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<SEC-DOCUMENT>0000891020-97-000379.txt : 19970327
<SEC-HEADER>0000891020-97-000379.hdr.sgml : 19970327
ACCESSION NUMBER: 0000891020-97-000379
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 6
CONFORMED PERIOD OF REPORT: 19961231
FILED AS OF DATE: 19970321
DATE AS OF CHANGE: 19970326
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PLUM CREEK TIMBER CO L P
CENTRAL INDEX KEY: 0000849213
STANDARD INDUSTRIAL CLASSIFICATION: 2400
IRS NUMBER: 911443693
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10239
FILM NUMBER: 97560969
BUSINESS ADDRESS:
STREET 1: 999 THIRD AVE
CITY: SEATTLE
STATE: WA
ZIP: 98104
BUSINESS PHONE: 2064673600
MAIL ADDRESS:
STREET 1: 999 THIRD AVENUE
CITY: SEATTLE
STATE: WA
ZIP: 98104-4096
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K FOR THE FISCAL YEAR ENDED 12/31/96
<TEXT>
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10239
PLUM CREEK TIMBER COMPANY, L.P.
(Exact name of registrant as specified in its charter)
999 Third Avenue, Seattle, Washington 98104-4096
Telephone: (206) 467-3600
Organized in the State of Delaware I.R.S. Employer Identification No.
91-1443693
Securities registered pursuant to Section 12(b) of the Act:
Depositary Units, Representing Limited Partner Interests
The above securities are registered on the New York Stock Exchange.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant'S knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Units held by non-affiliates based on the closing
sales price on February 28, 1997 was approximately $1,317,059,696. For this
calculation, all executive officers and directors have been deemed affiliates.
Such determination should not be deemed an admission that such executive
officers and directors are, in fact, affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: None.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Plum Creek Timber Company, L.P. (the "Partnership"), a Delaware limited
partnership organized in 1989, Plum Creek Manufacturing, L.P. ("Manufacturing"),
and Plum Creek Marketing, Inc. ("Marketing"), own, manage, and operate
approximately 2.4 million acres of timberland and twelve wood products
conversion facilities in the northwest and southeast United States. The
Partnership owns 98 percent of Manufacturing, and 96 percent of Marketing. Plum
Creek Management Company, L.P., (the "General Partner"), manages the businesses
of the Partnership, Manufacturing and Marketing and owns the remaining two
percent and four percent of Manufacturing and Marketing, respectively. As used
herein, "Company" refers to the combined entities of the Partnership,
Manufacturing and Marketing.
ACQUISITIONS AND DISPOSITION
On October 18, 1996, the Partnership acquired approximately 529,000
acres (plus approximately 9,000 leased acres) of timberland in Louisiana and
Arkansas, along with two sawmills, a plywood plant and a nursery from Riverwood
International Corporation for a total purchase price of $540 million, plus $11.9
million for working capital (the "Southern Region Acquisition"). See Financial
Condition and Liquidity and Note 2 of Notes to Combined Financial Statements.
On October 11, 1996, the Company consummated the sale to Stimson Lumber
Company ("Stimson") of 107,000 acres of timberland in Northeast Washington and
Northern Idaho and the Company's sawmill near Colville, Washington (the "Newport
Asset Sale") for approximately $141.9 million, plus $8.7 million for working
capital. The Company used the net proceeds from the Newport Asset Sale to pay a
portion of the purchase price for the Southern Region Acquisition. See Financial
Condition and Liquidity and Note 2 of Notes to Combined Financial Statements.
On November 1, 1993, the Partnership purchased approximately 865,000
acres of timberland and other timber related assets located in western Montana
(the "Montana Timberland Acquisition") from Champion International Corporation
for approximately $260 million.
SEGMENT INFORMATION
As used herein, "Resources Segment" refers to the combined timber and
land management business of the Partnership. "Manufacturing Segment" refers to
the combined business of Manufacturing and Marketing. Certain financial
information for each business segment is included in Note 13 of Notes to
Combined Financial Statements.
