the purchase and sale of such investments.
IN WITNESS WHEREOF, the Owner-Trustee and the Lessee have caused this
Lease to be executed and delivered by their respective duly authorized officers,
all as of the date first above written.
[CORPORATE SEAL] WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
under Crown Pacific Trust No. 981
By
------------------------------------------
Its
----------------------------------------
Owner-Trustee
[CORPORATE SEAL] CROWN PACIFIC LIMITED PARTNERSHIP
By CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP, a Delaware
limited partnership
-64-
<PAGE>
Its General Partner
By HS Corp. of Oregon, an
Oregon corporation
Its General Partner
By
Its
-----------------------------
Lessee
-65-
<PAGE>
This Facility Lease and the rentals and other sums due and to become due
hereunder have been assigned to and are subject to a security interest in favor
of FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Indenture Trustee under a Trust
Indenture and Security Agreement dated as of October 15, 1998 between said
Indenture Trustee and the Owner-Trustee hereunder, as debtor. Information
concerning such security interest may be obtained from the Indenture Trustee at
its address set forth in Section 20 of this Facility Lease.
[Form of Indenture Trustee's receipt to appear only in "original"
counterpart for purposes of Section 20(g)]
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged this ____ day of ___________, 1998.
FIRST SECURITY BANK, NATIONAL ASSOCIATION
By
Its
--------------------------------------
-66-
<PAGE>
STATE OF ________________ )
) SS
COUNTY OF ______________)
On this ___ day of ______________, 1998 before me, ____________________, a
Notary Public, personally appeared ____________________________, known or
identified to me to be the ________________________ of the corporation that
executed the above instrument or the person who executed the instrument on
behalf of said corporation and acknowledged to me that such corporation executed
the same.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
--------------------------------------
Residing at
---------------------------
(SEAL)
My Commission Expires: _________
-67-
<PAGE>
STATE OF ________________ )
) SS
COUNTY OF ______________)
On this ___ day of _________, 1998 before me, ___________________, a
Notary Public, personally appeared _____________________, known or identified to
me to be the _____________________ of HS CORP. OF OREGON, a general partner of
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP, the general partner of CROWN
PACIFIC LIMITED PARTNERSHIP that executed the above instrument or the person who
executed the instrument on behalf of said corporation and acknowledged to me
that such corporation executed the same.
In witness whereof I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
--------------------------------------
Residing at
---------------------------
(SEAL)
My Commission Expires: _________
-68-
<PAGE>
SCHEDULE OF PERIODIC RENT PERCENTAGES
RENT PERIODIC
PAYMENT RENT
DATE PERCENTAGE
SCHEDULE 1
(to Facility Lease (Idaho))
<PAGE>
SCHEDULE OF CASUALTY VALUE
AMOUNT OF
DETERMINATION CASUALTY
DATE VALUE
SCHEDULE 2
(to Facility Lease (Idaho))
<PAGE>
SCHEDULE OF TERMINATION VALUE
RENT AMOUNT OF RENT AMOUNT OF
PAYMENT TERMINATION PAYMENT TERMINATION
DATE VALUE DATE VALUE
SCHEDULE 3
(to Facility Lease (Idaho))
<PAGE>
SCHEDULE OF THE EARLY PURCHASE DATE
AND EARLY PURCHASE PRICE
EARLY EARLY
PURCHASE PURCHASE
DATE PRICE
SCHEDULE 4
(to Facility Lease (Idaho))
<PAGE>
FUNDED DEBT AND CAPITALIZED RENTALS
OF THE LESSEE
The Funded Debt (other than Capitalized Rentals) and Capitalized Rentals
of the Lessee as of June 30, 1998 but immediately after the funding of the 1997
Notes is as follows:
<TABLE>
<CAPTION>
Item Principal Amount ($000)
---- -----------------------
FUNDED DEBT
(other than Capitalized Rentals):
<S> <C>
Working Capital Facility $ 16,500
9.78% Senior Notes $ 275,000
9.60% Senior Notes $ 25,000
8.01% Senior Notes $ 6,490
8.16% Senior Notes $ 50,000
8.21% Senior Notes $ 19,510
8.25% Senior Notes $ 15,000
Acquisition Facility $ 59,000
Purchase Price Note payable
to Trillium Corporation $ 52,500
</TABLE>
CAPITALIZED RENTALS:
CAPITALIZED
LEASE DATE PARTY AMOUNT ($000)
----- ---- ----- -------------
NONE
SCHEDULE 5
(to Facility Lease (Idaho))
<PAGE>
DESCRIPTION OF MAJOR COMPONENTS
OF THE FACILITY
The sawmill, including without limitation, the Debarker, the Sawquip Sharp
Chain System, the Scanning Board Edger, the Scanning Trimmer System, the Lumber
Stacker, the Planer, Mechanical Stress Grader, and the Boilers.
EXHIBIT A
(to Facility Lease (Idaho))
<PAGE>
DESCRIPTION OF THE SITE
EXHIBIT C
(to Facility Lease (Idaho))
<PAGE>
PRICING ASSUMPTIONS
EXHIBIT D
(to Facility Lease (Idaho))
<PAGE>
LEASE SUPPLEMENT NO. 1 (IDAHO)
THIS LEASE SUPPLEMENT NO. 1 (IDAHO), dated as of ________________________,
between WILMINGTON TRUST COMPANY, a Delaware banking corporation, not
individually but solely as trustee (the "OWNER-TRUSTEE") under the Trust
Agreement establishing Crown Pacific Trust No. 981 (the "OWNER-TRUSTEE"), and
CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership (the
"LESSEE");
WITNESSETH:
The Owner-Trustee and the Lessee have heretofore entered into that certain
Facility Lease (Idaho) dated November ___, 1998 (the "FACILITY LEASE"). The
terms used herein are used with the meanings specified in the Facility Lease).
The Facility Lease provides for the execution and delivery of a Lease
Supplement substantially in the form hereof for, among other things, the purpose
of confirming any change in Periodic Rent, Casualty Value and Termination Value.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Owner-Trustee and the Lessee hereby agree that:
[Schedules 1, 2, 3 and 4 to the Facility Lease, showing Periodic Rent
percentages, Casualty Values, Termination Values and Early Purchase Price,] are
hereby amended to read in full as attached hereto.
Any and all notices, requests, certificates and other instruments executed
and delivered after the execution and delivery of this Lease Supplement may
refer to the "Facility Lease (Idaho) dated November ___, 1998" or the "Lease
(Idaho) dated November ___, 1998" without making specific reference to this
Lease Supplement, but nevertheless all such references shall be deemed to
include this Lease Supplement unless the context shall otherwise require.
This Lease Supplement shall be construed in connection with and as part of
the Lease, and all terms, conditions and covenants contained in the Lease,
except as herein modified, shall be and remain in full force and effect.
This Lease Supplement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together one and the same
instrument.
IN WITNESS WHEREOF, the Owner-Trustee and the Lessee have caused this
Lease Supplement to be duly executed as of the day and year first above written
and to be delivered as of the date first above written.
[SEAL] WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
under Crown Pacific Trust No. 981
EXHIBIT E
(to Facility Lease (Idaho))
<PAGE>
By
------------------------------------------
Its
--------------------------------------
[SEAL] CROWN PACIFIC 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
-------------------------
Consented to as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Indenture Trustee
By
Its
--------------------------------
-78-
<PAGE>
STATE OF _______ )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
_______________________ and _______________________________, to me known, who
declared and acknowledged to me that they are ______________________ and
_______________________, respectively, of WILMINGTON TRUST COMPANY, that as such
duly authorized officers, by and with the authority of the Board of Directors of
said corporation they signed and executed the foregoing instrument, as the free
and voluntary act and deed of said corporation, for and on behalf of said
corporation, and for the objects and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
_____ day of __________________, _____.
-------------------------------------
Notary Public
(SEAL)
My commission expires:
<PAGE>
STATE OF OREGON )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
________________________ and ________________________, to me known, who declared
and acknowledged to me that they are ___________________ and
___________________, respectively, of HS CORP. OF OREGON, a general partner of
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP, the general partner of CROWN
PACIFIC LIMITED PARTNERSHIP, that as such duly authorized officers, by and with
the authority of the Board of Directors of said corporation they signed and
executed the foregoing instrument, as the free and voluntary act and deed of
said corporation, for and on behalf of said corporation, and for the objects and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
____ day of ________________________, _____.
------------------------------------
Notary Public
(SEAL)
My commission expires:
<PAGE>
SCHEDULE OF PERIODIC RENT PERCENTAGES
SCHEDULE 1
(to Lease Supplement No. 1 (Idaho))
<PAGE>
SCHEDULE OF CASUALTY VALUE
SCHEDULE 2
(to Lease Supplement No. 1 (Idaho))
<PAGE>
SCHEDULE OF TERMINATION VALUE
SCHEDULE 3
(to Lease Supplement No. 1 (Idaho))
<PAGE>
SCHEDULE OF THE EARLY PURCHASE DATE
AND EARLY PURCHASE PRICE
SCHEDULE 4
(to Lease Supplement No. 1 (Idaho))
<PAGE>
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED FUNDED DEBT
(a) The indebtedness evidenced by the subordinated notes (1)* and any
renewals or extensions thereof, shall at all times be wholly subordinate and
junior in right of payment to any
- ----------------------------
(1)* Or debentures or other designation as may be appropriate.
EXHIBIT F
(to Facility Lease (Idaho))
<PAGE>
and all indebtedness of the Lessee [here insert description of indebtedness to
which Subordinated Funded Debt is subordinated] (herein called "SUPERIOR
INDEBTEDNESS"), in the manner and with the force and effect hereafter set forth:
(i) In the event of any liquidation, dissolution or winding up of
the Lessee, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Lessee 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;
(ii) 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 Lessee, under circumstances when the
foregoing clause (i) 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
(iii) 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 Lessee
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 (iii), the Lessee 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
Lessee 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
-86-
<PAGE>
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 Lessee or the holders of
Superior Indebtedness, or by any noncompliance by the Lessee with any of the
terms, provisions and covenants of the subordinated notes or the agreement under
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 Lessee 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 Lessee 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 Lessee and the holders of the subordinated notes, the
obligation of the Lessee 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.
-87-
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACILITY LEASE (WASHINGTON)
Dated October 30, 1998
Between
WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Trustee
under Crown Pacific Trust No. 98-1
Lessor
And
CROWN PACIFIC LIMITED PARTNERSHIP
Lessee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Port Angeles, Washington
This Facility Lease and the rentals and other sums due and to become due
hereunder have been assigned to and are subject to a security interest in favor
of First Security Bank, National Association, as Indenture Trustee under a Trust
Indenture and Security Agreement dated as of October 15, 1998 between said
Indenture Trustee and the Owner-Trustee, as Debtor. Information concerning such
security interest may be obtained from the Indenture Trustee at its address set
forth in Section 20 of this Facility Lease.
EXHIBIT C
(to Participation Agreement)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<C> <S> <C>
SECTION 1. INTERPRETATION OF THIS LEASE. . . . . . . . . . . . . . . . . . 1
(a) Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Accounting Principles . . . . . . . . . . . . . . . . . . . . . 1
(c) Directly or Indirectly. . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. ACCEPTANCE OF LEASED PROPERTY . . . . . . . . . . . . . . . . . 1
SECTION 3. TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 4. RENT PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) Rent for Facility . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Rent for Site Lease Property. . . . . . . . . . . . . . . . . . 2
(c) Supplemental Rent . . . . . . . . . . . . . . . . . . . . . . . 2
(d) Place and Manner of Payment . . . . . . . . . . . . . . . . . . 2
(e) Overdue Payments. . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Adjustment of Rent. . . . . . . . . . . . . . . . . . . . . . . 3
(g) Verification of Rental Adjustments. . . . . . . . . . . . . . . 4
SECTION 5. INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 6. LESSEE'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 6.1. Nature of Business. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 6.2. Limitations on Current Debt and Funded Debt . . . . . . . . . . 5
SECTION 6.3. Distributions.. . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6.4. Mergers and Consolidations. . . . . . . . . . . . . . . . . . . 6
SECTION 6.5. Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6.6. Limitation on Harvesting. . . . . . . . . . . . . . . . . . . . 9
SECTION 6.7. Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 6.8. Transactions with Affiliates. . . . . . . . . . . . . . . . . .10
SECTION 6.9. Multiemployer Plan Liability and Termination of Pension Plans .10
SECTION 6.10. Changes in Status of Subsidiaries.. . . . . . . . . . . . . . .10
SECTION 6.11. Certain Notices . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 6.12. Section 6 Definitions . . . . . . . . . . . . . . . . . . . . .12
SECTION 6.13. Certain Payments. . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 7. INSURANCE.. . . . . . . . . . . . . . . . . . . . . . . . . . .25
(a) Required Insurance Coverages and Limits . . . . . . . . . . . .25
(b) Adjustment and Payment of Losses. . . . . . . . . . . . . . . .26
-i-
<PAGE>
(c) Evidence of Insurance . . . . . . . . . . . . . . . . . . . . .27
(d) Application of Insurance Proceeds . . . . . . . . . . . . . . .27
(e) Insurance for Own Account . . . . . . . . . . . . . . . . . . .28
SECTION 8. MAINTENANCE; MAINTENANCE COSTS AND WARRANTIES; REPLACEMENT OF
PARTS; ALTERATIONS; MODIFICATIONS AND ADDITIONS . . . . . . . .28
(a) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . .28
(b) Maintenance Costs and Warranties. . . . . . . . . . . . . . . .29
(c) Replacement of Parts and Components . . . . . . . . . . . . . .30
(d) Required Alterations. . . . . . . . . . . . . . . . . . . . . .30
(e) Optional Alterations. . . . . . . . . . . . . . . . . . . . . .31
(f) Title to Parts. . . . . . . . . . . . . . . . . . . . . . . . .31
(g) Option to Purchase Additional Parts and Optional Alterations. .32
(h) Reports of Alterations. . . . . . . . . . . . . . . . . . . . .32
(i) Other Parties Not Obligated to Maintain or Repair . . . . . . .33
SECTION 9. LOCATION AND USE; NO ASSIGNMENT BY LESSEE . . . . . . . . . . .33
(a) Location and Use. . . . . . . . . . . . . . . . . . . . . . . .33
(b) No Assignment by Lessee; Permitted Subleases. . . . . . . . . .34
SECTION 10. LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
SECTION 11. OWNERSHIP AND MARKING. . . . . . . . . . . . . . . . . . . . .35
(a) Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . .35
(b) Facility Personal Property. . . . . . . . . . . . . . . . . . .35
(c) Marking. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12. DISCLAIMER OF WARRANTIES; NET LEASE . . . . . . . . . . . . . .36
(a) Disclaimer of Warranties. . . . . . . . . . . . . . . . . . . .36
(b) Net Lease; Non-Terminability. . . . . . . . . . . . . . . . . .36
SECTION 13. CASUALTY OCCURRENCES; CONDEMNATION; EARLY TERMINATION; ETC. . .38
(a) Casualty Occurrence . . . . . . . . . . . . . . . . . . . . . .38
(b) Certain Government Requisitions . . . . . . . . . . . . . . . .39
(c) Application of Payments with Respect to a Casualty Occurrence .39
(d) Early Termination . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 14. ASSIGNMENT BY OWNER-TRUSTEE . . . . . . . . . . . . . . . . . .41
(a) Right to Assign . . . . . . . . . . . . . . . . . . . . . . . .41
(b) Obligation and Right of Assignee. . . . . . . . . . . . . . . .41
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<PAGE>
(c) Amendments; Exercise of Remedies. . . . . . . . . . . . . . . .42
SECTION 15. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
(a) Events of Default . . . . . . . . . . . . . . . . . . . . . . .42
(b) Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .44
SECTION 16. RETURN OF FACILITY TO OWNER-TRUSTEE . . . . . . . . . . . . . .47
(a) Surrender at Site . . . . . . . . . . . . . . . . . . . . . . .47
(b) Engineer's Report . . . . . . . . . . . . . . . . . . . . . . .48
(c) Environmental Report. . . . . . . . . . . . . . . . . . . . . .49
(d) Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 17. [INTENTIONALLY LEFT BLANK]. . . . . . . . . . . . . . . . . . .50
SECTION 18. FINANCIAL STATEMENTS AND REPORTS; INSPECTION AND CERTIFICATES .50
SECTION 19. OPTIONS TO RENEW AND PURCHASE . . . . . . . . . . . . . . . . .54
(a) Determination of Fair Market Sales Value and Fair Market
Rental Value . . . . . . . . . . . . . . . . . . . . . . . .54
(b) End of Term Options to Purchase . . . . . . . . . . . . . . . .54
(c) End of Term Options to Renew. . . . . . . . . . . . . . . . . .55
(d) Casualty Value During Renewal Term. . . . . . . . . . . . . . .55
(e) Casualty Occurrence . . . . . . . . . . . . . . . . . . . . . .55
(f) Early Purchase Option . . . . . . . . . . . . . . . . . . . . .55
SECTION 20. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . .57
(a) No Waiver.... . . . . . . . . . . . . . . . . . . . . . . . . .57
(b) Right of Owner-Trustee to Perform . . . . . . . . . . . . . . .57
(c) Notices.... . . . . . . . . . . . . . . . . . . . . . . . . . .57
(d) Further Assurances. . . . . . . . . . . . . . . . . . . . . . .58
(e) Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . .59
(f) Successors and Assigns. . . . . . . . . . . . . . . . . . . . .59
(g) Counterparts; Uniform Commercial Code . . . . . . . . . . . . .59
(h) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .59
(i) Investment of Funds . . . . . . . . . . . . . . . . . . . . . .59
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
</TABLE>
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ATTACHMENTS TO FACILITY LEASE:
Schedule 1 -- Schedule of Periodic Rent Percentages
Schedule 2 -- Schedule of Casualty Value
Schedule 3 -- Schedule of Termination Value
Schedule 4 -- Schedule of the Early Purchase Date, Early Purchase Price
and Installment Amounts and Dates
Schedule 5 -- Funded Debt and Capitalized Rentals of the Lessee
Exhibit A -- Description of Major Components of the Facility
Exhibit B -- Intentionally Omitted
Exhibit C -- Description of the Site
Exhibit D -- Pricing Assumptions
Exhibit E -- Form of Lease Supplement
Exhibit F -- Subordination Provisions
Annex I -- Definitions
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<PAGE>
FACILITY LEASE (WASHINGTON)
THIS FACILITY LEASE (WASHINGTON), dated October 30, 1998, is between
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its individual
capacity but solely as trustee (the "OWNER-TRUSTEE") under Crown Pacific Trust
No. 98-1, as lessor hereunder, and CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware
limited partnership (the "LESSEE").
SECTION 1. INTERPRETATION OF THIS LEASE.
(a) DEFINITIONS. The capitalized terms used in this Lease shall have the
respective meanings indicated in Annex I hereto unless elsewhere defined herein
or the context hereof shall otherwise require.
(b) 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 Lease, this shall be done in accordance with generally accepted
accounting principles at the time in effect, to the extent applicable, except
where such principles are inconsistent with the requirements of this Lease.
(c) DIRECTLY OR INDIRECTLY. Where any provision in this Lease 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 2. ACCEPTANCE OF LEASED PROPERTY.
The Owner-Trustee does hereby lease and let the Leased Property to the
Lessee and the Leased Property is hereby accepted by the Lessee hereunder and
declared to be and constitute the property leased hereunder, all for the Rent
and the Term hereinafter stipulated and upon the terms and conditions herein set
forth.
SECTION 3. TERM OF LEASE.
The basic term of this Lease (the "BASIC TERM") shall commence on the
Closing Date and shall expire on the twelfth anniversary of the Closing Date,
subject to earlier termination pursuant to Sections 13, 15 and 19.
SECTION 4. RENT PAYMENTS.
The Lessee agrees to pay the Owner-Trustee the following rents hereunder:
(a) RENT FOR FACILITY. The Lessee hereby agrees to pay the
Owner-Trustee Rent for the Facility (the "PERIODIC RENT") payable for the
Basic Term in consecutive semiannual installments (other than the first
Periodic Rent payment, which shall be in respect of the period from the
Closing Date to the first Rent Payment Date), each in an
<PAGE>
amount equal to the product of the Adjusted Facility Cost multiplied by the
Periodic Rent percentage set forth opposite each Rent Payment Date on
Schedule 1, payable in advance or arrears as and to the extent set forth in
Schedule 1 on each such Rent Payment Date.
(b) RENT FOR SITE LEASE PROPERTY. The Lessee agrees to pay the
Owner-Trustee rent for the Site Lease Property (the "PERIODIC SITE RENT")
payable for the Term in consecutive semiannual installments (other than the
first Site Lease Rent payment, which shall be in respect of the period from
the Closing Date to the first Rent Payment Date), each in an amount equal
to the Periodic Site Rent Amount, payable in arrears on each Rent Payment
Date; PROVIDED THAT, so long as the Lessee shall be the Landlord under the
site Lease, the Lessee's obligation to make Periodic Site Rent payments
shall be satisfied by its concurrent right to receive Site Rent under the
Site Lease.
(c) SUPPLEMENTAL RENT. The Lessee agrees to pay to the
Owner-Trustee, or to whosoever shall be entitled thereto, any and all
Supplemental Rent promptly as the same shall become due and owing, and in
the event of any failure on the part of the Lessee to pay any Supplemental
Rent, the Owner-Trustee shall have all rights, powers and remedies provided
for herein or by law or equity or otherwise in the case of nonpayment of
Periodic Rent. Lessee will also pay, as Supplemental Rent, (i) in the case
of the termination of this Lease pursuant to Section 13(d), on the
Termination Date, an amount equal to the Make-Whole Amount, if any, with
respect to the principal amount of each Series A Note to be prepaid as a
result of such termination, (ii) in the case of the purchase of the
Facility pursuant to Section 19(f), unless Lessee shall have assumed the
Series A Notes as provided in the Participation Agreement, on such date of
purchase, an amount equal to the Make-Whole Amount, if any, with respect to
the principal amount of each Series A Note to be prepaid as a result of
such purchase, and (iii) in the case of any refinancing of the Series A
Notes pursuant to Section 13 of the Participation Agreement, on the
Refunding Date, an amount equal to the Make-Whole Amount, if any, with
respect to the aggregate principal amount of the Series A Notes being
prepaid. Lessee shall also pay, as Supplemental Rent, on the date any
amount is required to be paid by the Indenture Trustee pursuant to clause
(A) or (B) of Section 3.06(d)(ii) of the Indenture from the Account in
respect of the Facility, an amount equal to the difference, if any, between
(y) the amount in such Account, and (z) the amount so required to be paid.
(d) PLACE AND MANNER OF PAYMENT. All payments to be made by the
Lessee under this Lease shall be made as follows:
(i) Each installment of Periodic Rent shall be paid to the
Owner-Trustee by wire transfer to the principal office of the
Owner-Trustee at the address thereof provided for payments in
Section 20(c); PROVIDED that until the Lessee shall have received
notice from the Indenture Trustee that all Secured Indebtedness has
been fully paid and satisfied, all such payments shall be made by wire
transfer to the office of the Indenture Trustee designated in
Section 20(c) or as otherwise designated from time to time in writing
by the Indenture Trustee;
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<PAGE>
(ii) The entire amount of any payment of Casualty Value or
Termination Value pursuant to Section 13, of any payment of the
purchase price of the Facility pursuant to Section 19(b) or Early
Purchase Price pursuant to Section 19(f), and any payment pursuant to
Section 15 hereof shall be paid to the Owner-Trustee by wire transfer
to the principal office of the Owner-Trustee at the address thereof
provided for payments in Section 20(c); PROVIDED that until the Lessee
shall have received notice from the Indenture Trustee that all Secured
Indebtedness has been fully paid and satisfied, all such payments
shall be made by wire transfer to the office of the Indenture Trustee
designated in Section 20 or as otherwise designated from time to time
in writing by the Indenture Trustee;
(iii) The amount of any payment owing to the Owner-Trustee or
the Owner Participant pursuant to Section 6 or 8 of the Participation
Agreement (and by incorporation by reference herein, Section 5 hereof)
and Section 7 (but, in the case of Section 7, only with respect to
public liability insurance) shall be made directly to the party to
receive the same without regard to the assignment of this Lease
pursuant to Section 14; and
(iv) All payments other than those above specified shall be
made by the Lessee directly to the party entitled to receive the same.
The Lessee agrees that it will make payments due hereunder by wire
transfer where specified above in immediately available funds consisting of
lawful currency of the United States of America no later than 10:00 A.M.
Portland, Oregon time on the date due to the party to whom such payment is
to be made to such account in any United States bank as such party may from
time to time direct in writing, and where not so specified, such payment
shall be made by check of the Lessee drawn on a bank located in the
continental United States and mailed to the party to receive the same at
the address herein provided or at such other address as the Lessee shall
have been previously advised in writing.
(e) OVERDUE PAYMENTS. The amount of any installment of Periodic Rent
or Periodic Site Rent or any payment of Supplemental Rent remaining unpaid
after the due date thereof shall bear interest at the Late Rate from and
after the due date of such installment or payment and such interest shall
be paid by the Lessee, on demand as Supplemental Rent.
(f) ADJUSTMENT OF RENT. The Periodic Rent percentage, Casualty
Value, Termination Value and Early Purchase Date and Early Purchase Price
tables attached hereto as Schedules 1, 2, 3 and 4 respectively, have been
calculated on the assumptions (the "PRICING ASSUMPTIONS") set forth in
Exhibit D hereto.
If for any reason the Closing Date or the Transaction Costs related to
the Facility set forth in Exhibit D hereto shall prove to be incorrect,
then the Owner Participant acting in good faith shall, prior to the first
Rent Payment Date, recompute the factors for Periodic Rent, the Casualty
Value and Termination Value tables and the Early Purchase
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<PAGE>
Date and Early Purchase Price in order to provide the Owner Participant
with the same Net Economic Return as if such assumptions were accurate;
PROVIDED, that such adjustments shall comply with the Guidelines and all
provisions of the Code and the Treasury Regulations thereunder, in each
case as in effect on the date of such adjustment, including, without
limitation, Section 467 of the Code and the Treasury Regulations
thereunder, in each case as in effect on the date of such adjustment; and
PROVIDED, FURTHER, that (i) each installment of Periodic Rent shall be in
an amount sufficient to pay on each installment date the principal of, and
interest on, the Series A Notes due on such date without acceleration,
(ii) the Casualty Value and Termination Value as of any date shall be
sufficient to pay the aggregate unpaid principal amount of, and interest
on, the Series A Notes outstanding as of such date and (iii) the Early
Purchase Price shall at all times exceed the appraiser's estimated fair
market value for the Early Purchase Date. Such recomputation shall be
based upon the assumptions and methods of calculation utilized by the Owner
Participant in computing the amounts thereof originally set forth in this
Lease. On or before the first Rent Payment Date, the Owner-Trustee and the
Lessee shall execute and deliver a Lease Supplement, substantially in the
form of Exhibit E hereto, reflecting any revisions to Schedules 1, 2, 3 and
4 hereto, and the adjustments shall be effective as of said first Rent
Payment Date.
(g) VERIFICATION OF RENTAL ADJUSTMENTS. Each notice to the Lessee
from the Owner Participant setting forth the results of any calculation or
recalculation pursuant to paragraph (f) above shall be accompanied by a
letter from the Owner Participant setting forth the reasons for such
calculation or recalculation and stating that such calculation or
recalculation was made using the same methods and, except as to the change
or changes in circumstance giving rise to such adjustment, the same
assumptions as were used in computing the factors for Periodic Rent,
Casualty Values and Termination Values and the Early Purchase Date and
Early Purchase Price in effect prior to such adjustment.
SECTION 5. INDEMNITIES.
The Lessee's indemnity obligations are set forth in Sections 6 and 8 of the
Participation Agreement, which Sections are incorporated herein by reference as
though fully set forth in this Section 5. The Lessee's indemnity obligations
contained in Sections 6 and 8 of the Participation Agreement shall survive the
termination of any of this Lease and the other Operative Agreements and shall
survive the transfer of any Note or the Beneficial Interest and payment of any
or all Notes and the extinguishment of the Beneficial Interest.
SECTION 6. LESSEE'S COVENANTS.
SECTION 6.1. NATURE OF BUSINESS. Neither the Lessee 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 Lessee 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 Lessee and its
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<PAGE>
Restricted Subsidiaries on the date of this Lease and described in the Private
Placement Memorandum and other businesses incidental or reasonably related
thereto.
SECTION 6.2. LIMITATIONS ON CURRENT DEBT AND FUNDED DEBT. (a) The Lessee
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:
(i) Funded Debt evidenced by the 1997 Notes;
(ii) Funded Debt of the Lessee outstanding on the June 30, 1998 and
described in Schedule 5;
(iii) Current Debt and Funded Debt of the Lessee 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;
(iv) additional Current Debt and Funded Debt of the Lessee and
Funded Debt of a Restricted Subsidiary secured by Purchase Money Liens,
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:
(A) 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
(B) 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;
(v) unsecured Subordinated Funded Debt of the Lessee to the
General Partner or any Affiliate of the 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
(vi) Current Debt or Funded Debt of a Restricted Subsidiary to the
Lessee 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 6.2(a) shall constitute the
issuance of additional Current Debt or Funded Debt which is, in turn, subject to
the limitations of the applicable provisions of this Section 6.2, 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 6.2.
-5-
<PAGE>
(c) Any business entity which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of this Section 6.2 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 6.3. DISTRIBUTIONS. The Lessee 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 Lessee
will not authorize or make any Distribution (a) on any date other than a
Business Day, (b) in Property other than cash, (c) which is payable more than 60
days after the date of authorization or declaration, or (d) in an amount which,
together with all previous Distributions made by the Lessee 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 6.4. MERGERS AND CONSOLIDATIONS. The Lessee 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:
(a) 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 Lessee or any Wholly-owned Restricted Subsidiary so long
as in any merger or consolidation involving the Lessee, the Lessee shall be
the surviving or continuing entity; and
(b) the Lessee 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 Lessee's assets are sold (the
"SURVIVING ENTITY") shall be either the Lessee 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 Lessee is not the Surviving
Entity or in the case of any such sale, the Surviving Entity shall (A)
expressly assume in writing the due and punctual performance and
observance of all of the covenants in the Operative Agreements to be
performed or observed by the Lessee, and (B) furnish to the
Owner-Trustee, the Indenture Trustee and each Participant 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 the Owner-Trustee and the Indenture
Trustee;
(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
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<PAGE>
not be less than the Consolidated Net Worth of the Lessee 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 6.2(a)(iv).
SECTION 6.5. SALES OF ASSETS. (a) The Lessee 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 6.5) of the
assets of the Lessee and its Restricted Subsidiaries, except as permitted by
Section 6.4; PROVIDED, HOWEVER, that:
(i) any Restricted Subsidiary may sell, lease or otherwise dispose
of any substantial part of its assets to the Lessee or any Wholly-owned
Restricted Subsidiary;
(ii) the Lessee or any Restricted Subsidiary may sell Properties
constituting a substantial part of the assets of the Lessee and its
Restricted Subsidiaries if (A) 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; (B) after giving effect to such sale, no
Default or Event of Default shall have occurred and be continuing; (C) 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 6.5(b)) are either:
(1) applied within the Application Period to pay Senior
Funded Debt of the Lessee or any Restricted Subsidiary (other than
Senior Funded Debt of a Restricted Subsidiary to the Lessee or another
Restricted Subsidiary) selected by the Lessee; 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
(2) deposited and held in a separate trust account with a
bank or trust company satisfactory to the Owner-Trustee and the
Indenture Trustee (which account may be invested in Permitted
Investments) and such Net Proceeds shall be either (x) applied within
such Application Period to the acquisition of productive assets useful
in the Lessee's business, or (y) committed, pursuant to a binding
written contract entered into by the Lessee during such Application
Period, to be applied to the acquisition of productive assets useful
in the Lessee's business (in either 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,
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<PAGE>
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
(D) within ten Business Days after any sale pursuant to this clause (ii),
the Lessee shall have delivered to the Owner-Trustee, the Indenture Trustee
and each Participant a certificate of the Board of Control certifying that
such sale was for fair market value received by the Lessee 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
(1) the application pursuant to this clause (ii) of the Net Proceeds of any
sale or (2) the last day of any Application Period with respect to any
sale, the Lessee shall have delivered to the Owner-Trustee, the Indenture
Trustee and each Participant 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 (ii);
(iii) the Lessee 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 Lessee shall have delivered to the Owner-Trustee, the Indenture Trustee
and each Participant a description of such exchange in sufficient detail to
establish compliance with the foregoing requirements; and
(iv) the Lessee may sell not more than 25,000 acres in the
aggregate of timberlands owned by the Lessee designated in good faith by a
Responsible Officer for a higher and better use, PROVIDED that ten Business
Days after any such sale, the Lessee shall have delivered to the
Owner-Trustee, the Indenture Trustee and each Participant a certificate of
a Responsible Officer notifying the Owner-Trustee, the Indenture Trustee
and each Participant of such sale and certifying as to the number of acres
sold pursuant to this clause (iv) and the amount of gross proceeds from
such sale and establishing compliance herewith.
(b) As used in this Section 6.5, 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 Lessee 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 Lessee and its Restricted Subsidiaries (other than
pursuant to clauses (i) through (iv) above) (A) during the 12-month period
ending with the date of such sale, lease or other disposition, exceeds
$10,000,000 or (B) since December 22, 1994, exceeds $52,900,000, PROVIDED that
each such amount shall be adjusted annually from December 30, 1997 for the
percentage increase or decrease from the prior calendar year in the Consumer
Price Index.
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<PAGE>
SECTION 6.6. LIMITATION ON HARVESTING. The Lessee 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:
150% of the Planned Volume during any fiscal year of the Lessee,
140% of the Planned Volume during any period of two consecutive fiscal
years of the Lessee,
130% of the Planned Volume during any period of three consecutive fiscal
years of the Lessee, and
120% of the Planned Volume during any period of four consecutive fiscal
years of the Lessee;
PROVIDED, HOWEVER, that the Lessee and its Restricted Subsidiaries may harvest
timber from their timberlands exceeding the limitations set forth above (the
"EXCESS HARVEST") if (a) after giving effect to such Excess Harvest, no Default
or Event of Default shall have occurred and be continuing, (b) the Net Proceeds
of the sale of such Excess Harvest (based upon the average price received by the
Lessee and its Restricted Subsidiaries for timber sold during such period) are
either:
(i) applied within the Application Period to pay Senior Funded
Debt of the Lessee or any Restricted Subsidiary (other than Senior Funded
Debt of a Restricted Subsidiary to the Lessee or another Restricted
Subsidiary) selected by the Lessee, or
(ii) deposited and held in a separate trust account with the bank
or trust company satisfactory to the Owner-Trustee and the Indenture
Trustee (which account may be invested in Permitted Investments) and such
Net Proceeds shall be either (A) applied by the Lessee within the
Application Period to the acquisition of timber or timberland or (B)
committed, pursuant to a binding written contract entered into by the
Lessee during such 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
(c) within ten Business Days after any Excess Harvest, the Lessee shall have
delivered to the Owner-Trustee, the Indenture Trustee and each Participant 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 (i) the application
of the Net Proceeds as set forth clause (b) of this Section 6.6 or (ii) the last
day of any Application Period with respect to any Excess Harvest, the Lessee
shall have delivered to the Owner-Trustee, the Indenture Trustee and each
Participant a certificate of the Board of Control
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certifying as to the application of the Net Proceeds of such Excess Harvest and
establishing compliance with the requirements of clause (b) of this Section 6.6.
SECTION 6.7. GUARANTIES. The Lessee will not become or be liable in
respect of any Guaranty except (a) Guaranties by the Lessee which are limited in
amount to a stated maximum dollar exposure, (b) Guaranties of obligations
incurred by any Restricted Subsidiary in compliance with the provisions of this
Lease and (c) bonds posted by the Lessee in the ordinary course of business in
connection with timber harvest contracts, permits for road construction or work
in respect of environmental remediation.
SECTION 6.8. TRANSACTIONS WITH AFFILIATES. The Lessee 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 Lessee's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Lessee 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 Lessee shall be entitled to reimburse the General Partner for
Specified Expenses. The General Partner shall determine the Specified Expenses
that are allocable to the Lessee in any reasonable manner determined by the
General Partner.
SECTION 6.9. MULTIEMPLOYER PLAN LIABILITY AND TERMINATION OF PENSION
PLANS. The Lessee 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 Lessee and its Restricted Subsidiaries,
taken as a whole. The Lessee 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
Lessee or any Subsidiary pursuant to Section 4068 of ERISA.
SECTION 6.10. 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 the Owner-Trustee, the Indenture Trustee and each Participant,
designate a previously Unrestricted Subsidiary as a Restricted Subsidiary,
PROVIDED that immediately after such designation and after giving effect thereto
(a) no Default or Event of Default shall have occurred and be continuing and (b)
the Lessee could incur at least $1.00 of additional Funded Debt under the
provisions of Section 6.2(a)(iv).
Any notice of designation pursuant to this Section 6.10 shall be
accompanied by a certificate signed by the chief financial officer of the Lessee
stating that the provisions of this Section 6.10 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.
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SECTION 6.11. CERTAIN NOTICES.
(a) LIENS. Upon the attachment of an aggregate amount of $250,000 or more
of Liens on 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.
(b) 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 Site or the Facility under, any Applicable Law.
(c) PLANS AND SPECIFICATIONS; OPERATING MANUALS. The Lessee shall
maintain or cause its Affiliates to maintain throughout the Site 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 Alterations made
pursuant to Section 8 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 Alteration made within thirty
(30) days prior to such date). Upon the expiration of the 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.
(d) ENVIRONMENTAL EVENT. The Lessee shall promptly, but in any case
within five (5) Business Days, notify the Lessor if (i) any event has occurred
or any 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 an
Environmental Claim or has knowledge of any conditions or occurrences at the
Leased Property that could reasonably form the basis of a material Environmental
Claim, in either case that could reasonably be expected to result in any ordered
remediation or corrective action or other liability related to an 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, or (iii) any material
and actual or imminent restriction on the ownership, occupancy, use,
productivity or transferability of the Leased Property arising in connection
with any Release, threatened Release or disposal of a Hazardous Material or any
breach or violation of any Environmental Law, or (iv) any other environmental,
natural resource, health or safety condition which could materially and
adversely affect the ability of the Lessee to perform its obligations under the
Operative Agreements (each of (i) through (iv) an "ENVIRONMENTAL EVENT").
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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 (i) 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 (ii) 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, 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 6.12. SECTION 6 DEFINITIONS. The following terms shall have the
following meanings for all purposes of this Section 6:
"ACQUISITION" shall mean any transaction in which the Lessee 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 Lessee and its Restricted Subsidiaries, taken as a
whole, from the operating capacity of the Lessee and its Restricted
Subsidiaries, taken as a whole, existing immediately prior to such transaction.
"ACQUISITION CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement dated as of July 31, 1996, as amended, with Bank of America National
Trust and Savings Association and the other banks named therein.
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"ACQUISITION FACILITY" shall mean the facility pursuant to which not less
than $150,000,000 shall be made available to the Lessee in order to fund future
acquisitions by the Lessee of timberlands and related assets under the
Acquisition Credit Agreement, as from time to time renewed, extended, amended
and supplemented.
"APPLICATION PERIOD" shall mean, with respect to any sale of assets
pursuant to Section 6.5(a)(ii), the 180-day period following the date of such
sale; and, with respect to any sale of harvested timber subject to Section 6.6,
the 180-day period following the last day of the fiscal year of the Lessee in
which such Excess Harvest occurred.
"AVAILABLE CASH" shall mean, with respect to any fiscal quarter of the
Lessee and without duplication,
(a) the sum of:
(i) all cash receipts of the Lessee 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
(b) the sum of:
(i) all cash disbursements of the Lessee 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
General Partner determines in its reasonable discretion to be
necessary or appropriate (A) to provide for the proper conduct of the
business of the Lessee, (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 Lessee
is a party or by which any of its assets are subject, PROVIDED that
Available Cash shall reflect (1) 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 1994 Notes, the 1995 Notes, the 1996 Notes and
the 1997 Notes on the next interest payment date, and (2) in the third
fiscal quarter immediately preceding each fiscal quarter in which any
scheduled principal payment is due with respect to the 1994 Notes, the
1995 Notes, the 1996 Notes and/or the 1997 Notes (a "PRINCIPAL PAYMENT
QUARTER"), a reserve equal to at least 25% of the aggregate amount of
all principal to be paid in
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respect of such 1994 Notes, 1995 Notes, 1996 Notes and 1997 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 1994 Notes, 1995 Notes, 1996 Notes and 1997 Notes in
such principal payment quarter; and in the calendar 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 1994 Notes, 1995 Notes, 1996 Notes and 1997 Notes in
such principal payment quarter.
So long as the Lessee is not a taxpaying entity, taxes paid by the Lessee
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 Lessee 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 General Partner, so long as the Lessee is not a taxpaying
entity, such taxes (if pertaining to all Partners) may be considered to be cash
disbursements of the Lessee which reduce Available Cash, but the payment or
withholding thereof shall not be deemed to be a distribution of Available Cash
to such Partners.
"AVERAGE TREASURY RATE" at any date for any period shall mean the bid-side
yield to maturity for actively traded marketable U.S. Treasury fixed interest
rate non-callable securities (adjusted to constant maturities equal to such
period), as quoted on pages 7677 or 500 of Telerate U.S. Treasury and Money
Markets (or any successor or alternate publication then reporting yields on such
Treasury securities) two Business Days prior to such date. If no possible
maturity exactly corresponds to such period, yields for the two most closely
corresponding published maturities shall be calculated pursuant to the
immediately preceding sentence and the Average Treasury Rate shall be
interpolated from such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month.
"CAPITAL ADDITIONS AND IMPROVEMENTS" shall mean (a) additions or
improvements to the capital assets owned by the Lessee or any Restricted
Subsidiary or (b) 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 Lessee and its Restricted Subsidiaries, taken as a whole, from
the operating capacity of the Lessee and its Restricted Subsidiaries, taken as a
whole, existing immediately prior to such addition, improvement, acquisition or
construction.
"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.