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<PAGE> 3
RESOURCES SEGMENT
GENERAL. The Partnership owns and manages approximately 2.4 million
acres of timberland in the northwest and southeast United States (the
"Timberlands"). The Timberlands are geographically segregated into three
regions: the Cascades Region in western Washington, the Rocky Mountain Region in
western Montana and northern Idaho, and the Southern Region in Louisiana and
Arkansas. At December 31, 1996, the Timberlands contained an estimated timber
inventory of 8.9 billion board feet ("BBF") of standing timber in the Cascades
and Rocky Mountain Regions (the "Northwest Timberlands") and approximately 5.4
million Cunits in the Southern Region (the"Southern Timberlands").
The Resources Segment grows and harvests timber for sale in export and
domestic markets and sells, on an opportunistic basis, land which is designated
as having a higher and better use than for forest management.
The Cascades Region consists of approximately 311,000 acres of
timberland containing an estimated 2.1 BBF of standing timber. Logs harvested in
the Cascades Region are sold for export to Pacific Rim countries, principally
Japan, and to domestic mills owned by third parties, as the Company does not own
mills in the Cascades Region. Logs sold for export are generally of higher
quality than logs sold into the domestic market.
The Rocky Mountain Region consists of approximately 1,593,000 acres of
timberland containing an estimated 6.8 BBF of standing timber. The Rocky
Mountain Region sells logs to the Manufacturing Segment, with the remainder sold
to third-party domestic mills. Simultaneously with the Montana Timberland
Acquisition, the Partnership entered into a log sourcing agreement with Stimson
to supply Stimson's Montana mills with logs, at prevailing market prices, over a
ten year period ending in 2003.
The Southern Region consists of approximately 538,000 acres (including
9,000 acres of leased land) containing an estimated 5.4 million Cunits of
standing timber. The Southern Timberlands are nearing the end of a process
commenced in 1972 of conversion from unmanaged second growth timber into
plantation forests. The Partnership expects this process to be completed by
approximately 2000. The pine fiber growth from these plantations is expected to
increase substantially over the next 10 to 15 years as a result of this
conversion. The Southern Region sells sawlogs to the Manufacturing Segment and
to third-party domestic mills and sells pulp logs to third-party domestic pulp
and paper manufacturers. As part of the Southern Region Acquisition, the
Partnership entered into a long-term agreement to supply pulp wood fiber to
Riverwood International's West Monroe paperboard plant at prevailing market
prices. The Partnership expects that the agreement will provide the Company with
a secure market for its local mill residuals and a substantial portion of the
pine and hardwood pulp logs harvested from the Southern Timberlands.
DOMESTIC LOGS. The Partnership sells its sawlogs directly to the
Manufacturing Segment and unaffiliated wood products manufacturers and sells its
pulpwood and in-woods chips to unaffiliated pulp and paper manufacturers. The
percentage of logs which are sold as sawlogs or pulp logs varies by region and
is dependent on, among other things, the species mix and quality of
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<PAGE> 4
the inventory harvested and the market dynamics affecting the given region. The
Partnership's customers include numerous operators of conversion facilities.
Domestic sawlog sales accounted for approximately 21%, 21% and 22% of the
Company's combined revenues in 1996, 1995 and 1994, respectively.
In the Cascades Region, approximately 51% of the total volume harvested
in 1996 was sold to unaffiliated domestic wood products manufacturers. The
Partnership also sold 9% of the volume harvested in 1996 to third parties as
pulp logs. Pulp logs generally constitute smaller and lower quality logs which
are not suitable for use by wood products manufacturers.
In the Rocky Mountain Region, the Partnership sells its logs
domestically, virtually all as saw timber. In 1996, approximately 57% of the
timber harvested was sold to the Manufacturing Segment and the remainder was
sold to third-party domestic mills. In addition, a small amount of lower quality
logs is sold to pulp and paper manufacturers when market conditions permit.
The fee harvest in the Southern Region during the period from October
19, 1996 through December 31, 1996 consisted of 55% pulp logs and 45% sawlogs.
Approximately 43% of the total timber harvest in the Southern Region was sold to
the Manufacturing Segment, with the remainder sold to third-party domestic
conversion facilities.