"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 Lessee or a
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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
Lessee for comparable timber sold during such period, and (b) in the case of any
acquisition of any other productive asset by the Lessee 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
Lessee shall certify in writing to the Owner-Trustee, the Indenture Trustee and
each Participant (i) specified cost savings that can be effected by the Lessee
in the operation of such productive asset or (ii) the net additional resources
to be allocated to increase productivity of such asset, PLUS (to the extent
deducted in determining Operations Cash) (A) all cash debt service payments of
the Lessee and its Restricted Subsidiaries during such period, (B) all cash
capital expenditures (except capital expenditures relating to Acquisitions and
Capital Additions and Improvements) of the Lessee and its Restricted
Subsidiaries during such period, and (C) 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 (A) or (B).
"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.
"CURRENT DEBT" of any Person shall mean, as of the date of any
determination thereof, (a) all Indebtedness of such Person for borrowed money or
for the acquisition of assets, other than Funded Debt of such Person and (b)
Guaranties by such Person of Current Debt of others.
"DISTRIBUTION" in respect of the Lessee 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
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(c) any payment of or on account of Subordinated Funded Debt owed
to the General Partner or any payment on account of the purchase,
redemption or other retirement thereof.
"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.
"EXCESS HARVEST" is defined in Section 6.6.
"FOUR QUARTER PERIOD" shall mean a period of four full consecutive
quarterly fiscal periods of the Lessee, taken together as one accounting period.
"FUNDED DEBT" of any Person shall mean (a) 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, (b) all Capitalized
Rentals of such Person, and (c) all Guaranties by such Person of Funded Debt of
others.
"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
joint venture and of a partner in connection with a partnership), by such
Person: (a) to purchase such Indebtedness or obligation or any Property
constituting security therefor, (b) to advance or supply funds (i) for the
purchase or payment of such Indebtedness or obligation or (ii) 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,
(c) 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 (d) 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 the Operative
Agreements, 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.
"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
(a) obligations of such Person for
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borrowed money, (b) 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, (c) 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 (c) shall not include obligations of such
Person in respect of Operating Leases, (d) Capitalized Rentals of such Person,
and (e) Guaranties by such Person of Indebtedness of others.
"INTEREST EXPENSE" for any period shall mean all interest (including the
interest component of Rentals payable by the Lessee 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 Lessee and its Restricted Subsidiaries for which such calculations are
being made.
"INTERIM CAPITAL TRANSACTIONS" shall mean (a) borrowings, refinancings or
refundings of Current Debt and Funded Debt of the Lessee 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 Lessee or any Restricted Subsidiary, (b) sales of Equity
Interests by the Lessee and (c) sales or other voluntary or involuntary
dispositions of any assets of the Lessee or any Restricted Subsidiary (other
than (i) 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 (ii) 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 Lessee.
"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.
"MEASUREMENT DATE VALUE" means, as to any amount received or to be received
after the last day of the termination of the Basic Term, the value of such
amount discounted on a semi-annual compounded basis to such last day on the
basis of the sum of 1.00% and the Average Treasury Rate for the period, from the
date of the receipt, or scheduled receipt, thereof to such last day.
"NET PROCEEDS" shall mean the gross proceeds of the disposition or sale of
Property, LESS (a) all reasonable expenses incurred in connection with such
disposition or sale of such Property and (b) 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.
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"1994 NOTES" shall mean the $275,000,000 9.78% Senior Notes due December 1,
2009 of the Lessee issued under and pursuant to the Note Purchase Agreement
dated as of December 1, 1994 among the Lessee 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 Lessee issued under and pursuant to the Note Purchase Agreement
dated as of March 15, 1995 among the Lessee and the purchasers listed in
Schedule I thereto.
"1996 NOTES" shall mean the $91,000,000 Senior Notes due 2006 to 2013 of
the Lessee issued under and pursuant to the Note Purchase Agreement dated as of
August 1, 1996 among the Lessee and the purchasers listed in Schedule I thereto.
"1997 NOTES" shall mean the $95,000,000 Senior Notes, Series A, B and C,
due 2010 to 2018 of the Lessee issued under and pursuant to the Note Purchase
Agreement dated as of December 15, 1997 among the Lessee and the purchasers
listed in Schedule I thereto.
"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 Lessee 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 Lessee; 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:
(i) all cash operating expenditures of the Lessee and its
Restricted Subsidiaries during such period (including, without limitation,
(A) cash operating expenditures of Restricted Subsidiaries prior to the
acquisition thereof by the Lessee, (B) taxes, if any, paid by the Lessee as
an entity and by its Restricted Subsidiaries, and (C) amounts owed to the
General Partner as reimbursement for Specified Expenses);
(ii) all cash debt service payments of the Lessee and its
Restricted Subsidiaries during such period (other than payments or
prepayments of principal and premium (A) 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 (B) 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 General Partner, to be refunded or
refinanced by any Indebtedness incurred or to be incurred by the Lessee
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);
(iii) all cash capital expenditures of the Lessee and its Restricted
Subsidiaries during such period, except capital expenditures (including
associated transaction costs)
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relating to (A) Acquisitions, (B) Capital Additions and Improvements and
(C) Interim Capital Transactions;
(iv) the amount, if any, by which cash reserves outstanding as of
the end of such period that the 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 (i) through (iii) above exceeds such cash reserves outstanding at
the beginning of such period;
(v) the amount, if any, by which any cash reserves outstanding at
the end of such period that the 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
(vi) any cash receipts of any Restricted Subsidiary which for any
reason (including pursuant to its organizational documents) is unavailable
for distribution to the Lessee 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 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 Lessee is not a taxpaying entity, taxes paid by the Lessee
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 Lessee that
reduce Operations 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 General Partner, so long as the Lessee is not a taxpaying
entity, such taxes (if pertaining to all Partners) may be considered to be cash
operating expenditures of the Lessee which reduce Operations Cash, but the
payment or withholding thereof shall not be deemed to be a distribution of
Available Cash to such Partners.
"PERMITTED INVESTMENTS" shall mean:
(a) Investments in commercial paper maturing in 270 days or less
from the date of issuance which, at the time of acquisition by the Lessee
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 Owner-Trustee and the Indenture Trustee;
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(b) 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; and
(c) 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 Owner-Trustee and the Indenture Trustee.
"PLANNED VOLUME" shall mean, as of December 30, 1997, 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 Lessee and its Restricted Subsidiaries during such Determination
Period shall exceed the number of board feet of timber sold or otherwise
disposed of by the Lessee 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 Lessee and its
Restricted Subsidiaries during such Determination Period shall exceed the
number of board feet of timber acquired by the Lessee 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 6.6.
"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 Lessee and its Restricted
Subsidiaries on such determination date to (b) Funded Debt of the Lessee
and its Restricted Subsidiaries on a consolidated basis on such
determination date.
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"DETERMINATION PERIOD" shall mean the period from and including the
December 30, 1997 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 Lessee and its
Restricted Subsidiaries as of the first day of the Determination Period for
which such Annual Timber Decrease occurred.
"PRO FORMA INTEREST EXPENSE" for any Four Quarter Period shall mean the
Interest Expense payable by the Lessee and its Restricted Subsidiaries during
such Four Quarter Period on all Current Debt and Funded Debt of the Lessee 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 (a)
any Current Debt and Funded Debt to be issued on the date of determination of
Pro Forma Interest Expense and (b) the Current Debt or Funded Debt issued after
the end of such Four Quarter Period and prior to such date of determination, in
each case, giving effect as of the beginning of such Four Quarter Period (i) to
the incurrence of all such Current Debt and Funded Debt described in clauses (a)
and (b), and (ii) 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 Lessee 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, 2011, in respect of scheduled principal payments and all Interest
Expense with respect to all Current Debt and Funded Debt of the Lessee 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 (a) 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, (b) 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 (c)
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 (c), the
Lessee shall be deemed to have elected to have any amount outstanding under the
Acquisition Facility to be amortized in
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the manner and over the period provided for therein commencing at the expiration
of the period during which the Acquisition Facility is revolving in nature.
"PURCHASE MONEY LIENS" shall mean Liens incurred in connection with the
acquisition of any fixed asset useful and intended to be used in carrying on the
business of the Lessee or a Restricted Subsidiary, including Liens existing on
such fixed asset at the time of acquisition by the Lessee 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 (a)
the Lien shall attach solely to the fixed asset acquired or purchased, (b) 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
Lessee 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
December 30, 1997 (including such fixed asset) shall not exceed the following
amounts:
<TABLE>
<S> <C>
On or before November 30, 1999 $25,000,000
December 1, 1999 to November 30, 2004 $50,000,000
December 1, 2004 and thereafter $100,000,000,
</TABLE>
(c) all such Indebtedness shall have been incurred within the applicable
limitations provided in Section 6.2, and (d) after giving effect to such
acquisition no Default or Event of Default shall have occurred and be
continuing.
"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.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary (a) which is organized
under the laws of the United States or Canada or any state or province thereof;
(b) which conducts substantially all of its business and has substantially all
of its assets within the United States or Canada; (c) of which (i) in the case
of any corporation, more than 50% of the Voting Stock is beneficially owned,
directly or indirectly by the Lessee, or (ii) 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
Lessee; and (d) which is designated as a Restricted
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Subsidiary in the most recent written notice with respect to such Subsidiary
given by the Lessee pursuant to Section 6.10.
"SENIOR FUNDED DEBT" shall mean all Funded Debt other than Subordinated
Funded Debt.
"SPECIFIED EXPENSES" shall mean (a) all reasonable direct and indirect
expenses the General Partner incurs or payments it makes on behalf of the Lessee
(including, without limitation, salary, bonus, incentive compensation, and other
amounts paid to any Person to perform services for the Lessee or for the General
Partner in the discharge of its duties to the Lessee), and (b) all other
necessary or appropriate reasonable expenses allocable to the Lessee or
otherwise reasonably incurred by the General Partner in connection with
operating the Lessee's business (including without limitation reasonable
expenses allocated to the General Partner by its affiliates and, for so long as
Fremont Group, Inc. owns an interest in the 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
Lessee which shall contain or have applicable thereto subordination provisions
substantially in the form set forth in Exhibit F attached hereto providing for
the subordination thereof to other Funded Debt of the Lessee.
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary other than a Restricted
Subsidiary.
"VOTING EQUITY INTEREST" shall mean Voting Stock and General Partnership
Interests.
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean (a)
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 Lessee and/or one or more of
its Wholly-owned Subsidiaries, and (b) in the case of any partnership shall mean
a Subsidiary of which all of the outstanding General Partnership Interests are
owned by the General Partner and all of the Limited Partnership Interests and
all Indebtedness shall be owned by the Lessee and/or one or more of its
Wholly-owned Subsidiaries.
"WORKING CAPITAL CREDIT AGREEMENT" shall mean the Amended and Restated
Facility B Credit Agreement dated as of July 31, 1996, as amended, 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
Lessee (subject to certain conditions precedent set forth therein) not less than
$40,000,000 for working capital and general partnership purposes of the Lessee.
"WORKING CAPITAL FACILITY" shall mean the facility made available to the
Lessee 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
entered into by the Lessee 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.
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"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 6.13. CERTAIN PAYMENTS. (a) PAYMENT REQUIRED. On the date which
is 120 days after the last day of the Basic Term (the "MEASUREMENT DATE"), the
Lessee shall pay to the Owner Participant if, but only if, the Owner Participant
is the original Owner Participant, the amount, if any, by which the total Amount
Generated (as defined in Section 6.13(b)) shall be less than $790,632.24;
PROVIDED, HOWEVER, that no amount shall be payable under this Section 6.13
unless the Owner Participant shall receive on or prior to the last day of the
Basic Term, an opinion of independent tax counsel selected by the Owner
Participant, at the Owner Participant's expense, to the effect that neither the
existence nor the operation of this Section 6.13 will result in any adverse tax
consequences to the Owner Participant, and PROVIDED FURTHER, that the foregoing
requirement with respect to obtaining a tax opinion may not be waived by the
Owner Participant. It shall be a condition to the right of the Owner
Participant to receive any amounts pursuant to the preceding sentence that the
Owner Participant shall have made all reasonable efforts to maximize the total
Amount Generated. In no event shall the Lessee have any tax liability with
respect to any payment or nonpayment to the Owner Participant pursuant to this
Section 6.13.
(b) TOTAL AMOUNT GENERATED. The total Amount Generated shall be:
(i) if the Facility has been sold by the Lessor (other than to the
Lessee pursuant to Section 19) on or after the last day of the Basic Term
(including a sale pursuant to Section 15(b) hereof), the Measurement Date
Value of the sum of (i) the net sales price received by the Lessor for the
Facility and (ii) any rents (including Renewal Term Rent received pursuant
to Section 19) received by the Lessor with respect to the Facility after,
and with respect to periods after, the last day of the Basic Term;
(ii) if the Facility is being leased by the Lessor on the
Measurement Date, the sum of (i) the Measurement Date Value of any rents
(including Renewal Term Rent received pursuant to Section 19) received by
the Lessor on or before the Measurement Date after, and with respect to
periods after, the last day of the Basic Term, (ii) the Measurement Date
Value of any rents scheduled to be received by the Lessor after the
Measurement Date and (iii) the Measurement Date Value of the Fair Market
Sales Value at the end of such lease (not including the terms of any
renewal options not yet irrevocably exercised); or
(iii) if the Facility is owned by the Lessor on the Measurement Date,
and not then being leased by the Lessor, the sum of (i) the Measurement
Date Value of any rents (including Renewal Rent received pursuant to
Section 19) received by the Lessor on or before the Measurement Date after,
and with respect to periods after, the last day of the Basic Term and
(ii) the Measurement Date Value of the Fair Market Sales Value on the
Measurement Date.
(c) NOTICE; VERIFICATION. The Owner Participant shall notify the Lessee
of any amount the Owner Participant believes is due pursuant to Section 6.13(a)
and shall provide the Lessee
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appropriate information as to the computation of such amount. Any such notice
shall include a certification by an Authorized Officer of the Owner Participant
that the Owner Participant has complied with the penultimate sentence of
Section 6.13(a). If the Lessee shall disagree with any such amount, the
verification procedures contained in Section 4(g) shall be applicable to such
disagreement.
(d) SURVIVAL. Notwithstanding anything herein or in any other Operative
Agreement, this Section 6.13 shall survive the termination of this Lease.
SECTION 7. INSURANCE.
(a) REQUIRED INSURANCE COVERAGES AND LIMITS. The Lessee agrees that it
will at its own cost and expense at all times during the Term:
(i) Keep the Leased Property insured against all physical loss
including by fire, windstorm, explosion, flood, subsidence, earthquake,
earth movement and collapse and with all-risk coverage and against all such
other risks as are insured against by the Lessee with respect to property
of a similar character owned or leased by the Lessee, in an amount not less
than the greater of (A) the replacement value of the Facility and (B) the
Casualty Value of the Facility as of the next preceding Rent Payment Date,
which insurance shall (v) cover all materials, equipment, tools and
supplies stored on the Site and to become part of the Leased Property, (w)
cover all portions of the Leased Property while in transit, (x) include
boiler and machinery insurance, (y) include coverage against loss caused by
explosion and breakdown and (z) waive any condition requiring that the
Leased Property be in use or ready for use,
(ii) Maintain comprehensive general public liability insurance with
respect to the Leased Property including liability coverage for
premise-operations, contractual liability (including liability pursuant to
Section 8 of the Participation Agreement), product liability, and owned,
non-owned and hired car auto liability, which coverage shall be against
damage because of bodily injury, including death, or damage to property of
others, such insurance to afford protection to the limit of not less than
$15,000,000 combined single limit in respect of bodily injury, death and
damage to property of others, and
(iii) Maintain such other insurance covering such risks and in such
amounts as is customary by corporations owning, operating or leasing
property or engaged in the same or similar business, similarly situated
with the Leased Property and/or the Lessee, to the extent available on
commercially reasonable terms.
The Lessee agrees to maintain all insurance provided for under this
Section 7 with good and responsible insurance companies of recognized national
reputation approved by the Owner-Trustee and the Participants. Any policies of
insurance carried in accordance with this Section 7 and any policies taken out
in substitution or replacement for any of such policies (1) shall name the
Insured Parties as additional insureds, (2) shall provide that in respect of the
interest of the Insured Parties in such policies the insurance shall not be
invalidated by any action
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or inaction of the Lessee or any other Person and shall insure the Insured
Parties' interests as they appear, regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by the Lessee or
any other Person, (3) shall provide that, if such insurance is cancelled for any
reason whatsoever, or any substantial change is made in the coverage which
affects the interest of any Insured Party or if such insurance is allowed to
lapse for non-payment of premium, such cancellation, change or lapse shall not
be effective as to such Insured Party for 30 days after receipt by such Insured
Party of written notice from such insurers of such cancellation, change or
lapse, (4) shall provide that no Insured Party shall have any obligation or
liability for premiums in connection with such insurance, (5) shall provide that
such insurance shall be primary without right of contribution from any other
insurance which may be carried by any Insured Party with respect to its interest
as such in the Leased Property, (6) shall provide that the insurers shall waive
any rights of subrogation against the Insured Parties, except for claims as
shall arise from the willful misconduct or gross negligence of any such Insured
Party, and (7) shall provide that such insurers shall waive any right of
set-off, counterclaim or any other deduction, whether by attachment or
otherwise, in respect of any liability of any Insured Party. Each liability
policy shall expressly provide that all of the provisions thereof, except the
limits of liability, shall operate in the same manner as if there were a
separate policy covering each insured. Each policy covering casualty insurance
required to be carried by paragraph (a)(i) of this Section shall provide either
(y) that any payments for any loss or damage to the Leased Property shall be
paid to the Indenture Trustee (or, if the Secured Indebtedness shall have been
fully paid and satisfied, to the Owner-Trustee), as loss payee, or (z) that
(i) any payments for any loss or damage to the Leased Property constituting a
total or constructive loss or a Casualty Occurrence shall be paid to the
Indenture Trustee (or, if the Secured Indebtedness shall have been fully paid
and satisfied, to the Owner-Trustee), as loss payee, (ii) any payments for any
loss or damage to the Leased Property which do not constitute a total or
constructive loss or a Casualty Occurrence and are not in excess of $500,000
shall be paid to the Lessee (unless the insurer shall have received notice of a
Default or Event of Default, in which case such payments shall be paid to the
Indenture Trustee (or, if the Secured Indebtedness shall have been fully paid
and satisfied, to the Owner-Trustee), as loss payee, and (iii) any payments for
any loss or damage to the Leased Property which do not constitute a total or
constructive loss or a Casualty Occurrence and are in excess of $500,000 shall
be paid to the Indenture Trustee (or, if the Secured Indebtedness shall have
been fully paid and satisfied, to the Owner-Trustee), as loss payee), in each
case under a standard mortgage loss payable clause (which clause specifies
payment solely to the Indenture Trustee or, if the Secured Indebtedness shall
have been fully paid and satisfied, solely to the Owner-Trustee, and which
clause acknowledges that the loss payee shall have no obligation for unpaid
premiums) satisfactory to the Indenture Trustee. Any such insurance may be
carried under blanket policies maintained by the Lessee so long as such policies
otherwise comply with the provisions of this Section 7(a). If general public
liability insurance shall be carried under any blanket policy which is subject
to aggregate annual claim limitations, the Lessee shall keep the Owner-Trustee
advised from time to time of the amount of any such limitations and the amounts
of claims which reduce the available policy limits.
(b) ADJUSTMENT AND PAYMENT OF LOSSES. The loss, if any, under any
casualty insurance required to be carried by paragraph (a)(i) of this Section
shall be adjusted with the insurance companies by the Lessee, or otherwise
collected, including the filing of proceedings deemed advisable by the Lessee,
subject to the approval of the Owner-Trustee (and the Indenture Trustee
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unless the Secured Indebtedness shall have been fully paid and satisfied) if the
loss exceeds $500,000. The loss so adjusted shall be paid in accordance with
the antipenultimate sentence of Section 7(a). Losses covered by liability
insurance shall be adjusted by and paid to the Person suffering such loss. All
such policies shall provide that the loss, if any, under such insurance shall be
adjusted and paid as provided in this Lease.
(c) EVIDENCE OF INSURANCE. The Lessee shall, on or before the Closing
Date, furnish the Owner-Trustee and the Indenture Trustee with certificates or
other satisfactory evidence of maintenance of the insurance required hereunder
and shall with respect to any renewal policy or policies, furnish certificates
evidencing such renewal not less than ten days prior to the expiration date of
the original policy or policies. Each such certificate or other evidence of
insurance shall identify the insurance carrier, the type of insurance, the
coverage limits, annual aggregate limits, if any, and the policy term. Within
the period provided in Section 18(a)(ii) the Lessee shall provide, or cause to
be provided, to the Owner-Trustee, the Indenture Trustee and each Participant a
report by Aon Risk Services, Inc. of Oregon or another firm of independent
insurance brokers (which may be the Lessee's regular insurance agency) chosen by
the Lessee and satisfactory to the Owner-Trustee and the Indenture Trustee
setting forth the insurance obtained by the Lessee pursuant to this Section 7
and then in effect (or to be in effect, in the case of renewals) and stating
whether, in the opinion of such firm, such insurance complies with the
requirements of this Section 7. The Lessee will cause such firm to advise each
Insured Party in writing promptly of any default in the payment of any premium
and of any other act or omission on the part of the Lessee of which such firm
has knowledge and which might invalidate or render unenforceable, in whole or in
part, any insurance on the Leased Property. The Lessee will also cause such
firm to advise each Insured Party in writing promptly upon such firm acquiring
knowledge that an interruption or reduction of any insurance carried and
maintained on the Leased Property pursuant to this Section 7 will occur.
(d) APPLICATION OF INSURANCE PROCEEDS. All insurance proceeds from
policies required to be maintained hereunder received by or payable to the
Owner-Trustee on account of any damage to or destruction of the Leased Property
or any part thereof (less the actual costs, fees and expenses incurred in the
collection thereof) shall be applied or dealt with as follows:
(i) All such proceeds actually received on account of any such
damage or destruction other than a Casualty Occurrence shall be paid over
to the Lessee or as it may direct from time to time as restoration,
replacement and rebuilding of the Leased Property ("RESTORATION") progress
to pay (or reimburse the Lessee for) the cost of Restoration, if the amount
of such proceeds received by the Owner-Trustee, together with such
additional amounts, if any, theretofore expended by the Lessee out of its
own funds for Restoration are sufficient to pay the estimated cost of
completing Restoration, but only upon a written application of the Lessee
accompanied by an Officer's Certificate of the Lessee stating that no
Default or Event of Default has occurred and is continuing under the Lease
and showing, in reasonable detail, (A) the nature of Restoration, (B) that
such Restoration is intended to restore the Facility to Design Capacity
(normal wear and tear excepted), (C) the actual cash expenditures made to
date for Restoration, and (D) the estimated cost (which, if requested by
the Owner-Trustee, shall be verified by an accompanying certificate of an
engineer or architect not an employee of the Lessee) to
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complete Restoration. Upon the written request of the Lessee, accompanied
by evidence satisfactory to the Owner-Trustee that Restoration has been
completed and the costs thereof paid in full, that the Facility is capable
of operating at Design Capacity (normal wear and tear excepted) and that
there are no mechanics' or similar liens for labor or materials supplied in
connection therewith, the balance, if any, of such proceeds shall be paid
over or assigned to the Lessee or as it may direct.
(ii) All such proceeds received or payable on account of a Casualty
Occurrence shall be paid over or assigned to the Lessee or as it may direct
upon termination of this Lease and receipt by the Owner-Trustee of the
Casualty Value of the Facility and all other payments due hereunder.
(iii) Pending application pursuant to subparagraph (i) or (ii) above,
all such proceeds held from time to time by the Owner-Trustee shall be
invested and reinvested by the Owner-Trustee in accordance with the
provisions of Section 20(i).
(e) INSURANCE FOR OWN ACCOUNT. Nothing in this Section 7 shall limit or
prohibit the Owner-Trustee, any Participant or the Lessee from obtaining, at its
own expense, additional insurance for its own account and any proceeds payable
thereunder shall be payable in accordance with the insurance policy relating
thereto, PROVIDED that no such insurance may be obtained which would limit or
otherwise adversely affect the coverage of any insurance required to be
maintained pursuant to this Section 7, and PROVIDED, FURTHER, that nothing in
this clause (e) shall impose any obligation on the Owner-Trustee, any
Participant or the Lessee to obtain any such additional insurance.
(f) APPLICATION OF PAYMENTS DURING EXISTENCE OF AN EVENT OF DEFAULT. Any
amount referred to in this Section 7 which is payable to or retainable by the
Lessee shall not be paid to or retained by the Lessee if at the time of such
payment or retention a Default or Event of Default shall have occurred and be
continuing, but shall be held by or paid over to the Owner-Trustee (or, so long
as the Secured Indebtedness shall not have been fully paid and satisfied, the
Indenture Trustee) as security for the obligations of the Lessee under this
Lease and, if a Default or Event of Default shall have occurred and be
continuing, applied against the Lessee's obligations hereunder as and when due.
At such time as there shall not be continuing any such Default or Event of
Default, such amount shall be paid to the Lessee in accordance with the
foregoing provisions of this Section 7 to the extent not previously applied in
accordance with the preceding sentence.
SECTION 8. MAINTENANCE; MAINTENANCE COSTS AND WARRANTIES; REPLACEMENT OF PARTS;
ALTERATIONS; MODIFICATIONS AND ADDITIONS.
(a) MAINTENANCE. The Lessee at its sole cost and expense shall maintain,
service and repair the Leased Property to keep it (i) in as good operating
condition and as capable of operating at Design Capacity as when new in
accordance with the Plans, (ii) in such condition so as to have the capacity and
functional ability to perform, on a daily basis in commercial operation, the
functions for which it was designed, in accordance with the Plans, and (iii) in
such condition as the Lessee would, in the prudent management of its own
properties, maintain,
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service and repair similar property owned by the Lessee and in any event, to the
extent required to maintain the Leased Property in good repair in a manner
consistent with prudent industry practice and in compliance in all material
respects with all Applicable Laws, rules and regulations, noncompliance with
which might result in the imposition of a penalty on any Indemnified Party or
materially adversely affect the Leased Property or the operation thereof. The
Lessee shall comply with such repair and maintenance standards and schedules as
are required to enforce warranty claims against the manufacturers and suppliers
of the Leased Property or which are otherwise established by such manufacturers
and suppliers as recommended operating procedures and any standards imposed by
any insurance policies in effect with respect to the Leased Property. The
Lessee shall maintain at its principal place of business a maintenance log with
respect to the Leased Property, which shall include the dates and details of all
material maintenance and repairs performed on the Leased Property. In the event
of any damage to or destruction of the Leased Property, or any part thereof, by
fire or other casualty, unless this Lease shall be terminated pursuant to
Section 13, the Lessee shall, at its own expense, with reasonable promptness,
repair, restore or rebuild the same so that upon the completion of such repair,
restoration or rebuilding the Leased Property shall be in the condition required
by the provisions of this Section 8(a) and so that the value and utility of the
Leased Property shall be at least equal to the value and utility of the Leased
Property immediately prior to the occurrence of such casualty assuming that the
Leased Property was then in the condition required to be maintained by the terms
of this Lease.
(b) MAINTENANCE COSTS AND WARRANTIES. The Lessee agrees to pay all
costs, expenses, fees and charges incurred in connection with (i) the use and
operation of the Leased Property by the Lessee during the Term hereof, including
but not limited to repairs, maintenance, storage and servicing as provided in
this Section 8 and (ii) the preserving and protecting of the Leased Property,
and the repairing, maintaining and servicing of the Leased Property as provided
in this Section 8, during the period after a termination of the Lessee's right
of possession of the Facility and the Site pursuant to Section 15 and prior to
the interest of the Owner-Trustee in the Leased Property being leased or sold to
a third person (not the Owner-Trustee, the Indenture Trustee, or any
Participant, or any Affiliate of any thereof, in connection with the exercise of
their rights in the Leased Property under the Operative Agreements) by the
Owner-Trustee (or the Indenture Trustee or any Participant, or any Affiliate
thereof, in connection with the exercise of their rights under the Operative
Agreements). So long as no Event of Default has occurred and is continuing, the
Owner-Trustee hereby constitutes the Lessee the agent and attorney-in-fact of
the Owner-Trustee for the purpose of exercising and enforcing, and with full
right, power and authority to exercise and to enforce, all of the right, title
and interest of the Owner-Trustee in, under and to the warranties and
obligations of any supplier of goods or services in respect of the Leased
Property and agrees to execute and deliver such further instruments as may be
necessary to enable the Lessee to obtain goods or services furnished for the
Leased Property by said suppliers. The Owner-Trustee shall have no other
obligation or duty with respect to any of such matters. Any proceeds obtained
by the Lessee from the enforcement of the warranties and obligations of any
supplier of goods or services in respect of the Facility shall be held by the
Lessee and applied from time to time to the repair and maintenance of the
Facility, and any balance thereof remaining at the expiration of the Term shall
be paid over to the Owner-Trustee or as it may direct.
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(c) REPLACEMENT OF PARTS AND COMPONENTS. The Lessee at its sole cost and
expense, will, with reasonable promptness, replace all appliances, parts,
instruments, appurtenances, accessories, furnishings and other equipment of
whatever nature:
(i) which may from time to time constitute a part of the Facility
(herein for the purpose of this Section 8 collectively called "PARTS"), and
(ii) which may from time to time be incorporated or installed in or
attached to the Site Lease Property (herein for the purpose of this
Section 8 collectively called "COMPONENTS")
and which may from time to time become worn out, lost, stolen, destroyed,
seized, confiscated, damaged beyond repair or permanently rendered unfit for use
for any reason whatsoever. All replacement Parts and Components shall be free
and clear of all Liens and rights of others except Permitted Encumbrances and
shall be in as good operating condition as, and shall have a current and
residual value, useful life and utility at least equal to, the Parts or
Components replaced, assuming that such replaced Parts or Components were in the
condition required to be maintained by the terms hereof, and shall be in the
condition and repair required to be maintained by the terms hereof.
All Parts owned by the Owner-Trustee at any time removed from the Facility
shall remain the property of the Owner-Trustee, no matter where located, until
such time as such Parts shall be replaced by Parts which have been incorporated
or installed in or attached to the Facility and which meet the requirements for
replacement Parts specified above. Immediately upon any such replacement Part
becoming incorporated or installed in or attached to the Facility as above
provided, without further act, (A) title to the removed Part shall thereupon
vest in the Lessee or such person as shall be designated by the Lessee, free and
clear of all rights of the Owner-Trustee, and shall no longer be deemed a Part
hereunder, (B) title to such replacement Part shall thereupon vest in the
Owner-Trustee, free and clear of all Liens (other than Permitted Encumbrances)
and (C) such replacement Part shall become subject to this Lease and be deemed
part of the Facility for all purposes to the same extent as the Parts originally
incorporated or installed in or attached to such Facility.
(d) REQUIRED ALTERATIONS. The Lessee, at its sole cost and expense,
shall, with reasonable promptness, make such repairs, alterations,
modifications, reconfigurations, improvements and additions (herein for the
purpose of this Section 8 collectively called "ALTERATIONS") to the Leased
Property as may be required from time to time to meet the requirements of
Applicable Law or of any insurance policies in effect with respect to the Leased
Property unless prior to the time at which such Alterations became required
pursuant to such Applicable Law or insurance policies the Lessee shall have
given the Owner-Trustee notice of the termination of this Lease pursuant to
Section 13(d). If the Lessee determines in good faith that the cost of any
Alteration required under this Section 8(d) is greater than $1,000,000, the
Lessee may, upon less than 90 days' prior written notice to the Owner-Trustee,
elect to close the Facility and either purchase the Facility or terminate the
Lease pursuant to the next succeeding paragraph.
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Such written notice shall be accompanied by an Officer's Certificate of the
Lessee specifying the required Alteration, the Lessee's good faith determination
of the cost of such Alteration and that, as a result of such cost, the Lessee
has elected to close the Facility. Such written notice shall specify either
(i) that the Lessee has elected to and shall purchase the Facility pursuant to
Section 19(f), PROVIDED that the Early Purchase Date for purposes of
Section 19(f) shall be the next succeeding Rent Payment Date that is at least 90
days after the date of such written notice and the Early Purchase Price for
purposes of Section 19(f) shall be the Termination Value on such Early Purchase
Date, or (ii) that the Lessee has elected to and shall terminate the Lease
pursuant to Section 13(d) as of the next succeeding Rent Payment Date that is at
least 180 days after the date of such written notice.
(e) OPTIONAL ALTERATIONS. (i) The Lessee, at its sole cost and expense,
may from time to time make such Alterations to the Facility as the Lessee may
deem desirable in the proper conduct of its business and which are not
inconsistent with, and would not impair, the continuing operation of the
Facility in accordance with its original functional purpose; PROVIDED, that any
such Alteration made by the Lessee pursuant to this paragraph shall not diminish
the value, utility, condition or remaining economic useful life and estimated
residual value of the Facility to the Owner-Trustee below the value, utility,
condition, remaining economic useful life and estimated residual value thereof
to the Owner-Trustee immediately prior to such Alteration assuming that the
Facility was then in the condition required to be maintained by the terms of
this Lease. At the Owner-Trustee's request, the Lessee will remove any readily
removable Alterations under this paragraph prior to the end of the Term at the
Lessee's sole cost and expense.
(ii) The Lessee, at its own expense shall have the right to erect, alter
or abandon structures, improvements, personal property, ramps, ditches,
roadways, drainage and sanitary systems, supply lines for materials and
utilities on the Site Lease Property, to grant licenses, rights, and easements
respecting the same and otherwise to affect the Site Lease Property in any
manner which the Lessee shall deem necessary or advisable for the operation of
the Facility or the Site Lease Property as originally erected or from time to
time altered by the Lessee; PROVIDED that there shall be no interference with or
impairment of the operation of the Leased Property and no adverse effect on the
current or residual value, useful life or utility of the Leased Property
resulting therefrom, and that all such licenses, rights and easements granted
pursuant to this sentence shall be subject and subordinate to this Lease and the
Site Lease. Provided that the foregoing conditions have been met and subject to
all other provisions of this Lease, including, without limitation, maintenance
requirements, the Owner-Trustee agrees to accept such structures, improvements,
personal property, ramps, ditches, roadways, drainage and sanitary systems,
supply lines for materials and utilities thereon, in an "as-is" condition at the
time the Lessee's rights under this Lease of possession and use of the Facility
and the Site shall cease.
(f) TITLE TO PARTS. (i) Title to all Parts and Alterations incorporated
or installed in or attached to the Facility shall without further act vest in
the Owner-Trustee free and clear of all Liens (other than Permitted
Encumbrances) and shall be deemed to constitute a part of the Facility and be
subject to this Lease in the following cases:
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(A) such Part or Alteration is in replacement of or in substitution
for, and not in addition to, any Part constituting a part of the Facility
at the time of the acceptance thereof hereunder or any such original part;
(B) such Part or Alteration is required to be incorporated or
installed in or attached to the Facility pursuant to the terms of
paragraphs (a), (c) or (d) of this Section; or
(C) such Part or Alteration cannot be readily removed from the
Facility without (1) impairing the continuing operation of the Facility in
accordance with its original functional purpose, (2) materially damaging
the Facility, or (3) materially diminishing the value of the Facility or
diminishing the utility, condition, remaining economic useful life or
estimated residual value, below the value, utility, condition, remaining
economic useful life and estimated residual value thereof immediately prior
to such removal, assuming that the Facility was then in the condition
required to be maintained by the terms of this Lease and (except in the
case of a Part or Alteration referred to in clause (A) or (B) above) such
Part had not been added, or such Alteration made, to the Facility.
(ii) Title to any other Parts and Alterations shall remain with the Lessee
and such Parts and Alterations shall not be deemed to constitute part of the
Facility in determining either the fair market sales value or the fair market
rental value of the Facility; PROVIDED, HOWEVER, that any such part which is not
removed by the Lessee prior to the termination of this Lease shall become the
property of the Owner-Trustee.
(g) OPTION TO PURCHASE ADDITIONAL PARTS AND OPTIONAL ALTERATIONS. The
Owner-Trustee shall have the option upon the expiry or earlier termination of
the Term hereunder to purchase any right, title or interest of the Lessee (to
the extent that such right, title or interest is transferable) in and to any
Part that remains the property of the Lessee pursuant to Section 8(f)(ii) for
the fair market sales value thereof as of such date. The Owner-Trustee shall
give the Lessee written notice at least 60 days prior to the expiry or earlier
termination of the Term as to its election to exercise the purchase option
provided for in the preceding sentence; PROVIDED HOWEVER, that if the Lease is
terminated due to the occurrence of an Event of Default hereunder, only 15 days
prior written notice prior to the return of the Leased Property shall be
required.
(h) REPORTS OF ALTERATIONS. On or before the date each property report
is delivered by the Lessee to the Owner-Trustee pursuant to Section 18(d) and on
the date on which the Term of this Lease expires, by limitation or otherwise,
the Lessee shall furnish the Owner-Trustee with a report describing in
reasonable detail all Alterations to the Facility of the character referred to
in this Section 8 involving, in any case, a cost to the Lessee in excess of
$200,000 for any one Alteration, or $500,000 in the aggregate for all
Alterations, which have been made during the period from the Closing Date in the
case of the first such report, or during the period from the last previous
report, in the case of all subsequent reports.
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(i) OTHER PARTIES NOT OBLIGATED TO MAINTAIN OR REPAIR. The
Owner-Trustee, the Indenture Trustee and each Participant shall not under any
circumstances be required to make any repairs, replacements, Alterations or
renewals of any nature or description to the Leased Property, make any
expenditure whatsoever in connection with this Lease or maintain the Leased
Property in any way. The Lessee waives any right to (i) require the
Owner-Trustee, the Indenture Trustee or any Participant to maintain or repair
all or any part of the Facility or (ii) make repairs at the expense of the
Owner-Trustee, the Indenture Trustee or any Participant pursuant to any
Applicable Law, contract, agreement, or covenant, condition or restriction in
effect at any time during the Term.
SECTION 9. LOCATION AND USE; NO ASSIGNMENT BY LESSEE.
(a) LOCATION AND USE. (i) The Lessee agrees that the Facility will be
used solely in the conduct of its business and solely by qualified personnel and
will at all times be and remain in the exclusive possession and control of the
Lessee at the Site, PROVIDED that the Lessee may deliver possession of any part
or portion of the Facility to any manufacturer, contractor or supplier
designated by the Lessee for purposes of realizing the benefits of any warranty
or in order to comply with the obligations and rights of the Lessee under
Section 8, but the rights of any such party in possession of such part or
portion of the Facility shall be subject and subordinate to the terms of this
Lease, including without limitation, the right of the Owner-Trustee to take
possession of the Facility pursuant to Section 15. In the event that pursuant
to the foregoing sentence hereof any part or portion of the Facility having a
value in excess of 1% of the then Casualty Value is removed from Clallam County,
Washington, the Lessee shall give the Owner-Trustee not less than 30 days' prior
written notice of such removal and shall deliver to the Owner-Trustee promptly
after such removal, and in any event within 10 days thereafter, the opinion of
the Lessee's counsel that such removal shall not impair or adversely affect the
ownership of such part or portion of the Facility by the Owner-Trustee, that all
necessary recordings and filings under Applicable Law have been duly made in the
public offices wherein such recordings or filings are necessary to protect the
validity and effectiveness of this Lease and the Indenture (including the
maintenance of the perfection of security interest thereof in the removed part
or portion) and that all fees, taxes and charges payable in connection therewith
have been paid in full by the Lessee. The Lessee shall not change the use of
the Leased Property as a sawmill without the Owner-Trustee's prior, written
consent. The Lessee will not do or permit any act or thing that may impair the
value of the Leased Property or any part thereof or that materially increases
the dangers, or poses an unreasonable risk of harm, to third parties (on or off
the Leased Property) arising from activities thereon, or that constitutes a
public or private nuisance or waste to the Leased Property or any part thereof.
The Lessee agrees that it will not use the Leased Property if it has failed to
procure or maintain insurance to the extent required by Section 7 herein.
(ii) The Lessee agrees that the Leased Property will at all times be
maintained, used and operated under and in compliance in all material respects
with all Applicable Laws (other than CERCLA) and in all respects with CERCLA;
PROVIDED, HOWEVER, that the Lessee may contest the application of any such rule,
regulation or order in good faith and by appropriate proceedings, but only so
long as such proceedings do not involve any danger of criminal liability or a
material danger of civil liability of the Owner-Trustee, the Indenture Trustee
or any Participant, or a
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material danger of the sale, forfeiture or loss of the Leased Property, any
portion thereof or any interest of the Owner-Trustee, the Indenture Trustee or
any Participant therein. The Lessee and the Leased Property shall comply in all
material respects with all applicable Environmental Laws and the Lessee shall
obtain and maintain in good standing all Governmental Approvals required for the
operations of the Facility by any applicable Environmental Law. The Lessee
shall not (A) own or operate on the Site any (1) underground storage tank, (2)
material amounts of asbestos containing building material, or (3) landfill or
dump, (B) use, generate, treat, store or dispose of Hazardous Materials at or on
the Site in quantities materially greater than that which is customary for
operations similar to those of the Lessee at the Site, or (C) conduct any
activity on the Site or use the Leased Property in any manner (1) which would
cause the Leased Property to become a hazardous waste treatment, storage or
disposal facility within the meaning of, or otherwise bring the Leased Property
within the ambit of, RCRA or any similar state law or local ordinance, (2) so as
to cause a Release or threat of Release of any Hazardous Material from or at the
Site, to cause the Site to become a site on or nominated for the National
Priority List promulgated pursuant to CERCLA or any state priority list
promulgated pursuant to any similar state law, or otherwise to bring the Leased
Property within the ambit of, CERCLA, or any similar state law or local
ordinance or any other Environmental Law or (3) so as to cause a discharge of
pollutants or effluents into any water source or system, or the discharge into
the air of any emissions, which would require a permit under the Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251 ET SEQ., or the Clean Air Act, 42
U.S.C. Sections 741, ET SEQ., or any similar state law or local ordinance,
unless such a permit shall be in full force and effect and such discharge shall
be in full compliance therewith. At its sole expense (but without thereby
waiving any claims it may have against third parties), the Lessee 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 Site in accordance with any applicable Environmental Law and any
order or directive from a Governmental Authority having jurisdiction, except to
the extent the Lessee is diligently contesting any applicable Environmental Law
or any order or directive from a Governmental Authority, so long as such contest
is in good faith and by appropriate proceedings, but only so long as reserves
deemed by the Lessee to be adequate are maintained and such proceedings do not
involve any danger of criminal liability or a material danger of civil liability
of the Owner-Trustee, the Indenture Trustee or any Participant, or a material
danger of the sale, forfeiture or loss of the Leased Property, any portion
thereof or any interest of the Owner-Trustee, the Indenture Trustee or any
Participant therein.