Due to the strength in the pulp and paper markets in 1995, the
Partnership implemented in- woods chipping operations in conjunction with
conventional logging operations wherever feasible, producing wood-chips from
once valueless treetops and other debris that were previously unutilized. Chip
markets are highly susceptible to fluctuations in markets for pulp and paper
because pulp and paper manufacturers are the primary customers. During the first
half of 1996, a decline in chip prices made it uneconomical to continue most of
the Partnership's in-woods chipping operations. However, operations resumed at
reduced levels in the second half of the year.
Domestic wood and fiber consuming facilities tend to purchase raw
materials within relatively confined geographic areas, generally within a
200-mile radius, due to transportation costs. Competitive factors within a
market area generally will include price, species and grade, quality, proximity
to wood consuming facilities, ability to consistently supply logs meeting the
customer's specifications and ability to meet delivery requirements. The
Partnership has a reputation as a stable and consistent supplier of
well-merchandised, high-quality logs. In domestic log markets, the Partnership
competes with numerous private land and timber owners in the northwestern and
southeastern United States and the state agencies of Arkansas, Idaho, Louisiana,
Montana, Oregon and Washington, as well as lesser amounts of foreign imports,
primarily from Chile and New Zealand. In addition, the Partnership competes with
the United States government, principally the United States Forest Service
("USFS"), the Bureau of Land Management ("BLM") and the Bureau of Indian Affairs
("BIA"). Timber supplied from public lands in Washington and Oregon is
restricted from export, and is sold solely into domestic markets.
EXPORT LOGS. Due to its extensive timber holdings, the Partnership
harvests large volumes of Douglas-fir logs, historically a preferred species in
Japan. Approximately 40% of the total 1996 timber harvest in the Cascades Region
was sold for export to Pacific Rim countries, principally
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<PAGE> 5
Japan. Douglas-fir logs sold for export have generally commanded a significant
premium over Douglas-fir sold domestically. Export log revenues accounted for
8%, 10% and 12% of combined revenues for 1996, 1995 and 1994, respectively, and
accounted for 18%, 21% and 24%, respectively, of operating income in such
periods.
The Partnership's export log customers consist of large Japanese
trading companies who resell the logs purchased to Japanese conversion
facilities or wholesalers. Competitors in this market include numerous private
land or timber owners in the United States and Canada, as well as companies and
state-controlled enterprises in Chile, New Zealand, Russia and Scandinavia, all
of which have abundant timber resources. In the export log market, the
Partnership competes based on its long- term relationships with established
customers and its reputation as a reliable supplier of premium grade logs. Other
competitive factors include price, species and grade, and the ability to meet
delivery requirements on a year-round basis.
TIMBER RESOURCE MANAGEMENT. The Partnership's resource operations
involve timber management and harvesting operations, which include road
construction and reforestation, as well as wildlife and watershed management.
The Partnership employs a number of traditional and newly developed harvesting
techniques on its lands based on site specific characteristics and other
considerations. The Partnership practices "Environmental Forestry" on the
Northwest Timberlands which attempts to better protect and maintain the
ecosystem while providing for a reasonable harvest. The Partnership also manages
the Southern Timberlands, which consist primarily of managed plantations, in a
manner consistent with its environmental stewardship approach.
Particular forestry practices vary by geographic region and depend upon
factors such as soil productivity, tree size, age and stocking. Forest stands
are thinned periodically to improve growth and stand quality until they are
harvested. The Partnership actively utilizes pre-commercial and commercial
thinning timber management practices. Pre-commercial thinning occurs when the
timber harvested is not merchantable. The Partnership believes that such
thinning improves the overall productivity of the Timberlands by enhancing the
growth of the remaining trees.
It is the Partnership's policy to ensure that every acre harvested is
promptly reforested. Based on the geographic and climatic conditions of the
harvest site, harvested areas may be regenerated naturally by leaving mature
trees to reseed the area. Natural regeneration methods are widely used on about
70% of the harvested land in the Rocky Mountain Region. During 1996, the
Partnership planted over 4 million seedlings on the Northwest Timberlands,
mostly in the Cascades Region where substantially all of the reforestation is
done by planting. Substantially all of the areas harvested in the Southern
Timberlands are regenerated with seedlings.