(b) NO ASSIGNMENT BY LESSEE; PERMITTED SUBLEASES. The Lessee agrees
that, without the prior written consent of the Owner-Trustee and the Indenture
Trustee, the Lessee will not assign, transfer (except a transfer in accordance
with Section 6.4 or Section 6.5) or sublease its right in respect of the Leased
Property under this Lease, or permit its rights or interest hereunder to be
subject to any Lien other than Permitted Encumbrances. Any sublease consented
to by the Owner-Trustee and the Indenture Trustee pursuant to the foregoing
sentence shall be subject to the conditions that (i) the sublessee shall agree
in writing to comply with all of the terms and provisions of this Lease during
the period of said sublease, (ii) the rights of any person who receives
possession of the Leased Property shall be subject and subordinate to all the
terms of this Lease, (iii) such sublease shall be expressly subject and
subordinate to the terms of this Lease, including, without limitation, all of
the Owner-Trustee's rights pursuant to Section 15,
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(iv) no such sublease shall extend beyond the remaining Term of this Lease, and
(v) such sublease shall expressly prohibit by its terms any sublease by the
sublessee thereunder. No assignment or sublease of any of the rights of the
Lessee hereunder shall relieve the Lessee of any of its obligations, liabilities
or duties hereunder which shall be and remain those of a principal and not a
guarantor.
SECTION 10. LIENS.
The Lessee agrees that it will keep the Leased Property free and clear of
any and all Liens other than Permitted Encumbrances. Lessee shall promptly, at
its own expense, take such action as may be necessary to duly discharge any such
Lien if the same shall arise at any time.
SECTION 11. OWNERSHIP AND MARKING.
(a) OWNERSHIP. The Lessee acknowledges and agrees that it does not and
will not have or obtain any title to the Facility, nor any property right or
interest, legal or equitable, therein except its right and interest as lessee
hereunder and subject to all the terms hereof. The Lessee understands and
acknowledges that the Facility is owned by the Owner-Trustee, and mortgaged to
the Indenture Trustee pursuant to the Indenture.
(b) FACILITY PERSONAL PROPERTY. It is the intent of the parties hereto
that the Facility shall be and remain personal property notwithstanding the
manner in which the Facility may be attached or affixed to realty. Further, the
Lessee and the Owner-Trustee agree that the Facility shall for purposes of the
laws of the State of Washington be personal property and not real property. The
Lessee covenants and warrants that it will take no action which would cause the
Facility to become real property or fixtures under Applicable Law. In the event
that, notwithstanding the foregoing, a court of competent jurisdiction shall
make a final determination that some part or portion of the Facility constitutes
real property under Applicable Law, then this Lease shall be deemed to be and
shall be construed as a divisible and severable contract between the
Owner-Trustee and the Lessee for the leasing of, respectively, (i) the part or
portion of the Facility so determined to constitute real property under
Applicable Law and (ii) the remainder of the Facility, all to the same extent
and with the same force and effect as though a separate lease had been entered
into by the Owner-Trustee and the Lessee in respect of the part or portion of
the Facility so determined to constitute real property and the remainder of the
Facility, and the amount of each installment of Rent payable in respect of the
part or portion of the Facility so determined to constitute real property shall
bear the same relationship to the aggregate amount of such installment of Rent
as the cost to the Owner-Trustee of such part or portion of the Facility so
determined to constitute real property shall bear to the Adjusted Facility Cost.
There shall be no merger of this Facility Lease nor of the leasehold estate
created hereby with any other estate in the Facility or the Site, or any part
thereof, by reason of the fact that the same Person may acquire or own such
estates, directly or indirectly.
(c) MARKING. The Lessee shall promptly cause each major component of the
Facility (such components being identified in Exhibit A hereto) to be plainly,
permanently and
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conspicuously marked by stenciling or by a metal tag or plate affixed thereto,
setting forth the following legend:
THIS FACILITY IS OWNED BY WILMINGTON TRUST COMPANY AS OWNER-TRUSTEE
UNDER CROWN PACIFIC TRUST NO. 98-1, IS LEASED BY SAID OWNER-TRUSTEE TO
CROWN PACIFIC LIMITED PARTNERSHIP, AND IS SUBJECT TO A SECURITY
INTEREST GRANTED TO FIRST SECURITY BANK, NATIONAL ASSOCIATION, AS
INDENTURE TRUSTEE.
The Lessee covenants and agrees to replace any stenciling, tag or plate and sign
or marker which may be removed or destroyed or become illegible and to indemnify
each Indemnified Party against any liability, loss or expense incurred by any of
them as a result of the failure to maintain such markings.
SECTION 12. DISCLAIMER OF WARRANTIES; NET LEASE.
(a) DISCLAIMER OF WARRANTIES. Without waiving any claim the Lessee or
the Owner-Trustee may have against any seller, supplier or manufacturer, the
Lessee acknowledges and agrees that (i) the Leased Property is of a design,
capacity and manufacture selected by the Lessee, (ii) the Lessee is satisfied
that the Leased Property is suitable for its purposes, (iii) the Owner-Trustee
is not a manufacturer nor a dealer in property of such kind, (iv) the Leased
Property is leased hereunder subject to the rights of any parties in possession
of the Site and the state of the title to the Site and the rights of ownership
in the Site at the time the Leased Property becomes subject to this Lease and to
all applicable zoning regulations, restrictions, laws and ordinances, building
restrictions, and other laws and governmental regulations now in effect or
hereafter adopted and in the state and condition of every part thereof when the
same first becomes subject to this Lease, without representation or warranty of
any kind by the Owner-Trustee, and (v) THE OWNER-TRUSTEE LEASES THE LEASED
PROPERTY AS-IS WITHOUT WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED AS
TO (A) THE FITNESS FOR ANY PARTICULAR PURPOSE OR MERCHANTABILITY OR DESIGN OR
QUALITY OF THE LEASED PROPERTY, (B) THE ABSENCE OF ANY INFRINGEMENT OF ANY
PATENT, TRADEMARK OR COPYRIGHT, (C) THE OWNER-TRUSTEE'S TITLE THERETO OR
INTEREST THEREIN, (D) THE LESSEE'S RIGHT TO THE QUIET ENJOYMENT THEREOF, OR (E)
ANY OTHER MATTER WHATSOEVER. It is agreed that, as between the Indemnified
Parties and the Lessee, all risks incident to the matters discussed in the
preceding sentence are to be borne by the Lessee. The provisions of this
Section 12 have been negotiated by the Owner-Trustee and the Lessee and are
intended to be a complete exclusion and negation of any representations or
warranties of the Indemnified Parties, express or implied, with respect to the
Leased Property that may arise pursuant to any law now or hereafter in effect,
or otherwise.
(b) NET LEASE; NON-TERMINABILITY. (i) This Lease is a net lease, and it
is intended that the Lessee shall pay all costs and expenses of every character,
whether seen or unforeseen, ordinary or extraordinary or structural or
non-structural, in connection with the use, operation, maintenance, repair and
reconstruction of the Leased Property by the Lessee, including the costs and
expenses particularly set forth in this Lease. The Rent which the Lessee is
obligated to pay
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shall be paid without notice or demand and without set-off (other than with
respect to Periodic Site Rent as expressly provided in Section 4(b)),
counterclaim, abatement, suspension, deduction or defense.
(ii) Except as otherwise expressly provided, this Lease shall not
terminate, nor shall the Lessee have any right to terminate this Lease or be
entitled to abatement, suspension, deferment or reduction of any Rent which the
Lessee is obligated to pay hereunder, nor shall the obligations hereunder of the
Lessee be affected, by reason of (A) any defect in the condition,
merchantability, design, construction, operation, durability, quality or fitness
for use of the Leased Property or any portion thereof or the failure of the
Leased Property to comply with all Applicable Laws, including any inability to
use the Leased Property by reason of such non-compliance; (B) any defect in
title or rights to the Leased Property, or the existence of any Liens with
respect to the Leased Property or any part thereof; (C) any damage to, removal,
abandonment, salvage, loss, theft, contamination of, scrapping or destruction of
the Leased Property or any portion thereof; (D) the taking of the Leased
Property or any portion thereof by condemnation, confiscation, requisition,
eminent domain or otherwise; (E) any prohibition, limitation, restriction,
prevention, interruption, cessation or curtailment of or interference with any
use or possession of the Leased Property or any portion thereof, or any eviction
by paramount title or otherwise; (F) the termination or loss of the
Owner-Trustee's interest under the Site Lease or any other lease, sublease,
right-of-way, easement or other interest in personal or real property upon or to
which any portion of the Leased Property is located, attached or appurtenant or
in connection with which any portion of the Leased Property is used or which
otherwise affects or may affect the Owner-Trustee's ownership of or right to use
the Leased Property or any portion thereof; (G) the inadequacy or incorrectness
of the description of any portion of the Leased Property or the failure of this
Lease to demise to the Lessee the Leased Property or any portion thereof; (H)
the Lessee's acquisition or ownership of all or any part of the Leased Property
otherwise than pursuant to an express provision of this Lease; (I) any change,
waiver, extension, indulgence or other action or omission or breach in respect
of any obligation or liability of or by the Owner-Trustee, the Indenture Trustee
or any Participant; (J) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceedings relating to the
Lessee, the Owner-Trustee, the Indenture Trustee, any Participant or any other
Person, or any action taken with respect to this Lease by any trustee or
receiver of the Lessee, the Owner-Trustee, the Indenture Trustee, any
Participant or any other Person, or by any court in any such proceeding; (K) any
set-off, counterclaim, recoupment, defense or other right or claim that the
Lessee has or might have against any Person, including without limitation the
Owner-Trustee, the Indenture Trustee, any Participant or any vendor,
manufacturer, contractor of or for the Leased Property for any reason
whatsoever; (L) any failure on the part of the Owner-Trustee or any other Person
to perform or comply with any of the terms of this Lease, of any other Operative
Agreement or of any other agreement or any breach of any representation or
warranty of, or any act or omission of the Lessee, the Owner-Trustee, the
Indenture Trustee or any Participant under this Lease or any of the other
Operative Agreements, or any claims, rights or remedies occurring or arising as
a result of any other business dealings between or among the Lessee and any of
the Owner-Trustee, the Indenture Trustee and any Participant; (M) any invalidity
or unenforceability or illegality or disaffirmance of this Lease against or by
the Lessee or any provision hereof or any of the other Operative Agreements or
any provision of any thereof or any lack of right, power or authority of the
Lessee the Owner-Trustee,
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the Indenture Trustee or any Participant to enter into any Operative Agreement
or any of the transactions contemplated thereby; (N) the impossibility or
illegality of performance by the Lessee, the Owner-Trustee, the Indenture
Trustee, any Participant or any of them; (O) any action by any court,
administrative agency or other Governmental Authority; or (P) any other cause or
circumstances whether similar or dissimilar to the foregoing and whether or not
the Lessee shall have notice or knowledge of any of the foregoing, it being the
intention of the parties hereto that the obligations of the Lessee shall be
absolute and unconditional and shall be separate and independent covenants and
agreements and shall continue unaffected unless and until the covenants have
been terminated pursuant to an express provision of this Lease.
Each Rent payment made pursuant to this Lease by Lessee shall be final and
Lessee will not seek to recover all or any part of such payment from the
Owner-Trustee, the Indenture Trustee or any Participant for any reason
whatsoever. If for any reason whatsoever this Lease shall be terminated in
whole or in part by operation of law or otherwise except as specifically
provided herein or as otherwise agreed, Lessee nonetheless agrees to pay to the
Owner-Trustee or to whomsoever shall be entitled thereto, an amount equal to
each Rent payment at the time such payment would have become due and payable in
accordance with the terms hereof had this Lease not been terminated in whole or
in part. The obligation of Lessee in the immediately preceding sentence shall
survive the expiration or termination of this Lease other than in accordance
with its terms. Nothing contained in this Section 12(b) shall be construed to
otherwise limit the right of Lessee to make any claim it might have against the
Owner-Trustee or any other Person or to pursue such claim in such manner as
Lessee shall deem appropriate.
The Lessee covenants that it will remain obligated under this Lease in
accordance with its terms and will take no action to terminate, rescind or avoid
this Lease, notwithstanding the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting the Owner-Trustee or the Owner Participant or any assignee
of the Owner-Trustee or the Owner Participant or any other action with respect
to this Lease which may be taken in any such proceeding by any trustee or
receiver of the Owner-Trustee or of any assignee of the Owner-Trustee or by any
court or any of the foregoing actions which may be taken by or against any of
the Owner-Trustee's predecessors in interest in the Facility.
Except as expressly provided herein, the Lessee waives all rights now or
hereafter conferred by law (y) to quit, terminate, rescind or surrender this
Lease or the Leased Property or any part thereof, or (z) to any abatement,
suspension, deferment, return or reduction of the Rent.
SECTION 13. CASUALTY OCCURRENCES; CONDEMNATION; EARLY TERMINATION; ETC.
(a) CASUALTY OCCURRENCE. In the event of a Casualty Occurrence, the
Lessee shall promptly and fully inform the Owner-Trustee and the Indenture
Trustee in writing in regard thereto and shall, on the Casualty Termination
Date, pay the Owner-Trustee an amount equal to the sum of (i) the Casualty Value
of the Facility determined as of the Casualty Termination Date, (ii) if the
Casualty Termination Date is a Rent Payment Date, the Periodic Rent (other than
Periodic Rent payable "in advance" on such date) and the Periodic Site Rent due
on the Casualty Termination Date, and (iii) all other Supplemental Rent then
due. Notwithstanding such
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Casualty Occurrence, the Lessee's obligation to pay Rent hereunder due and
payable as to the Facility on or prior to the payment date of such Casualty
Value shall continue. Upon receipt by the Owner-Trustee of such payments and
all other sums then due and payable by the Lessee under this Lease and the other
Operative Agreements, this Lease shall terminate, and the Owner-Trustee will
transfer to the Lessee all the Owner-Trustee's right, title and interest, if
any, in and to the Leased Property on an "as-is", "where-is" basis, without
recourse or warranty, express or implied, except for a warranty against Lessor's
Liens attributable to the Owner-Trustee or Wilmington Trust Company.
(b) CERTAIN GOVERNMENT REQUISITIONS. In the event that during the Term
the use of the Leased Property is requisitioned or taken by any Governmental
Authority under the power of eminent domain or otherwise under circumstances
which do not constitute a Casualty Occurrence in respect thereof, the Lessee's
duty to pay Periodic Rent, Periodic Site Rent and Supplemental Rent shall
continue for the duration of such requisition or taking. Unless a Default or
Event of Default shall have occurred and be continuing, the Lessee shall be
entitled to receive and retain for its own account all sums payable for any such
period by such Governmental Authority as compensation for requisition or taking
of possession. If a Default or Event of Default shall have occurred and be
continuing, the Lessee shall be deemed to the extent of any such compensation so
received to be the agent of the Owner-Trustee in collecting and receiving the
same and shall segregate and hold in trust and promptly remit any such
compensation so received to the Owner-Trustee for crediting against any sums
then due and owing hereunder to the Owner-Trustee, its successors and assigns.
(c) APPLICATION OF PAYMENTS WITH RESPECT TO A CASUALTY OCCURRENCE. The
Owner-Trustee shall receive the entire amount payable by any Governmental
Authority or instrumentality or agency thereof or other Person with respect to a
Casualty Occurrence (other than proceeds of insurance maintained by the Lessee,
the application of which shall be governed by Section 7 hereof). Such amount,
after deducting all expenses, including attorneys' fees, incurred by the
Owner-Trustee in or as a result of such condemnation proceedings shall be
applied promptly as follows: so much of such payments as shall not exceed the
Casualty Value required to be paid by the Lessee pursuant to Section 13 shall be
applied in reduction of the Lessee's obligation to pay such Casualty Value, if
not already paid by the Lessee, or, if already paid by the Lessee and no Default
or Event of Default exists, shall be applied to reimburse the Lessee for its
payment of such Casualty Value. The balance, if any, of such payments shall be
retained by the Owner-Trustee.
(d) EARLY TERMINATION. So long as no Default or Event of Default shall
have occurred and be continuing, the Lessee may, upon not less than 180 days'
prior written notice to the Owner-Trustee (which notice shall not be revocable
without the consent of the Owner Participant), terminate this Lease as of
January 2, 2006 (or, if earlier, the date referred to in clause (ii) of the
second paragraph of Section 8(d)) or as of any succeeding Rent Payment Date if
the Facility, in the good faith judgment of the Lessee as determined by the
Board of Control, shall have become uneconomic, obsolete or surplus to the needs
of the Lessee so as to be no longer useful in the conduct of Lessee's business.
Such written notice shall designate the date on which termination is to become
effective (the "TERMINATION DATE") and shall be accompanied by a certified copy
of the resolutions of the Board of Control making such determination and by an
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Officer's Certificate of the Lessee setting forth the determination that the
Facility has become uneconomic, obsolete or surplus to the needs of Lessee and a
statement in reasonable detail of the basis for such determination. For the
purposes of this Section 13(d), interest rates payable by the Lessee on its
indebtedness for borrowed money or finance charges payable by the Lessee in
connection with the acquisition of its equipment under conditional sale
contracts, leases or other arrangements for deferred payment shall be
disregarded in the determination of any right of termination provided herein.
Following the giving of such notice, the Lessee, as agent for the Owner-Trustee,
shall dispose of the Facility and transfer all of the Owner-Trustee's right,
title and interest in and to the Site Lease on the Termination Date for the best
price obtainable unless the Owner Participant shall notify the Lessee that it
elects to retain ownership of the Facility in accordance with and to the extent
permitted by the last paragraph of this Section 13(d), PROVIDED that no such
disposition shall be to the Lessee or any Affiliate of the Lessee. The Lessee
shall certify to the Owner-Trustee in writing the amount of each bid so received
and the name and address of the party submitting such bid promptly upon receipt
thereof. The Owner-Trustee may obtain bids, but shall be under no duty to
solicit bids, inquire into the efforts of the Lessee to obtain bids or otherwise
take any action in connection with arranging such dispositions. Prior to such
disposition and after such termination, the Facility shall not be used by the
Lessee or any Affiliate of the Lessee.
Any disposition pursuant to this Section 13(d) shall be on an "as-is",
"where-is" basis, without recourse, representation or warranty, express or
implied, except for a warranty against Lessor's Liens attributable to the
Owner-Trustee or Wilmington Trust Company. In disposing of the Facility, the
Lessee shall take such action as the Owner-Trustee shall reasonably request to
terminate any contingent liability which the Owner-Trustee or the Owner
Participant might have arising out of such disposition. The Lessee shall remain
liable under all provisions of this Lease (other than its obligation to pay
Periodic Rent and Periodic Site Rent for the period after the Rent Payment Date
as of which Termination Value is determined) as if this Lease were in full force
and effect, until such time as the Facility shall have been disposed of in
accordance with the provisions of this Section 13(d). If, on the Termination
Date, (x) the Owner Participant shall not have elected to retain the Facility,
(y) the Facility shall have not been sold pursuant to and in accordance with the
provisions of this Section 13(d) or (z) the Lessee does not make all payments
required pursuant to and in accordance with the provisions of this
Section 13(d), Lessee's notice of termination shall be deemed to be withdrawn as
of such date and this Lease shall continue in full force and effect with respect
to the Facility and the Lessee shall pay the reasonable costs, expenses and
liabilities incurred by the Owner-Trustee, the Indenture Trustee and the
Participants as a result of Lessee's having given such notice of termination.
Any proceeds from the disposition of the Facility pursuant to this
Section 13(d) shall be paid to and retained by the Owner-Trustee (or, so long as
the Secured Indebtedness shall not have been fully paid and satisfied, the
Indenture Trustee). In the case of a disposition of the Facility pursuant to
this Section 13(d), on the Termination Date, the Lessee shall pay to the
Owner-Trustee (or, so long as the Secured Indebtedness shall not have been fully
paid and satisfied, the Indenture Trustee) (i) all payments of Periodic Rent
(other than Periodic Rent payable "in advance" on the Termination Date) and
Periodic Site Rent through and including the Termination Date, (ii) the excess,
if any, of (A) the Termination Value of the Facility as of the Termination Date,
over (B) the net cash proceeds from the disposition of the Facility pursuant to
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this Section 13(d) (after the deduction of all costs and expenses of the Lessee,
the Owner-Trustee, the Indenture Trustee and the Participants that have not been
previously paid by the Lessee in connection with such disposition) received by
the Owner-Trustee (or, so long as the Secured Indebtedness shall not have been
fully paid and satisfied, the Indenture Trustee) and the Persons entitled
thereto, (iii) an amount equal to the Make-Whole Amount, if any, in respect of
the principal amount of the Series A Notes to be prepaid in accordance with
Section 2.10(b) of the Indenture and (iv) all other sums then due and payable by
the Lessee under this Lease and the other Operative Agreements. Any amount of
such net proceeds in excess of such payments by the Lessee shall be retained by
the Owner-Trustee or the Indenture Trustee, as the case may be.
Owner-Trustee may, at any time prior to 45 days prior to the Termination
Date, give written notice to Lessee and the Indenture Trustee that Owner-Trustee
elects irrevocably to terminate this Lease with respect to the Facility on the
Termination Date. On the Termination Date the Owner Participant shall pay to
the Indenture Trustee sufficient funds to enable Owner-Trustee to pay in full
the aggregate unpaid principal amount of all Series A Notes then outstanding,
together with accrued interest thereon to such Termination Date, plus Make-Whole
Amount, if any, thereon and all other sums due and payable on such Termination
Date to the holders of the Series A Notes under the Operative Agreements other
than the Series B Notes (but without relieving Lessee of its obligations to make
all payments of Supplemental Rent owed by Lessee in connection therewith under
the last sentence of Section 4(c)). Effective on full payment to the Indenture
Trustee of all the foregoing amounts and on Lessee's full payment of the
installment of Periodic Rent (other than Periodic Rent payable "in advance" on
the Termination Date) and Periodic Site Rent due on such Termination Date plus
all other amounts of Rent due on or prior to such Termination Date including,
without limitation, Supplemental Rent in the amount of the Make-Whole Amount, if
any, due to the Indenture Trustee under the preceding sentence, this Lease shall
terminate; PROVIDED that this Lease, notwithstanding anything else to the
contrary contained herein, shall continue in full force and effect unless such
amounts are paid in full. If, after giving an irrevocable notice, the Owner
Participant fails to make the required payment on the Termination Date, the
Owner-Trustee shall have no further rights to make the election provided for
under this paragraph.
SECTION 14. ASSIGNMENT BY OWNER-TRUSTEE.
(a) RIGHT TO ASSIGN. This Lease and all rent and all other sums due or
to become due hereunder may be assigned as collateral in whole or in part by the
Owner-Trustee without the consent of the Lessee, but the Lessee shall be under
no obligation to any assignee of the Owner-Trustee (other than the Indenture
Trustee) except upon written notice of such assignment from the Owner-Trustee.
Upon notice to the Lessee of any such assignment, the rent and other sums
payable by the Lessee which are the subject matter of the assignment shall be
paid to or upon the written order of the assignee. Such notice is hereby given
of the assignment of this Lease and certain of the Rent and other sums due and
to become due to the Indenture Trustee under and pursuant to the Indenture, and
the Lessee agrees to make all payments of Rent hereunder in accordance with the
provisions of Section 4.
(b) OBLIGATION AND RIGHT OF ASSIGNEE. Any assignee pursuant to this
Section 14 shall not be obligated to perform any duty, covenant or condition
required to be performed by the
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Owner-Trustee under any of the terms hereof, but on the contrary, the Lessee and
the Owner-Trustee by their respective executions hereof each acknowledge and
agree that notwithstanding any such assignment each and all of such duties,
covenants or conditions required to be performed by the Owner-Trustee shall
survive any such assignment and shall be and remain the sole liability of the
Owner-Trustee. Without limiting the foregoing, the Lessee acknowledges and
agrees that the rights of such assignee in and to the Rent shall not be subject
to any abatement whatsoever, and shall not be subject to any defense, setoff,
counterclaim or recoupment or reduction of any kind for any reason whatsoever
whether by reason of failure of or defect in the Owner-Trustee's title or any
interruption from whatsoever cause in the use, operation or possession of the
Leased Property or any part thereof or any damage to or loss or destruction of
the Leased Property or any part thereof or by reason of any other indebtedness
or liability, howsoever and whenever arising, of the Owner-Trustee or of any
other Person to the Lessee or to any other Person, or for any cause whatsoever,
it being the intent hereof that the Lessee shall be unconditionally and
absolutely obligated to pay such assignee all of the Rent, subject only to the
provisions of the Indenture relating to Excepted Property.
(c) AMENDMENTS; EXERCISE OF REMEDIES. Unless and until the Lessee shall
have received written notice from the Indenture Trustee that the Lien of the
Indenture has been released (i) no amendment or modification of, or waiver by or
consent or approval of the Owner-Trustee in respect of, any of the provisions of
this Lease shall be effective unless the Indenture Trustee shall have joined in
such amendment, modification, waiver or consent or shall have given its prior
written consent thereto, and (ii) except as otherwise provided in the Indenture,
the Indenture Trustee shall have the sole right to exercise all rights,
privileges and remedies and to make elections, demands or the like and to take
any other discretionary action (either in its own name or in the name of the
Owner-Trustee for the use and benefit of the Indenture Trustee) which by the
terms of this Lease or by Applicable Law are permitted or provided to be
exercised by the Owner-Trustee.
SECTION 15. DEFAULTS.
(a) EVENTS OF DEFAULT. The following events shall constitute Events of
Default (whether any such event shall be voluntary or involuntary or come about
or be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) The Lessee shall default in the payment when due of any
installment of Periodic Rent or of Periodic Site Rent or of any Casualty
Value or Termination Value payable pursuant to Section 13 or Early Purchase
Price payable pursuant to Section 19 and such default shall continue for a
period of five Business Days; or
(ii) The Lessee shall default in the payment of any Supplemental
Rent (other than Casualty Value, Termination Value or Early Purchase Price)
and such default shall continue for a period of five Business Days after
written notice thereof shall have been received by the Lessee; or
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(iii) The Lessee shall default in the observance or performance of
any covenant required to be observed or performed by the Lessee under
Section 6.2 through Section 6.6, both inclusive, or Section 10 (which in
the case of a default under Section 10 shall have been continuing for a
period of five Business Days) shall default in the maintenance of the
insurance coverage required by Section 7 or shall make or permit any
unauthorized assignment or transfer of this Lease, or of the Lessee's
interest in the Leased Property, or any portion thereof; or
(iv) The Lessee shall default in the observance or performance of
any other covenant required to be observed or performed by the Lessee
hereunder or under any other Lessee Agreement (except the Other Facility
Lease) and such default shall continue for more than 30 days after the
earlier of (A) the day on which the Lessee first obtains knowledge of such
default, or (B) the day on which written notice thereof shall have been
received by the Lessee, or such longer period, not to exceed 90 days, as
may be necessary to cure any such default that can be cured within such
period, so long as the Lessee is diligently proceeding to cure such default
and such default does not involve any material danger of the sale,
forfeiture or loss of any part of the Leased Property; or
(v) Any representation or warranty made by the Lessee herein or
in any other Lessee Agreement (except the Other Facility Lease and Tax
Indemnity Agreement) or in any statement or certificate furnished by the
Lessee to the Owner-Trustee or the Indenture Trustee or any Participant in
connection with the transactions contemplated by the Operative Agreements
or furnished by the Lessee pursuant hereto proves untrue in any material
respect as of the date of issuance or making thereof; or
(vi) Final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 is or are outstanding against the
Lessee or any Restricted Subsidiary (each as defined in Section 6.12) 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
(vii) 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 or Current Debt (each as
defined in Section 6.12) of the Lessee 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
(viii) 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 Lessee 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
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(ix) A custodian, liquidator, trustee, receiver or similar
official is appointed for the Lessee 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
(x) The Lessee, any Restricted Subsidiary or the General Partner
becomes insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors, or the
Lessee or any Restricted Subsidiary or the General Partner applies for or
consents to the appointment of a custodian, liquidator, trustee, receiver
or similar official for the Lessee, such Restricted Subsidiary or the
General Partner or for the major part of the Property of any of them; or
(xi) 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 Lessee, any Restricted Subsidiary or the General Partner and, if
instituted against the Lessee, any Restricted Subsidiary or the General
Partner, are consented to or are not dismissed within 60 days after such
institution; or
(xii) The Lessee, or any Person on behalf of the Lessee, shall
contest or deny the validity or enforceability of this Lease or the other
Lessee Agreements or its obligations hereunder or thereunder; or
(xiii) An order or decree requiring a split-up or divestiture of the
Lessee is outstanding against the Lessee and such order or decree remains
unstayed and in effect for more than 30 consecutive days; or
(xiv) An Event of Default under the Other Facility Lease shall have
occurred and be continuing.
(b) REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter so long as the same shall be continuing, the Owner-Trustee may,
at its option, declare this Lease to be in default by a written notice to the
Lessee (provided that no such written notice shall be required with respect to
any Event of Default under Section 15(a)(ix), (x) or (xi)) and at any time
thereafter, so long as the Lessee shall not have remedied all outstanding Events
of Default, the Owner-Trustee may do one or more of the following as the
Owner-Trustee in its sole discretion shall elect, to the extent permitted by,
and subject to compliance with any mandatory requirements of, Applicable Law
then in effect:
(i) the Owner-Trustee may proceed by appropriate court action or
actions, either at law or in equity, to enforce performance by the Lessee
of the applicable covenants and terms of this Lease or to recover damages
for the breach thereof;
(ii) the Owner-Trustee may terminate this Lease, and, whether or
not this Lease has been so terminated, enter upon the Site and take
immediate possession of the Facility and the Site and remove all or any
part of the Facility by summary proceedings or otherwise, all without
liability to the Lessee for or by reason of such entry or taking of
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possession, whether for the restoration of damage to property caused by
such taking or otherwise;
(iii) the Owner-Trustee may sell the Facility and its interest in
the Site Lease Property or any part thereof at public or private sale, as
the Owner-Trustee may determine, free and clear of any rights of the Lessee
and without any duty to account to the Lessee with respect to such sale or
for the proceeds thereof (except to the extent required by paragraph (vi)
below if the Owner-Trustee elects to exercise its rights under said
paragraph), in which event the Lessee's obligation to pay Periodic Rent and
Periodic Site Rent hereunder for the period commencing on the date of such
sale shall terminate (except to the extent that Periodic Rent or Periodic
Site Rent, as the case may be, is to be included in computations under
paragraph (v) or paragraph (vi) below if the Owner-Trustee elects to
exercise its rights under either of said paragraphs);
(iv) the Owner-Trustee may hold, keep idle or lease to others the
Leased Property or any part thereof, as the Owner-Trustee 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 proceeds with respect thereto, except that the Lessee's
obligation to pay Periodic Rent and Periodic Site Rent for the period
commencing when the Lessee shall have been deprived of possession pursuant
to this Section 15 shall be reduced by the net proceeds, if any, received
by the Owner-Trustee from leasing the Leased Property or such part to any
person other than the Lessee for any period during the Term;
(v) whether or not the Owner-Trustee shall have exercised, or
shall thereafter at any time exercise, any of its rights under paragraph
(i), (ii), (iii) or (iv) above, the Owner-Trustee, by written notice to the
Lessee specifying a payment date which shall be not earlier than 10 days
after the date of such notice, may demand that the Lessee pay to the
Owner-Trustee, and the Lessee shall pay to the Owner-Trustee, on the
payment date specified in such notice, as liquidated damages for loss of a
bargain and not as a penalty (in lieu of the Periodic Rent and Periodic
Site Rent due after the Rent Payment Date coinciding with or immediately
preceding the payment date specified in such notice), any unpaid Periodic
Rent and Periodic Site Rent and any and all unpaid Supplemental Rent due
hereunder before or during the exercise of remedies hereunder, including,
without limitation, all legal fees and other costs and expenses incurred by
the Owner-Trustee, the Indenture Trustee or any Participant by reason of
the occurrence of any Event of Default or the exercise of remedies with
respect thereto, plus whichever of the following amounts the Owner-Trustee,
in its sole discretion, shall specify in such notice (together with
interest on such amount at the Late Rate from the payment date specified in
such notice to the date of actual payment): (A) an amount equal to the
excess, if any, of the Casualty Value (plus interest at the Specified Rate
on such Casualty Value from the Rent Payment Date as of which such Casualty
Value was calculated to the payment date specified in such notice) computed
as of the Rent Payment Date coinciding with or immediately preceding the
payment date specified in such notice, over the fair market rental value
(computed as hereafter in this Section provided) of the Facility for the
remainder of the then current Term after discounting such fair market
rental value to present worth as of
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the payment date specified in such notice at a discount rate equal to the
Specified Rate in effect on the date of such notice, compounded
semiannually on the Rent Payment Dates; or (B) an amount equal to the
excess, if any, of the Casualty Value (plus interest at the Specified Rate
on such Casualty Value from the Rent Payment Date as of which such Casualty
Value was calculated) computed as of the payment date specified in such
notice over the fair market sales value of the Facility (computed as
hereafter in this Section provided) as of the payment date specified in
such notice;
(vi) if the Owner-Trustee shall have sold the Facility and its
interest in the Site Lease Property pursuant to paragraph (iii) above, the
Owner-Trustee, in lieu of exercising its rights under paragraph (v) above,
may, if it shall so elect, demand that the Lessee pay to the Owner-Trustee,
and the Lessee shall pay to the Owner-Trustee, as liquidated damages for
loss of a bargain and not as a penalty, any unpaid Periodic Rent and
Periodic Site Rent due for periods up to and including the Rent Payment
Date next following the date of such sale and any and all unpaid
Supplemental Rent due hereunder before or during the exercise of remedies
hereunder, including, without limitation, all legal fees and other costs
and expenses incurred by the Owner-Trustee, the Indenture Trustee or any
Participant by reason of the occurrence of any Event of Default or the
exercise of remedies with respect thereto, plus the amount of any
deficiency between the net proceeds of such sale and the Casualty Value of
the Facility, computed as of the Rent Payment Date next following the date
of such sale, together with interest at the Late Rate on the amount of such
deficiency from the Rent Payment Date as of which such Casualty Value is
computed until the date of actual payment;
(vii) In lieu of exercising its rights under paragraph (v) above,
the Owner-Trustee may by notice to the Lessee require the Lessee to pay on
demand to the Owner-Trustee, and the Lessee hereby agrees that it will so
pay to the Owner-Trustee, as liquidated damages for loss of a bargain and
not as a penalty (in lieu of the Periodic Rent and Periodic Site Rent due
after the Rent Payment Date next succeeding the date of such notice) any
unpaid Periodic Rent and Periodic Site Rent due for all periods up to and
including the Rent Payment Date next succeeding the date of such notice and
any and all unpaid Supplemental Rent due hereunder before or during the
exercise of remedies hereunder, including, without limitation, all legal
fees and other costs and expenses incurred by the Owner-Trustee, the
Indenture Trustee or any Participant by reason of the occurrence of any
Event of Default or the exercise of remedies with respect thereto, plus an
amount equal to Casualty Value computed as of the Rent Payment Date next
succeeding the date of such notice (or if such date is a Rent Payment Date,
then computed as of such Rent Payment Date), together with interest, to the
extent permitted by law, at the Late Rate on such amount of Casualty Value
from the date as of which such Casualty Value was computed to the date of
actual payment; and upon such payment of liquidated damages and the payment
of all other Rent then due hereunder, the Owner-Trustee shall assign and
transfer the Facility and its interest in the Site Lease Property to
Lessee, as-is, where-is, without recourse or warranty, express or implied,
except for a warranty against Lessor's Liens attributable to the
Owner-Trustee or Wilmington Trust Company, and the Owner-Trustee shall
execute and deliver such documents evidencing such assignment and transfer
as the Lessee shall reasonably request. In addition, promptly after the
Lessee
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makes the payment of Casualty Value as aforesaid, the fair market sales
value of the Facility as of the date of which Casualty Value was determined
will be determined. If the fair market sales value of the Facility as of
such date is determined to exceed the Casualty Value paid pursuant to the
first sentence of this paragraph (vii), the Lessee shall, within 30 days
after such determination, pay the amount of such excess to the
Owner-Trustee; and
(viii) the Owner-Trustee may exercise any other right or remedy
which may be available to it under Applicable Law.
In addition, the Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Rent due hereunder before or during the exercise
of any of the foregoing remedies and for all legal fees and other costs and
expenses incurred by the Owner-Trustee, the Indenture Trustee or any Participant
by reason of the occurrence of any Event of Default or the exercise of the
Owner-Trustee's remedies with respect thereto, including all costs and expenses
incurred in connection with the surrender of the Leased Property or redelivery
of the Facility in accordance with Section 16 hereof or in placing the Leased
Property in the condition required by said Section and any premium payable on
the Series A Notes. For the purpose of paragraphs (v) and (vii) above, the
"FAIR MARKET RENTAL VALUE" or the "FAIR MARKET SALES VALUE" of the Leased
Property shall mean such value as determined by the Owner-Trustee. Such fair
market sales value and such fair market rental value shall be determined on the
basis specified in Section 19, except that the assumptions set forth in clause
(i) of Section 19(a) shall not be made (unless the Facility is still located at
the Site, in which case the then remaining Site Lease Term shall be considered),
but such determination shall instead be made on an "as-is, where-is" basis,
taking into account the actual condition and location of the Facility. At any
sale pursuant to this Section, any Participant may bid for and purchase the
Facility and the Owner-Trustee's interest in the Site Lease Property. To the
extent permitted by Applicable Law, the Lessee hereby waives any rights now or
hereafter conferred by statute or otherwise which may require the Owner-Trustee
to sell, lease or otherwise use the Leased Property in mitigation of the
Lessee's damages as set forth in this Section or which may otherwise limit or
modify any of the Owner-Trustee's rights and remedies in this Section.
SECTION 16. RETURN OF FACILITY TO OWNER-TRUSTEE.
(a) SURRENDER AT SITE. Except in the event that the Facility shall be
sold to a third party pursuant to Section 13 or the Lessee shall purchase the
Facility pursuant to Section 19, the Lessee will at its own expense surrender
possession of the Leased Property to the Owner-Trustee at the Site at the end of
the Term hereof.
At the time of such surrender,
(i) the Lessee shall also surrender to the Owner-Trustee one copy
of the Plans and all other logs, catalogs, software, documents,
instruments, plans, maps, surveys, blueprints, as built diagrams,
specifications, manuals, technical drawings and other materials relating to
the Leased Property and the Technology;
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(ii) all lines, hoses, ducts and other similar items which are
part of the Facility shall be air, steam or fluid tight, as the case may
be;
(iii) each Ordinary Wear Part shall be returned with a remaining
useful life of at least 50% of its original useful life;
(iv) all equipment which is part of the Facility shall be properly
lubricated and all surfaces and components shall be properly coated with a
protective coating from the elements;
(v) the Leased Property shall be free from all Liens except those
for which the Owner-Trustee or the Owner Participant is responsible under
Section 7 of the Participation Agreement, Liens described in clause (g) of
the definition of "Permitted Encumbrances" and the exceptions to title
described in Schedule B to the Title Policy issued on the Closing Date to
the Owner-Trustee;
(vi) the Facility shall be immediately capable of being operated
at the Site by an operator other than the Lessee or any Affiliate of the
Lessee without the need for any Alterations;
(vii) the Facility shall be in compliance in all material respects
with all then existing Applicable Laws governing its use, operation and
sale;
(viii) any Hazardous Materials, other than those used in the normal
operation of the Facility and used and stored in compliance with
Environmental Laws, shall have been removed from the Leased Property by a
licensed waste disposal firm, provided that upon the written request of the
Owner-Trustee, the Lessee shall also remove Hazardous Materials used in the
normal operation of the Facility which have been used and stored in
compliance with Environmental Laws to the extent that such Hazardous
Materials are not salable; and
(ix) the Leased Property shall be in at least the operating
condition required by the terms hereof, including, without limitation, the
provisions of Section 8(a).
(b) ENGINEER'S REPORT. Not less than 90 days and not more than 180 days
prior to the last day of the Term (or the date on which the Facility is
otherwise returned to the Owner-Trustee), the Lessee shall provide to the
Owner-Trustee an inspection report prepared by a qualified independent engineer
selected by the Lessee and reasonably satisfactory to the Owner-Trustee
certifying whether or not the Facility is (i) in good working order,
(ii) capable of performing substantially at the original manufacturer's
performance specifications at the time the Facility was originally designed and
(iii) capable of performing at its Design Capacity. In the event that such
report indicates that the Facility does not satisfy the requirements of clause
(i), (ii) or (iii) of the preceding sentence, the Owner-Trustee may elect either
(A) to deem that the Leased Property is not returned until the earlier of
(1) the date on which the Facility is properly repaired to satisfy such
requirements and (2) one year after the last day of the Term, in which case the
Lessee shall continue to be obligated under all the terms and conditions of this
Lease
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(including without limitation the provisions relating to insurance,
indemnification and risk of loss), except that, other than set forth in
Section 16(e) below, the Lessee shall not be required to pay Periodic Rent and
Periodic Site Rent after the expiration of the Basic Term or any Renewal Term,
as the case may be, but the Lessee shall pay to the Owner-Trustee as liquidated
damages, and not as a penalty, for the failure of the Lessee to return the
Leased Property to the Owner-Trustee at the expiration of the Term as required
by the provisions of this Section 16, an amount equal to 120% of the daily
equivalent of (y) the arithmetic average of the Periodic Rent during the Basic
Term, or (z) if the failure to return occurs after a Renewal Term, the
arithmetic average of the Periodic Rent during such Renewal Term, or (B) to
terminate this Lease, in which case the Lessee shall pay to the Owner-Trustee
the Termination Value. If the Owner-Trustee elects the option specified in
clause (A) above and the Facility has not been properly repaired one year after
the last day of the Term, the Lessee shall pay to the Owner-Trustee the
Termination Value for the Facility and title to the Facility shall vest in the
Lessee upon such payment.