Forests are subject to a number of natural hazards, including damage by
fire, insects and disease. Severe weather conditions and other natural disasters
can also reduce the productivity of forest lands and can interfere with the
processing and delivery of forest products. However, damage from natural causes
is typically localized and would only affect a portion of the Timberlands at any
given time. Nevertheless, such hazards are to a large extent unpredictable and
there can be no assurance that losses will be so limited. The size, species,
diversity and checker-board ownership of the Northwest Timberlands, as well as
the Partnership's forest management practices, should help
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<PAGE> 6
to minimize these risks. Consistent with the practices of other large timber
companies, the Partnership does not maintain insurance against loss to standing
timber on the Timberlands, but maintains insurance for loss of logs due to fire
and other occurrences following harvesting.
LAND MANAGEMENT. The Partnership seeks to realize the value of property
that may have a higher and better use than for commercial timberland management
or is otherwise a candidate for sale or exchange. The Partnership identified
approximately 150,000 acres of land located in recreational areas or near
expanding population centers that may optimally be used for conservation,
residential or recreational purposes. Over the next five to fifteen years the
Partnership expects to realize the value of these properties, either through
sales or exchanges. Approximately 21,600 acres of this land were sold or
exchanged during 1996.
MANUFACTURING SEGMENT
GENERAL. The Manufacturing Segment consists of four lumber mills, two
plywood plants, a lumber remanufacturing facility and a medium density
fiberboard ("MDF") facility in western Montana and a wood chip plant in
Washington (collectively known as the "Northwest Conversion Facilities") and a
lumber mill and plywood plant located in Joyce, Louisiana and a lumber mill
located in Huttig, Arkansas, all of which were purchased in connection with the
Southern Region Acquisition (collectively known as the "Southern Conversion
Facilities", and together with the Northwest Conversion Facilities, the
"Conversion Facilities"). The Northwest Conversion Facilities produce a wide
variety of lumber, plywood and MDF products that are sold to Marketing, which
markets and sells the products. Marketing targets the products to retail home
centers and various specialty niche markets which are less cyclical than
traditional housing related markets. In addition, in order to enhance customer
service and provide prompt deliveries, Marketing has established a network of
over 40 independent warehouses located strategically throughout the United
States. The Southern Conversion Facilities produce a wide variety of lumber and
plywood products that are sold to home construction and industrial markets.
LUMBER. Manufacturing produces a diverse line of lumber products,
including boards, studs and dimension lumber which are manufactured at two
studmills, two dimension lumber mills, two random-length lumber mills and a
lumber remanufacturing plant. For the years ended December 31, 1996, 1995 and
1994 these mills produced 461 million board feet ("MMBF"), 433 MMBF, and 388
MMBF of lumber, respectively. Production increased in 1996 primarily due to the
addition of the two dimension lumber mills in the southeast United States,
offset in part by the disposition of the Company's Arden random-length lumber
mill, in October 1996. Production increased in 1995 due to the addition of the
lumber remanufacturing plant, which began operations in late November 1994,
higher productivity due to improved log merchandising specifications and capital
improvements, and additional production shifts. Lumber product revenues
represented approximately 38% of total combined revenues in 1996, 1995 and 1994.
Upgrades at the Pablo mill to allow for more efficient processing of small logs
were begun in 1996. This project will be completed in 1997.
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<PAGE> 7
Lumber products manufactured in the Northwest Conversion Facilities are
targeted towards domestic lumber retailers, such as retail home center chains,
for use in repair and remodeling projects. Value-added products and services
such as consumer appearance boards, pull-to-length boards, premium furring
strips, premium studs and pattern boards, aimed at retail and other specialty
markets, have made the Manufacturing Segment less dependent on the cyclical
housing related market. Lumber products manufactured in the Southern Conversion
Facilities are targeted toward the home construction, industrial and export
markets. In 1996, 54% of Manufacturing's lumber products was sold into retail
markets, 19% to stocking distributors, 17% to industrial and remanufactured
product markets, 4% to export markets and 6% to other markets.