(c) ENVIRONMENTAL REPORT. Not less than 90 days and not more than 180
days prior to the last day of the Term (or the date on which the Facility is
otherwise returned to the Owner-Trustee), the Lessee shall provide to the
Owner-Trustee an inspection report prepared by a reputable environmental
consulting firm selected by the Owner-Trustee certifying whether or not the Site
and the Facility are in compliance with CERCLA and in all material respects with
all other then existing Environmental Laws. In the event that such report
indicates that the Site or the Facility is not in compliance with all then
existing Environmental Laws, the Owner-Trustee may elect either (A) to deem that
the Leased Property is not returned until the earlier of (1) the date on which
the Site and the Facility are in compliance with all then existing Environmental
Laws and (2) one year after the last day of the Term, in which case the Lessee
shall continue to be obligated under all the terms and conditions of this Lease
(including without limitation the provisions relating to insurance,
indemnification and risk of loss), except that, other than set forth in
Section 16(e) below, the Lessee shall not be required to pay Periodic Rent and
Periodic Site Rent after the expiration of the Basic Term or any Renewal Term,
as the case may be, but the Lessee shall pay to the Owner-Trustee as liquidated
damages, and not as a penalty, for the failure of the Lessee to return the
Leased Property to the Owner-Trustee at the expiration of the Term as required
by the provisions of this Section 16, an amount equal to 120% of the daily
equivalent of (y) the arithmetic average of the Periodic Rent during the Basic
Term, or (z) if the failure to return occurs after a Renewal Term, the
arithmetic average of the Periodic Rent during such Renewal Term, or (B) to
terminate this Lease, in which case the Lessee shall pay to the Owner-Trustee
the Termination Value for the Facility and title to this Facility shall vest in
the Lessee upon such payment. If the Owner-Trustee elects the option specified
in clause (A) above and the Facility has not been properly repaired one year
after the last day of the Term, the Lessee shall pay to the Owner-Trustee the
Termination Value for the Facility.
(d) STORAGE. Following the surrender of the Facility as provided in
Section 16(a) above, the Lessee agrees to store the Facility at the Site in the
condition requested by the Owner-Trustee at the risk and expense of the Lessee
for a period of one year. The Owner-Trustee may during the storage period
obtain bids for purchase of the Facility on an "as-is", "where is" a basis, and
at its sole option, may elect to accept or reject any such bids for the
Facility. The Lessee shall continue to be obligated under all the terms and
conditions of this Lease (including without limitation the provisions relating
to insurance, indemnification and risk of loss) during the
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storage period set forth above, except that, other than set forth in
Section 16(e) below, the Lessee shall not be required to pay Periodic Rent and
Periodic Site Rent after the expiration of the Basic Term or any Renewal Term,
as the case may be. Neither the Lessee nor any Affiliate shall be entitled to
use the Facility during such period.
SECTION 17. [INTENTIONALLY LEFT BLANK].
SECTION 18. FINANCIAL STATEMENTS AND REPORTS; INSPECTION AND CERTIFICATES.
(a) REPORTS AND RIGHTS OF INSPECTION. The Lessee will keep, and will
cause each Subsidiary to keep, proper books of record and account in which full
and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Lessee or such Subsidiary, in
accordance with GAAP consistently applied (except for changes disclosed in the
financial statements furnished to the Owner-Trustee, the Indenture Trustee and
each Participant pursuant to this Section 18(a) and concurred in by the
independent public accountants referred to in Section 18(a)(ii) hereof), and
will furnish to the Owner-Trustee, the Indenture Trustee and each Participant
(in duplicate if so specified below or otherwise requested), and in the case of
the financial statements delivered pursuant to Section 18(a)(ii), to the
Securities Valuation Office, National Association of Insurance Commissioners,
195 Broadway, Suite 1903, New York, New York 10007:
(i) 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:
(A) consolidated balance sheets of the Lessee 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
(B) consolidated statements of income and cash flows of
the Lessee 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 Lessee;
(ii) ANNUAL STATEMENTS. As soon as available and in any event
within 120 days after the close of each fiscal year of the Lessee,
duplicate copies of:
(A) consolidated balance sheets of the Lessee and its
Restricted Subsidiaries as of the close of such fiscal year, and
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(B) consolidated statements of income and cash flows of
the Lessee 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 Lessee 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 Lessee 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;
(iii) SEC AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Lessee to all holders of Equity Interests in the
Lessee generally and of each regular or periodic report, and any
registration statement or prospectus filed by the Lessee, 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 Lessee or any of its Subsidiaries is a party,
issued by any governmental agency, Federal or state, having jurisdiction
over the Lessee or any of its Subsidiaries, other than reports or licenses
granted by any such governmental agency with respect to the timber;
(iv) NOTICE OF DEFAULT OR CLAIMED DEFAULT. Immediately upon
becoming aware of the existence of a Default or an Event of Default or that
the Owner-Trustee has given notice or taken any other action with respect
to an Event of Default or a claimed default under this Lease, or a default
in the payment of the principal, premium, if any, sinking fund or interest
with respect to indebtedness for borrowed money, or an event of default
with respect to any indebtedness for borrowed money or in the instrument
under which such indebtedness is outstanding permitting the holders thereof
to accelerate the maturity thereof, a written notice specifying the nature
of the Default, Event of Default, default or claimed default and any such
notice given or action taken by the Owner-Trustee and what action the
Lessee is taking or proposes to take with respect thereto;
(v) 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 Lessee 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 PBGC with respect
thereto: (A) a Reportable Event with respect to any employee benefit plan;
(B) the institution of any steps by the Lessee, any ERISA Affiliate, the
PBGC or any other Person to terminate any employee benefit plan pursuant to
Sections 4041(c) or 4042 of ERISA; (C) the institution of any steps by the
Lessee 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 Lessee and its
Restricted Subsidiaries taken as a whole; (D) a "prohibited transaction"
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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 Lessee and its Restricted
Subsidiaries, taken as a whole; or (E) any increase in the liability of the
Lessee 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 Lessee and its Restricted
Subsidiaries, taken as a whole; and
(vi) NOTICE OF LITIGATION. Prompt written notice, and in any
event within five Business Days after the Lessee first obtains knowledge
thereof, with respect to the institution of any suit or proceeding against
the Lessee 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 financial condition of the Lessee or any Restricted
Subsidiary.
(vii) INFORMATION IN RESPECT OF DAMAGES AND TAXES. Such
information and data as the Owner-Trustee, the Indenture Trustee or any
Participant may from time to time request as to location and the existence
and status of any claims for damages (whether against the Leased Property
or against the Owner-Trustee or the Lessee) arising out of the use,
operation or condition of the Leased Property, the taxes of the nature
provided to be paid by the Lessee under Section 6 of the Participation
Agreement which have been assessed and the amount of such taxes paid, and
such other data pertinent to the Leased Property and the condition, use,
repair and operation thereof as any such party from time to time may
reasonably request. Without limiting the foregoing, the Lessee agrees
that, without any such request, it will furnish the Owner-Trustee, the
Indenture Trustee and each Participant with prompt written notice of (A)
any claim for damages arising out of the use, operation or condition of the
Leased Property if the amount of such claim exceeds $500,000 and (B) any
damage, loss, theft or destruction, partial or complete, of any of the
Leased Property, if the amount thereof exceeds $500,000; and
(viii) REQUESTED INFORMATION. With reasonable promptness, such
other data and information as the Owner-Trustee, the Indenture Trustee or
any Participant may reasonably request including, without limitation, any
information required to be provided to such Note Purchaser or a prospective
purchaser of the Series A Notes by Rule 144A(d)(4) under the Securities
Act.
(b) OFFICER'S CERTIFICATES. Within the periods provided in
Sections 18(a)(i) and 18(a)(ii), the Lessee shall deliver to the Owner-Trustee,
the Indenture Trustee and each Participant a certificate signed by the chief
financial officer of the Lessee stating that such officer has reviewed the
provisions of this Lease and the other Operative Agreements and setting forth:
(i) the information and computations (in sufficient detail) required in order to
establish whether the Lessee was in compliance with the requirements of
Section 6.2 through Section 6.6, inclusive, at the end of the period covered by
the financial statements then being furnished (including with respect to
Section 6.5(a)(ii) and Section 6.6, a certification as to the application of any
Net Proceeds (as defined in Section 6.12) 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)
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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 Lessee is taking and proposes to take with respect thereto.
(c) ACCOUNTANT'S CERTIFICATES. Within the period provided in
Section 18(a)(ii), the Lessee shall deliver to the Owner-Trustee, the Indenture
Trustee and each Participant a letter, addressed to the Owner-Trustee, the
Indenture Trustee and each Participant, of the accountants who render an opinion
with respect to such financial statements, stating that they have reviewed this
Lease and stating further that nothing came to their attention that caused them
to believe that the Lessee was not in compliance with any of the provisions of
Section 6.2 through Section 6.6, inclusive, 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 the Lessee with any of the terms or
provisions of this Lease.
(d) PROPERTY REPORT. Each set of financial statements of the Lessee
delivered pursuant to Section 18(a)(ii) will be accompanied by a report of an
officer of the Lessee familiar with the status and condition of the Leased
Property which describes the status, condition and location of the Leased
Property, describing any repair to the Facility having a cost exceeding
$500,000, any warranty claim in an amount exceeding $250,000 against any
supplier of goods or services in connection with the Leased Property, any period
of 45 or more consecutive days during which the Facility was not in operation
and any material violation of governmental rules or regulations involving the
Facility or the operation thereof, in each case during the period since the
previous report (or, in the case of the first such report, since the date of
this Lease), and describing the circumstances thereof, and stating whether any
Leased Property is then in the condition required by this Lease and, if not,
what the Lessee is doing or intends to do in connection therewith.
(e) INSPECTION. Without limiting the foregoing, the Lessee will permit
the Owner-Trustee, the Indenture Trustee and each Participant (or such Persons
as the Owner-Trustee, the Indenture Trustee or such Participant may designate)
to visit and inspect the Leased Property and any of the other Properties of the
Lessee or any Restricted 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 Lessee authorizes said accountants to discuss with the Owner-Trustee, the
Indenture Trustee, such Participant or such Person so designated the finances
and affairs of the Lessee and its Subsidiaries with or without an officer or
employee of the Lessee 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, the Owner-Trustee, the Indenture Trustee and such Participant shall
give the Lessee at least 10 days' prior written notice of any such visit. The
Lessee shall not be required to pay or reimburse the Owner-Trustee, the
Indenture Trustee or such Participant for expenses which it may incur in
connection with any such visitation or inspection except in the case of any such
visitation or
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inspection which shall occur while a Default or Event of Default shall have
occurred and shall be continuing.
SECTION 19. OPTIONS TO RENEW AND PURCHASE.
(a) DETERMINATION OF FAIR MARKET SALES VALUE AND FAIR MARKET RENTAL
VALUE. Not more than 18 months nor less than 14 months prior to the expiration
of the Basic Term and any Renewal Term, the Lessee may notify the Owner-Trustee
in writing that the Lessee desires a determination of the fair market sales
value of the Facility as of the end of such Term and the fair market rental
value of the Facility for a permitted Renewal Term, as specified in
Section 19(c), commencing upon the expiration of the then current Term and the
fair market sales value of the Facility as of the end of such Renewal Term.
Thereafter, the Owner-Trustee and the Lessee shall consult for the purpose of
determining such fair market sales values and fair market rental value and any
values agreed upon in writing shall constitute such fair market sales values and
fair market rental value. If the Owner-Trustee and the Lessee fail to agree
upon such values within 90 days after the Lessee's notice pursuant to the first
sentence of this paragraph, the Lessee may request that such values be
determined by the Appraisal Procedure. Such fair market sales values and fair
market rental value shall be determined on the basis of the value which would
obtain in an arm's-length transaction between an informed and willing buyer-user
or lessee (other than a lessee currently in possession) and an informed and
willing seller or lessor under no compulsion to sell, buy or lease. Any such
determination shall be made (i) on the assumption that the Facility has been
installed at the site of the purchaser or lessee with no expense being borne by
such purchaser or lessee for costs of removal, storage, transportation or
reinstallation of the Facility at such site, and that the Facility is in the
condition and state of repair required by this Lease, and, in the case of fair
market rental value, shall give effect to the then remaining Site Lease Term,
(ii) as respects fair market rental value, on the basis of a lease having terms
and conditions (other than Rent) similar to the terms and conditions of this
Lease, and (iii) giving effect to the removal of any Parts and Alterations which
remain the property of the Lessee under the provisions of Section 8 hereof. The
Lessee's request for a determination of fair market values shall not obligate
the Lessee to exercise any of the options provided in this Section 19. All
costs and expenses of any Appraisal Procedure pursuant to this Section 19 shall
be borne by the Lessee.
(b) END OF TERM OPTIONS TO PURCHASE. So long as no Default under clause
(ix), (x) or (xi) of Section 15(a) or Event of Default has occurred and is
continuing, the Lessee shall have the right on the date of the expiration of the
Basic Term to purchase the Facility at a price equal to the fair market sales
value determined as of the end of such Basic Term pursuant to Section 19(a).
The Lessee shall give to the Owner-Trustee irrevocable written notice at least
one year prior to the end of the Basic Term of its election to exercise the
purchase option provided for in the preceding sentence. Payment of the purchase
price shall be made on the date of purchase at the place of payment specified in
Section 4(d) hereof in immediately available funds, against delivery of a
quitclaim deed or bill of sale transferring and assigning to the Lessee all
right, title and interest of the Owner-Trustee in and to the Facility on an
"as-is" "where-is" basis without recourse or warranty, express or implied,
except for a warranty against Lessor's Liens attributable to the Owner-Trustee
or Wilmington Trust Company. The Owner-Trustee shall not otherwise be required
to make any representation or warranty as to the condition of the Leased
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Property or any other matters. Upon expiration of each Renewal Term, so long as
no Default under clause (ix), (x) or (xi) of Section 15(a) or Event of Default
has occurred and is continuing, the Lessee shall have the right to purchase the
Facility at a price equal to the fair market sales value thereof determined as
of the end of such Renewal Term pursuant to Section 19(a). The Lessee shall
give the Owner-Trustee irrevocable written notice at least one year prior to the
end of such Renewal Term of its election to exercise the purchase option
provided for in the preceding sentence. Following such notice, the Lessee shall
purchase the Facility on the terms and conditions set forth in this
Section 19(b). In the event of any purchase of the Facility by the Lessee
pursuant to this Section 19(b), the Owner-Trustee shall, concurrently with such
purchase, transfer its right, title and interest in and to the Site Lease to the
Lessee on an "as-is" "where-is" basis without recourse or warranty, express or
implied, except for a warranty against Lessor's Liens attributable to the
Owner-Trustee or Wilmington Trust Company.
(c) END OF TERM OPTIONS TO RENEW. So long as no Default or Event of
Default shall have occurred and be continuing, and assuming that the Lease has
not been earlier terminated, the Lessee shall have the right to renew this Lease
for no more than two Renewal Terms of one year each, commencing at the
expiration of the Basic Term or the preceding Renewal Term, as the case may be.
All of the provisions of this Lease shall be applicable during each Renewal Term
except that the Casualty Values shall be determined in accordance with
Section 19(d) and Periodic Rent shall be the fair market rental value of the
Facility for such Renewal Term, determined in accordance with Section 19(a).
The Lessee shall give to the Owner-Trustee irrevocable written notice at least
one year prior to the end of the Term of its election to exercise the renewal
option provided for in this Section for a Renewal Term commencing upon the
expiration of such Term.
(d) CASUALTY VALUE DURING RENEWAL TERM. The Casualty Value as of the
commencement of each Renewal Term shall be the fair market sales value of the
Facility as of the end of the Basic Term or the preceding Renewal Term, as the
case may be (determined in accordance with Section 19(a)), and on each Casualty
Termination Date during such Renewal Term shall decline on a straight-line basis
to a value for the final Casualty Termination Date for such Renewal Term equal
to the fair market sales value of the Facility as of the end of such Renewal
Term (determined in accordance with Section 19(a)).
(e) CASUALTY OCCURRENCE. Notwithstanding any request by the Lessee for
a determination of fair market sales value pursuant to this Section 19, the
provisions of Section 13 shall continue in full force and effect until the date
of purchase and the passage of ownership of the Facility unless the Lessee shall
have exercised the option by irrevocable written notice to purchase pursuant to
Section 19(b), in which event the amount of "CASUALTY VALUE" shall equal the
greater of (i) the option purchase price and (ii) the Casualty Value which would
have applied but for the exercise of such purchase option.
(f) EARLY PURCHASE OPTION. So long as no Default or Event of Default
shall have occurred and be continuing, the Lessee may, upon not less than 90
days' prior written notice to the Owner-Trustee, elect to purchase the Facility
on the Early Purchase Date at a price equal to the Early Purchase Price. Such
written notice shall be irrevocable. On the Early Purchase Date, the Lessee
shall pay to the Owner-Trustee (or, so long as the Secured Indebtedness shall
not have
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been fully paid and satisfied, the Indenture Trustee) at the place of payment
specified in Section 4(d) hereof in immediately available funds (i) all payments
of Periodic Rent (other than Periodic Rent payable "in advance" on the Early
Purchase Date) and Periodic Site Rent through and including such Early Purchase
Date, (ii) the Early Purchase Price, (iii) an amount equal to the Make-Whole
Amount, if any, in respect of the principal amount of the Series A Notes to be
prepaid in accordance with Section 2.10(d) of the Indenture and (iv) all other
sums then due and payable by the Lessee under this Lease and the other Lessee
Agreements, against delivery of a quitclaim deed or bill of sale transferring
and assigning to the Lessee all right, title and interest of the Owner-Trustee
in and to the Facility on an "as-is" "where-is" basis without recourse or
warranty, express or implied, except for a warranty against Lessor's Liens
attributable to the Owner-Trustee or Wilmington Trust Company. The
Owner-Trustee shall not otherwise be required to make any representation or
warranty as to the condition of the Leased Property or any other matters. In
the event of any such purchase and receipt by the Owner-Trustee and the
Indenture Trustee of all of the amounts provided in this Section 19(f) the
obligation of the Lessee to pay Periodic Rent and Periodic Site Rent hereunder
shall cease and the Term shall end. In the event the Lessee exercises its
option to assume the Series A Notes in accordance with Section 12 of the
Participation Agreement, the principal amount of such Series A Notes so assumed
shall be deducted from the amounts payable by the Lessee hereunder. If, on the
Early Purchase Date, the Lessee shall fail to pay all amounts required to be
paid pursuant to this Section 19(f), Lessee's notice of early purchase shall be
deemed to be withdrawn as of such date and this Lease shall continue in full
force and effect with respect to the Facility and the Lessee shall pay the
reasonable costs, expenses and liabilities incurred by the Owner-Trustee, the
Indenture Trustee and the Participants as a result of Lessee's having given such
notice. The Lessee may elect to pay the Early Purchase Price in installments in
the amounts (subject to reduction in the case of the first installment if the
Lessee elects to assume the Series A Notes in accordance with Section 12 of the
Participation Agreement) and on the dates set forth in Schedule 4; PROVIDED
HOWEVER, if the Lessee does not elect to assume the Series A Notes in accordance
with Section 12 of the Participation Agreement, after giving effect to the
payment and application of the first installment of the Early Purchase Price the
Series A Notes shall been paid in full; PROVIDED FINALLY, that if the Lessee so
elects to pay the Early Purchase Price in installments, the Lessee (a) unless
the Lessee shall have assumed the Series A Notes in accordance with Section 12
of the Participation Agreement, shall grant the Owner-Trustee a lien and
security interest in the Leased Property pursuant to agreements satisfactory in
scope, form and substance to the Owner Participant, securing the unpaid amount
of the Early Purchase Price, (b) shall provide a letter of credit in the amount
of the unpaid Early Purchase Price, in scope, form and substance satisfactory to
the Owner Participant, issued by a bank or trust company organized under the
laws of the United States or any State thereof, the long term debt of which bank
or trust company is rated A2 by Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., and A by Moody's Investors Service, Inc., or (c) shall grant
the Owner-Trustee a lien and security interest in Property of the Lessee
reasonably acceptable to Owner Participant (other than the Leased Property)
pursuant to agreements satisfactory in scope, form and substance to the Owner
Participant, securing the unpaid amount of the Early Purchase Price. In the
event of any purchase of the Facility by the Lessee pursuant to this
Section 19(f), the Owner-Trustee shall, concurrently with such purchase,
transfer its right, title and interest in and to the Site Lease to the Lessee on
an "as-is" "where-is" basis without recourse or warranty, express or implied,
except
-56-
<PAGE>
for a warranty against Lessor's Liens attributable to the Owner-Trustee or
Wilmington Trust Company.
SECTION 20. MISCELLANEOUS.
(a) NO WAIVER. No delay or omission to exercise any right, power or
remedy accruing to the Owner-Trustee upon any breach or default by the Lessee
under this Lease shall impair any such right, power or remedy of the
Owner-Trustee, nor shall any such delay or omission be construed as a waiver of
any breach or default, or of any similar breach or default hereafter occurring;
nor shall any waiver of a single breach or default be deemed a waiver of any
subsequent breach or default. All waivers under this Lease must be in writing,
but any breach or default, once waived in writing, shall not be deemed to be
continuing for any purpose of the Operative Agreements. All remedies either
under this Lease or by law afforded to the Owner-Trustee shall be cumulative and
not alternative. Any provision of this Lease prohibited by any law now or
hereafter in effect shall be ineffective to the extent of such provision without
invalidating the remaining provisions hereof.