Competition in the Company's lumber markets is primarily based on price
and quality, and to a lesser extent, the ability to meet delivery requirements
on a consistent long-term basis and to provide specialized customer service. The
Partnership competes in domestic lumber markets primarily with other United
States and Canadian companies. Canadian lumber producers have increased their
penetration into the United States market due to their lower wood fiber costs
and favorable exchange rates. During the five-year period ended December 31,
1995, Canadian producers increased their percentage of the North American lumber
markets from 27% to 36%. In 1995, the United States and Canadian governments
announced a five-year lumber trade agreement effective April 1, 1996. This
agreement is intended to reduce the volume of Canadian lumber exported into the
United States through the assessment of an export tariff on annual lumber
exports to the United States in excess of certain levels from the four major
producing provinces. The lumber market is also subject to competition from
substitute products, primarily in shelving, window and door markets. Substitute
products include radiata pine, MDF, particle board, laminates and wire shelving.
Substitution has significantly increased in the past several years due to the
increase in the price of studs and boards in the early 1990's.
PLYWOOD. Manufacturing produces a diverse line of plywood products at
the Company's three plywood facilities. The Northwest Conversion Facilities
produce high-grade plywood which is primarily sold into specialized industrial
markets. The Southern Conversion Facilities produce commodity and specialty
grade panel products used in home construction and furniture. For the years
ended December 31, 1996, 1995 and 1994 the plywood plants produced 334 million
square feet ("MMSF") (3/8" basis), 294 MMSF, and 290 MMSF of plywood,
respectively. The increase in production in 1996 is due to the addition of the
Joyce, Louisiana plywood plant in October 1996. Plywood product revenues
represented 17%, 18% and 17% of total combined revenues in 1996, 1995 and 1994,
respectively. During 1996, the lathe was upgraded at the Evergreen plywood plant
which will increase wood recovery by allowing logs to be peeled to a smaller
core. During 1995, capital improvements were made that expanded production to
include medium-density overlay plywood and scarfed (joined together) plywood to
produce longer lengths for specialty products.
During 1996, 67% of Manufacturing's plywood products was sold in
specialty industrial markets, including carpet strip, recreational boat,
recreational vehicle, fiberglass-reinforced panel, manufactured home and
furniture markets. Manufacturing's plywood products are generally of higher
quality than commodity construction grade products, which makes them more
valuable in these specialty niche markets.
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Competition within the plywood market is based primarily on price and
quality, and to a lesser extent, the ability to offer a full line of products
and to meet delivery requirements on a consistent, long-term basis. The domestic
plywood market is characterized by numerous large and small producers and is
also subject to competition from oriented strand board ("OSB"), a wood product
which is a less expensive and generally lower quality substitute. Due to OSB's
cost advantage, its demand and market share in the residential segment has been
increasing, and this trend is expected to continue. Between 1994 and 1998 the
annual capacity for OSB is expected to nearly double to an industry-wide
capacity of 20 billion square feet ("BSF") (3/8" basis). The quality of OSB
continues to improve and has become widely accepted in many building
applications. However, since OSB does not have the strength, weight and
machinability of plywood, it cannot be used in certain specialty applications.
Some commodity plywood manufacturers, in order to avoid closing their
facilities, have been refocusing their products toward the industrial markets
which has resulted in increased competition in markets that the Company serves.
The Company expects to remain competitive due to its strong customer base, years
of experience in the industrial markets, reputation for high quality products
(including various trademarked products such as MarineTech, RV-X, DuraFloor, and
Ultra-Core), superior wood, and the full line of products that it offers.
MEDIUM DENSITY FIBERBOARD. Manufacturing produces MDF products which
are primarily sold to distributors and door, moulding, fixture and furniture
manufacturers. During 1995, the manufacturing process was redesigned to produce
MDF(2), a higher quality MDF product that can be machined and finished more
efficiently. For the years ended December 31, 1996, 1995 and 1994 the plant
produced 113 MMSF (3/4" basis), 102 MMSF, and 123 MMSF of MDF, respectively.
Production for 1995 was below full capacity due to downtime encountered during
the start-up of new high-energy refiners for the Company's new MDF(2) product
and deterioration in market demand. Production for 1996 was also below full
capacity due to a continued focus on producing high quality MDF(2) during the
extended start-up phase. MDF(2) start-up was completed in the second half of
1996.
The Manufacturing Segment supplies high quality MDF to markets
primarily in North America and Pacific Rim countries. The introduction of
MDF(2), one of the highest quality MDF products available, has expanded the
Partnership's markets to include higher value applications, such as moulding and
kitchen cabinets. In 1996, the Manufacturing Segment sold approximately 58% of
its MDF directly to domestic industrial manufacturers or fabricators, 26% to
stocking distributors, 10% into overseas export markets, primarily Pacific Rim
countries, and 6% to retail and other markets.
MDF producers compete on a global scale, primarily on the basis of
price, quality and the level of service provided. MDF is also subject to
competition from solid wood products and hardboard and particle board products.
Competition in the industry has been increasing as a result of significant
capacity expansion both in the United States and Canada. In 1996, North American
capacity was approximately 1.7 BSF and, by the year 2000, capacity is expected
to increase by an additional 0.9 BSF. Much of the capacity additions will be in
direct competition with MDF(2). Over the same time period demand is also
expected to increase, but at a slower rate. The Partnership believes it is well
positioned to compete based on quality and price. MDF(2) commands a price
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premium over standard MDF due to its superior quality, and the panel's physical
properties and densities. Moreover, because the Company's fiber supply consists
of western softwoods, a slow growth species with a low abrasive content, MDF(2)
has proven to have superior machining qualities over competing MDF products. In
addition, by eliminating wood chips from the MDF manufacturing process (which
substantially reduces raw material costs) and because of the facility's access
to low cost energy sources the Partnership believes it is one of the lowest cost
producers in the market.
CHIPS. Manufacturing's lumber and plywood mills produce residual wood
chips as a by-product from the conversion of raw logs into finished products.
These wood chips are sold to regional paper and pulp mills. The Company's lumber
and plywood facilities produced 333 thousand bone dry units ("MBDU"), 297 MBDU
and 288 MBDU of chips in 1996, 1995 and 1994, respectively. The increase in
volume in 1996 was due to the addition of the Southern Conversion Facilities in
October 1996. In addition, residual wood chip sales volume has increased
annually due to increased lumber and plywood production and increased chip
recoveries. A substantial portion of the Company's chips produced in the Rocky
Mountain Region are sold to a customer under a long-term supply agreement.
Manufacturing also produces wood chips at its Cle Elum, Washington chip
plant. The chip plant produced 6 MBDU, 32 MBDU and 45 MBDU in 1996, 1995 and
1994, respectively. The chip plant was shut down on April 1, 1996 due to weak
chip markets and will not reopen until prices improve. The decrease in
production in 1995 resulted from production curtailments for approximately five
months due to log supply shortages.
RAW MATERIALS. Manufacturing obtains the majority of its raw logs from
the Partnership's Timberlands. The Resources Segment provided 70%, 73%, and 63%
of the Northwest Conversion Facilities raw log needs in 1996, 1995 and 1994,
respectively. The Southern Conversion facilities obtained 75% of their raw logs
from the Resources Segment during the period from October 19 through December
31, 1996. The price of logs obtained from the Partnership is determined
quarterly based upon estimated market prices and terms in effect at the time.
The Timberlands provide a consistent supply of quality logs and preferred
species to the Conversion Facilities, although over time the average log size is
expected to decline, and the species mix is expected to change due to harvest
and growth patterns.
Manufacturing has and will continue to purchase stumpage and logs from
external sources, which include the USFS, BIA, BLM and state and private
timberland owners. At December 31, 1996 and 1995, the Northwest Conversion
Facilities had 84 MMBF and 75 MMBF, respectively, of timber under contract from
external sources which may be harvested over the next three years. The USFS
harvest plan is expected to provide for a 1997 harvest of 300 MMBF in the
geographic area of the Northwest Conversion Facilities. However, due in part to
legal challenges and changes in public policy, the USFS will most likely sell
less volume. Manufacturing is permitted to bid on up to approximately fifty
percent annually of this USFS volume, with the remainder set aside for small
businesses. In addition, approximately 450 MMBF of timber is expected to be made
available annually from other sources. At December 31, 1996, the Southern
Conversion Facilities had 18 MMBF of timber under contract from external sources
which may be harvested over a three
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year period. The amount of timber expected to be available from other sources in
1997 in the geographic area of the Southern Conversion Facilities is 16 MMBF and
200 MMBF from the USFS and other sources, respectively. The geographic area in
which the Conversion Facilities operate may expand or contract from year to year
as the cost of logs and value of manufactured products fluctuate. (For further
discussion of other timber supply issues see "Federal and State Regulations".)