(b) RIGHT OF OWNER-TRUSTEE TO PERFORM. If the Lessee shall fail to
comply with the covenants herein contained, the Owner-Trustee may, but shall not
be obligated to, (i) make advances to perform the same, and (ii) enter upon the
Leased Property to perform any and all acts required by the Lessee's covenants
herein contained and to take all such action thereon as in the Owner-Trustee's
opinion may be necessary or appropriate therefor. All payments so made by the
Owner-Trustee and all costs and expenses (including without limitation,
reasonable attorneys' fees and expenses) incurred in connection therewith shall
be payable by the Lessee upon demand as additional rent hereunder, with interest
at the Late Rate. No entry shall be deemed an eviction of the Lessee or a
repossession of the Leased Property, and no such advance, performance or other
act shall be deemed to relieve the Lessee from any default hereunder.
(c) NOTICES. All communications under this Lease shall be in writing or
by facsimile and any such notice shall become effective (i) upon personal
delivery thereof, including, without limitation, by overnight mail or courier
service, (ii) upon receipt thereof, in the case of notice by United States mail,
certified or registered, postage prepaid, return receipt requested, or (iii)
upon confirmation of receipt thereof, in the case of notice by facsimile,
provided such transmission is promptly further confirmed in writing by either of
the methods set forth in clause (i) or (ii) above, in each case addressed to the
parties hereto at the following addresses as follows:
-57-
<PAGE>
If to the Owner-Trustee: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust
Administration
with a copy to the Owner Participant
If to the Lessee: CROWN PACIFIC LIMITED PARTNERSHIP
121 S.W. Morrison Street
Portland, Oregon 97204
Attention: Roger L. Krage
If to the Owner Participant: ICX CORPORATION
3 Summit Park Drive, Suite 200
Cleveland, Ohio 44131
Attention: General Counsel and
Chief Financial Officer
If to the Noteholders: At their respective addresses
for notices set forth in the
Register referred to in the
Indenture
If to the Indenture Trustee: FIRST SECURITY BANK,
NATIONAL ASSOCIATION
79 South Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Services
or at such other place as any such party may designate by notice given in
accordance with this Section. Any notice so addressed and mailed shall be
deemed to be given when so mailed.
(d) FURTHER ASSURANCES. The Lessee will at its own expense, do,
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, transfers and assurances as the Owner-Trustee or the Indenture
Trustee may reasonably request in order to protect the right, title and interest
of the Owner-Trustee hereunder or under the Site Lease or the perfection or
protection of the Lien granted by the Indenture. Without limiting the
foregoing, the Lessee agrees at its own expense to cause this Lease and all
supplements and amendments hereto, the Site Lease and all supplements and
amendments thereto and the Indenture and all supplements and amendments thereto
and all financing and continuation statements and similar notices required by
Applicable Law at all times to be kept recorded and filed in such manner and in
such places as the Owner-Trustee or the Indenture Trustee may request in order
to protect the right, title and interest of the Owner-Trustee hereunder or under
the Site Lease or to protect the rights of the Indenture Trustee under the
Indenture. No such recording or filing shall constitute an
-58-
<PAGE>
acknowledgment or implication by the Lessee that this Lease constitutes a
chattel mortgage or security agreement or creates a lien or security interest
under Applicable Law.
(e) OPINIONS OF COUNSEL. The Lessee agrees at its own expense to
furnish to the Owner-Trustee and the Indenture Trustee promptly after the
execution and delivery of any supplement and amendment hereto, promptly after
the execution and delivery of any supplement and amendment to the Site Lease and
promptly after the execution and delivery of any supplement and amendment to the
Indenture, an opinion of counsel satisfactory to the Owner-Trustee and the
Indenture Trustee (who may be independent counsel to the Lessee) stating that in
the opinion of such counsel, such supplement or amendment to this Lease or such
supplement or amendment to the Site Lease or such supplement or amendment to the
Indenture (or a financing statement, continuation statement or similar notice
thereof if and to the extent required by Applicable Law) has been properly
recorded or filed for record in all public offices in which such recording or
filing is necessary to protect the right, title and interest of the
Owner-Trustee hereunder or under the Site Lease or, as the case may be, to
perfect the Lien provided by the Indenture as a valid lien and security interest
in the Collateral.
(f) SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and shall
inure to the benefit of, and shall be enforceable by, the Owner-Trustee and the
Lessee and their respective successors and assigns.
(g) COUNTERPARTS; UNIFORM COMMERCIAL CODE. This Lease may be executed
in any number of counterparts, each counterpart constituting an original but all
together one Lease; PROVIDED, HOWEVER, that to the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code) no security interest in this Lease may be created through the transfer or
possession of any counterpart hereof other than the counterpart bearing the
receipt therefor executed by the Indenture Trustee on the signature page hereof,
which counterpart shall constitute the only "original" hereof for purposes of
the Uniform Commercial Code.
(h) GOVERNING LAW. THIS LEASE SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH
STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER
THAN SUCH STATE BUT INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.
(i) INVESTMENT OF FUNDS. The Owner-Trustee shall, upon the written
direction of the Lessee, invest and reinvest any funds from time to time held by
the Owner-Trustee which constitute proceeds of insurance held by the
Owner-Trustee pursuant to Section 7 (referred to in this paragraph as "FUNDS")
in such direct obligations of the United States of America or obligations for
which the full faith and credit of the United States is pledged to provide for
the payment of principal and interest, maturing not more than 90 days from the
date of such investment, as may be specified in any such direction. Upon any
sale or payment of any such investment, the proceeds thereof, plus any interest
received by the Owner-Trustee thereon shall be held by the Owner-Trustee as part
of the Fund from which such investment was made or
-59-
<PAGE>
application as a part of such Fund. If such proceeds (plus such interest and
earned discount) shall be less than the cost of such investment, the
Owner-Trustee will not more than three Business Days thereafter notify the
Lessee of the amount of such deficiency and the Lessee will promptly pay to the
Owner-Trustee an amount equal to such deficiency. Any payment in respect of
such deficiency shall be held and applied by the Owner-Trustee as part of the
Fund from which such investment was made. The Lessee will pay all expenses
incurred by the Owner-Trustee in connection with the purchase and sale of such
investments.
-60-
<PAGE>
IN WITNESS WHEREOF, the Owner-Trustee and the Lessee have caused this Lease
to be executed and delivered by their respective duly authorized officers, all
as of the date first above written.
[CORPORATE SEAL] WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as
Trustee under Crown Pacific Trust
No. 98-1
By
---------------------------------
Its
---------------------------------
Owner-Trustee
[CORPORATE SEAL] CROWN PACIFIC 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
-------------------------
Lessee
-61-
<PAGE>
This Facility Lease and the rentals and other sums due and to become due
hereunder have been assigned to and are subject to a security interest in favor
of FIRST SECURITY BANK, NATIONAL ASSOCIATION, as Indenture Trustee under a Trust
Indenture and Security Agreement dated as of October 15, 1998 between said
Indenture Trustee and the Owner-Trustee hereunder, as debtor. Information
concerning such security interest may be obtained from the Indenture Trustee at
its address set forth in Section 20 of this Facility Lease.
[Form of Indenture Trustee's receipt to appear only in "original"
counterpart for purposes of Section 20(g)]
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged this ____ day of ___________, 1998.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION
By
Its
--------------------------------
-62-
<PAGE>
STATE OF _______ )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
____________________ and ____________________, to me known, who declared and
acknowledged to me that they are _____________________ and __________________,
respectively, of WILMINGTON TRUST COMPANY, that as such duly authorized
officers, by and with the authority of the Board of Directors of said
corporation they signed and executed the foregoing instrument, as the free and
voluntary act and deed of said corporation, for and on behalf of said
corporation, and for the objects and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this ____
day of _______, 1998
------------------------------------
Notary Public
[SEAL]
My Commission Expires:
----------------------
-63-
<PAGE>
STATE OF OREGON )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
____________________ and ____________________, to me known, who declared and
acknowledged to me that they are ____________________ and ____________________,
respectively, of HS CORP. OF OREGON, a general partner of CROWN PACIFIC
MANAGEMENT LIMITED PARTNERSHIP, the general partner of CROWN PACIFIC LIMITED
PARTNERSHIP, that as such duly authorized officers, by and with the authority of
the Board of Directors of said corporation they signed and executed the
foregoing instrument, as the free and voluntary act and deed of said
corporation, for and on behalf of said corporation, and for the objects and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
________ day of _______, 1998.
------------------------------------
Notary Public
(SEAL)
My Commission Expires:
-------------------
-64-
<PAGE>
SCHEDULE OF PERIODIC RENT PERCENTAGES
RENT PERIODIC
PAYMENT RENT
DATE PERCENTAGE
SCHEDULE 1
(to Facility Lease (Washington))
<PAGE>
SCHEDULE OF CASUALTY VALUE
AMOUNT OF
DETERMINATION CASUALTY
DATE VALUE
SCHEDULE 2
(to Facility Lease (Washington))
<PAGE>
SCHEDULE OF TERMINATION VALUE
RENT AMOUNT OF RENT AMOUNT OF
PAYMENT TERMINATION PAYMENT TERMINATION
DATE VALUE DATE VALUE
SCHEDULE 3
(to Facility Lease (Washington))
<PAGE>
SCHEDULE OF THE EARLY PURCHASE DATE
AND EARLY PURCHASE PRICE
EARLY EARLY
PURCHASE PURCHASE
DATE PRICE
SCHEDULE 4
(to Facility Lease (Washington))
<PAGE>
FUNDED DEBT AND CAPITALIZED RENTALS
OF THE LESSEE
The Funded Debt (other than Capitalized Rentals) and Capitalized Rentals of
the Lessee as of June 30, 1998 but immediately after the funding of the 1997
Notes is as follows:
<TABLE>
<CAPTION>
Item Principal Amount ($000)
---- -----------------------
FUNDED DEBT
(other than Capitalized Rentals):
<S> <C> <C>
Working Capital Facility $ 16,500
9.78% Senior Notes $ 275,000
9.60% Senior Notes $ 25,000
8.01% Senior Notes $ 6,490
8.16% Senior Notes $ 50,000
8.21% Senior Notes $ 19,510
8.25% Senior Notes $ 15,000
Acquisition Facility $ 59,000
Purchase Price Note payable
to Trillium Corporation $ 52,500
CAPITALIZED RENTALS:
CAPITALIZED
LEASE DATE PARTY -----------
----- ---- ----- AMOUNT ($000)
-------------
NONE
</TABLE>
SCHEDULE 5
(to Facility Lease (Washington))
<PAGE>
DESCRIPTION OF MAJOR COMPONENTS
OF THE FACILITY
EXHIBIT A
(to Facility Lease (Washington))
<PAGE>
DESCRIPTION OF THE SITE
EXHIBIT C
(to Facility Lease (Washington))
<PAGE>
PRICING ASSUMPTIONS
EXHIBIT D
(to Facility Lease (Washington))
<PAGE>
LEASE SUPPLEMENT NO. 1 (WASHINGTON)
THIS LEASE SUPPLEMENT NO. 1 (WASHINGTON), dated as of
_________________________, between WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not individually but solely as trustee (the "OWNER-TRUSTEE") under
the Trust Agreement establishing Crown Pacific Trust No. 98-1 (the
"OWNER-TRUSTEE"), and CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited
partnership (the "LESSEE");
WITNESSETH:
The Owner-Trustee and the Lessee have heretofore entered into that certain
Facility Lease (Washington) dated October 30, 1998 (the "FACILITY LEASE"). The
terms used herein are used with the meanings specified in the Facility Lease).
The Facility Lease provides for the execution and delivery of a Lease
Supplement substantially in the form hereof for, among other things, the purpose
of confirming any change in Periodic Rent, Casualty Value and Termination Value.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, the Owner-Trustee and the Lessee hereby agree that:
[Schedules 1, 2, 3 and 4 to the Facility Lease, showing Periodic Rent
percentages, Casualty Values, Termination Values and Early Purchase Price,] are
hereby amended to read in full as attached hereto.
Any and all notices, requests, certificates and other instruments executed
and delivered after the execution and delivery of this Lease Supplement may
refer to the "Facility Lease (Washington) dated October 30, 1998" or the "Lease
(Washington) dated October 30, 1998" without making specific reference to this
Lease Supplement, but nevertheless all such references shall be deemed to
include this Lease Supplement unless the context shall otherwise require.
This Lease Supplement shall be construed in connection with and as part of
the Lease, and all terms, conditions and covenants contained in the Lease,
except as herein modified, shall be and remain in full force and effect.
This Lease Supplement may be executed in any number of counterparts, each
executed counterpart constituting an original but all together one and the same
instrument.
EXHIBIT E
(to Facility Lease (Washington))
<PAGE>
IN WITNESS WHEREOF, the Owner-Trustee and the Lessee have caused this Lease
Supplement to be duly executed as of the day and year first above written and to
be delivered as of the date first above written.
[SEAL] WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
under Crown Pacific Trust No. 98-1
By
----------------------------------------
Its
-----------------------------------
[SEAL] CROWN PACIFIC 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
-------------------------------
Consented to as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, as Indenture Trustee
By
Its
------------------------------------
-2-
<PAGE>
STATE OF _______ )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
_______________________ and _______________________________, to me known, who
declared and acknowledged to me that they are ______________________ and
_______________________, respectively, of WILMINGTON TRUST COMPANY, that as such
duly authorized officers, by and with the authority of the Board of Directors of
said corporation they signed and executed the foregoing instrument, as the free
and voluntary act and deed of said corporation, for and on behalf of said
corporation, and for the objects and purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this
_____ day of __________________, _____.
-----------------------------
Notary Public
(SEAL)
My commission expires:
<PAGE>
STATE OF OREGON )
) SS.:
COUNTY OF _______ )
BEFORE ME, the undersigned Notary Public, duly commissioned and qualified
in and for said County and State, personally came and appeared
________________________ and ________________________, to me known, who declared
and acknowledged to me that they are ___________________ and
___________________, respectively, of HS CORP. OF OREGON, a general partner of
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP, the general partner of CROWN
PACIFIC LIMITED PARTNERSHIP, that as such duly authorized officers, by and with
the authority of the Board of Directors of said corporation they signed and
executed the foregoing instrument, as the free and voluntary act and deed of
said corporation, for and on behalf of said corporation, and for the objects and
purposes therein set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal this ____
day of ________________________, _____.
-----------------------------
Notary Public
(SEAL)
My commission expires:
<PAGE>
SCHEDULE OF PERIODIC RENT PERCENTAGES
SCHEDULE 1
(to Lease Supplement No. 1 (Washington))
<PAGE>
SCHEDULE OF CASUALTY VALUE
SCHEDULE 2
(to Lease Supplement No. 1 (Washington))
<PAGE>
SCHEDULE OF TERMINATION VALUE
SCHEDULE 3
(to Lease Supplement No. 1 (Washington))
<PAGE>
SCHEDULE OF THE EARLY PURCHASE DATE
AND EARLY PURCHASE PRICE
SCHEDULE 4
(to Lease Supplement No. 1 (Washington))
<PAGE>
SUBORDINATION PROVISIONS APPLICABLE TO
SUBORDINATED FUNDED DEBT
(a) The indebtedness evidenced by the subordinated notes* and any renewals
or extensions thereof, shall at all times be wholly subordinate and junior in
right of payment to any and all indebtedness of the Lessee [here insert
description of indebtedness to which Subordinated Funded Debt is subordinated]
(herein called "SUPERIOR INDEBTEDNESS"), in the manner and with the force and
effect hereafter set forth:
(i) In the event of any liquidation, dissolution or winding up of
the Lessee, or of any execution, sale, receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other similar
proceeding relative to the Lessee 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;
(ii) 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 Lessee, under circumstances when the
foregoing clause (i) 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
(iii) 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 Lessee 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 (iii), the Lessee 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
Lessee 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
- ---------------------
* Or debentures or other designation as may be appropriate.
EXHIBIT F
(to Facility Lease (Washington))
<PAGE>
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 Lessee or the holders of
Superior Indebtedness, or by any noncompliance by the Lessee with any of the
terms, provisions and covenants of the subordinated notes or the agreement under
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 Lessee 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 Lessee 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 Lessee and the holders of the subordinated notes, the
obligation of the Lessee 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.
-2-
<PAGE>
EXHIBIT 99.1
CROWN PACIFIC, LTD.
CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
<PAGE>
CROWN PACIFIC, LTD.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
December 31, September 30,
1997 1998
------------ -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash $ 146 $ 199
Accounts receivable 226 226
Interest receivable 2,718 2,734
Due from affiliate 76 -
Income taxes receivable - 6
------------ -------------
Total current assets 3,166 3,165
Restricted cash 220,000 220,000
Timber and timberlands, net 9,154 9,150
Investment in limited partnership 11 9
Other assets 250 250
------------ -------------
$ 232,581 $ 232,574
------------ -------------
------------ -------------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accrued interest $ 2,669 $ 2,669
Due to affiliates - 217
Income taxes payable 570 -
------------ -------------
Total current liabilities 3,239 2,886
Deferred income taxes 6,827 6,200
Long-term debt 220,000 220,000
------------ -------------
230,066 229,086
------------ -------------
Commitments and contingent liabilities
Shareholders' equity:
Common stock, no par value, 5,000 shares
Authorized, 1,749.33 shares issued and
outstanding 20,381 20,381
Accumulated deficit (17,866) (16,893)
------------ -------------
2,515 3,488
------------ -------------
$ 232,581 $ 232,574
------------ -------------
------------ -------------
</TABLE>
1
The accompanying note is an integral part of this statement.
<PAGE>
CROWN PACIFIC, LTD.
NOTES TO CONSOLIDATED BALANCE SHEET
(UNAUDITED)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Crown Pacific, Ltd. ("CPL" or the "Company") was incorporated in the state
of Oregon on January 28, 1988. The Company's primary operations consist of
a limited and general partnership interest in Crown Pacific Partners, L.P.
(the "MLP") aggregating approximately 10.01% at December 31, 1997 and
approximately 9.9% at September 30, 1998.
The MLP is publicly held and owns and operates timberlands and related
manufacturing facilities in Oregon, Idaho, Washington, Arizona and Montana.
During 1996, the MLP completed an equity offering of an additional 9.0
million units, which effectively reduced the Company's interest from 14.81%
to 10.01%. The MLP issued additional units in January 1998 which further
diluted the Company's interest to approximately 9.9%. The ownership
interest in the MLP represents the extent of the Company's operations
and therefore the Company is considered economically dependent on the
MLP as of December 31, 1997 and September 30, 1998.
The September 30, 1998 Balance Sheet included in this Form 8-K is
unaudited and reflects the consolidated financial position of the
Company. This Balance Sheet includes all the accounts of the Company's
balance sheet but does not contain all of the information required by
generally accepted accounting principles to be included in a full set of
financial statements. The Balance Sheet as of December 31, 1997, which
is included on Form 8-K dated June 9, 1998, should be read in
conjunction with this Form 8-K. In the opinion of management, all
material adjustments necessary to present fairly the financial position
of the Company at September 30, 1998 have been included. All such
adjustments are of a normal and recurring nature and all significant
intercompany transactions have been eliminated.
2
<PAGE>
Exhibit 99.2
CROWN PACIFIC MANAGEMENT
LIMITED PARTNERSHIP
BALANCE SHEET
DECEMBER 31, 1997 AND SEPTEMBER 30, 1998
<PAGE>
CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
BALANCE SHEET
(IN THOUSANDS)
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December 31, September 30,
1997 1998
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(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 66 $ 274
Due from affiliates 818 1,234
Prepaid and other current assets 5 20
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Total current assets 889 1,528
Investment in limited partnership 1,912 1,472
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$ 2,801 $ 3,000
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LIABILITIES AND PARTNERS' EQUITY
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Current liabilities:
Accounts payable and accrued expenses $ 886 $ 1,566
Partners' equity 1,915 1,434
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Total liabilities and partners' equity $ 2,801 $ 3,000
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The accompanying note is an integral part of this statement.
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CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP
NOTE TO BALANCE SHEET
(UNAUDITED)
1. THE PARTNERSHIP
Crown Pacific Management Limited Partnership (the "Partnership") is a
Delaware limited partnership that was formed August 12, 1994 to become the
managing general partner of Crown Pacific Partners, L.P. (the "MLP"). The
MLP is a limited partnership that owns and operates timberlands and related
manufacturing facilities in Oregon, Idaho, Washington, Arizona and Montana.
The Partnership manages the businesses of the MLP and owns a 0.99% general
partner interest in the MLP. The Partnership also owns a 1% general
partnership interest in Crown Pacific Limited Partnership (the "Operating
Partnership"), a subsidiary of the MLP. The operations of the Operating
Partnership represent the majority of the MLP's operations. The ownership
interests in these limited partnerships represents the extent of the
Partnership's operations and therefore the Partnership is considered to be
economically dependent on the MLP as of December 31, 1997 and September 30,
1998. The general partners of the Partnership are Fremont Timber, Inc. and
HS Corp. of Oregon.
The September 30, 1998 balance sheet included in this Form 8-K is
unaudited and reflects the financial position of the Partnership. This
balance sheet includes all the accounts of the Partnership's balance
sheet but does not contain all the information required by generally
accepted accounting principles to be included in a full set of financial
statements. The balance sheet as of December 31, 1997, which is included
on Form 8-K dated June 9, 1998, should be read in conjunction with this
Form 8-K. In the opinion of management, all material adjustments
necessary to present fairly the September 30, 1998 balance sheet have
been included. All such adjustments are of a normal and recurring nature
and all significant intercompany transactions have been eliminated.
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