The MDF facility has a consistent supply of sawdust and wood shavings
from internal and external sources. The remanufacturing facility uses short
pieces of lumber, a by-product of Manufacturing's studmill operations.
COMPETITION
Markets for forest products are highly competitive in terms of price
and quality. Many of the Company's competitors have substantially greater
financial and operating resources than the Company. In addition, wood products
are subject to increasing competition from a variety of substitute products,
including non-wood and engineered wood products. Plywood markets are subject to
competition from OSB, and lumber and log markets are subject to competition from
other worldwide suppliers. The Partnership believes it is able to compete
effectively due to its extensive private timber inventory (which includes
several premium species such as Douglas-fir and Ponderosa Pine), its proven
leadership in environmental forestry which has reduced the uncertainty
associated with ever increasing levels of federal and state regulation, its
reputation as a dependable, long-term supplier of quality products, its
innovative approach to providing high quality, value-added products to various
specialty and industrial niche markets and the integration of its timberlands
with its efficient manufacturing processes. See "Resources Segment" and
"Manufacturing Segment."
SEASONALITY
Domestic log sales volumes from the Northwest Timberlands are typically
at their lowest point in the second quarter of each year during spring break-up,
when warming weather thaws and softens roadbeds, restricting access to logging
sites. Log sales volumes from the Southern Timberlands are generally at their
lowest point during the first quarter of each year, as winter rains limit
operations in some areas. Export log sales are affected in part by variations in
inventory, both domestically and in the countries where such logs are sold, as
well as by weather conditions. Winter logging activity in the Pacific Northwest
takes place at lower elevations, where predominantly second growth logs are
found, affecting the volume of higher quality export logs sold during this time
of the year.
Demand for manufactured products is generally lower in the fall and
winter quarters when activity in the construction markets is slower, and higher
in the spring and summer quarters when these markets are more active. In
addition to seasonal fluctuations in demand, prices of manufactured products can
be impacted by weather-related, seasonal fluctuations in supply, as production
can be hampered during severely cold winter months and then rebound when warmer
spring weather arrives. Working capital varies with seasonal fluctuations. Log
inventories increase
10
<PAGE> 11
going into the winter season to prepare for reduced harvest during spring
break-up.
FEDERAL AND STATE REGULATIONS
GENERAL. The activities of the Company are subject to various federal
and state environmental laws and regulations which impose limitations on the
discharge of pollutants into the air and water and which also establish
standards for the treatment, storage and disposal of solid and hazardous waste
and govern the discharge of runoff stormwater and wastewater. The General
Partner believes that the Company is in substantial compliance with such laws
and regulations. (See Item 3. Legal Proceedings.)
The activities of the Company are also subject to federal and state
regulations regarding natural resources and forestry operations and the
requirements of the federal Occupational Safety and Health Act and comparable
state statutes relating to the health and safety of the Company's employees. The
General Partner believes that the Company is in substantial compliance with such
laws and regulations.
The Company conducts operations in or near significant environmentally
sensitive areas which include the habitats of numerous species, including a
number of threatened or endangered species. As a result, the Company's
activities in such areas may be subject to restrictions relating to the
harvesting of timber and the construction of roads.
THREATENED AND ENDANGERED SPECIES. The Endangered Species Act ("ESA")
protects species threatened with possible extinction. Protection of endangered
species may include the imposition of restrictions on timber harvesting and road
building activities in areas containing the affected species. A number of
species indigenous to the Timberlands have been listed as threatened or
endangered or have been proposed for such status under the ESA, including the
northern spotted owl, marbled murrelet, gray wolf, red cockaded woodpecker,
mountain caribou, grizzly bear, bald eagle and various salmon species.
In 1990, the United States Fish and Wildlife Service (the "USFWS")
listed the northern spotted owl ("Owl") as a threatened species throughout its
range in Washington, Oregon and California. At the time of the listing, the
USFWS issued suggested guidelines ("Guidelines") to be followed by landowners in
order to comply with the ESA's prohibition against harming or harassing Owls.
The Guidelines recommend several measures, including the restriction of harvest
activities in areas within a certain proximity of known Owl activity centers.
The USFWS also has proposed a rule for the conservation of the Owl on
non-federal land. Such proposed rule has not been adopted but is substantially
similar to the Washington Rule described below.
In May 1996, the Washington State Forest Practices Board (the "Board")
adopted permanent regulations, effective July 1996, to protect habitat for the
Owl (the "Washington Rule"). Under the Washington Rule, designated Owl special
emphasis areas ("SEAs") have restrictions that are similar to but slightly
greater than those contained in the Guidelines. Approximately 60% of the
Partnership's timberlands in the Cascades Region are within SEAs.
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<PAGE> 12
The Washington Rule exempts from its provisions forest practices that are
consistent with a federally approved habitat conservation plan and related
permit.
In June 1996, the Partnership received a permit under the ESA from the
USFWS and the National Marine Fisheries Service ("NMFS" and together with the
USFWS, the "Services") that covers the Partnership's forest management on
170,000 acres within SEAs in the Cascades Region (the "Planning Area").
Substantially all of the areas impacted by Owls are within the Planning Area. As
a part of the permit application, the Partnership prepared a multi-species
habitat conservation plan (the "HCP") that will govern the Partnership's
management activities in the Planning Area during the 50-year life of the
permit. Consistent with government policy (the "No-Surprises Policy"), the
implementing agreement for the HCP provides that no additional costs will be
imposed on or land restrictions required from the Partnership in the Planning
Area, absent extraordinary circumstances, so long as the Partnership is in
compliance with the terms of the HCP. The HCP requires the Partnership to
maintain certain levels of wildlife habitat and to take numerous other
mitigation measures, including the protection of riparian areas.
In consideration for such mitigation, the permit authorizes forestry
practices that are consistent with the HCP even though they may have an adverse
impact on the four listed species currently covered by the plan and permit,
including the Owl. The HCP provides that the Services will amend the permit to
add subsequently listed species without requiring the Partnership to provide
additional mitigation absent extraordinary circumstances. Such circumstances
would include situations where continued activity under the HCP would have a
significant material adverse impact on the species and mitigation on federal
land would not alleviate the concern. As an incentive to the Partnership to
create additional wildlife habitat in the Planning Area, the permit provides
certain additional authorization during a second 50-year period if the wildlife
habitat within the Planning Area exceeds levels set in the HCP. The permit thus
is expected to provide long-term certainty and predictability for the
Partnership's harvest activities in the Planning Area. For lands within the
Planning Area, the HCP management restrictions replace existing state and
federal restrictions for Owls.
In November 1996, a lawsuit was filed by a number of groups in Federal
District Court for the District of Columbia challenging the process by which the
Clinton Administration adopted the No-Surprises Policy. The Partnership is
unable at this time to predict the outcome of the challenge, or what effect, if
any, it might have on the HCP, if successful.
In December 1995, the Partnership entered into an agreement to conserve
grizzly bears (the "Grizzly Bear Agreement") with the USFWS, the USFS, and the
state of Montana covering 83,000 acres of the Partnership's timberlands in the
Swan Valley in western Montana. Under the Grizzly Bear Agreement, the
Partnership has agreed to protect certain habitat and to minimize the impact of
the Partnership's forestry activities on the grizzly bear. In consideration for
this mitigation, the USFWS authorized forestry practices in the Swan Valley that
are consistent with the agreement even though such practices may have an adverse
impact on grizzly bears.
In November 1996, several organizations filed a lawsuit against the
Secretary of the Interior and certain USFWS and Forest Service officials in
Federal District Court for the District
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<PAGE> 13
of Montana challenging the Grizzly Bear Agreement under the ESA and the National
Environmental Policy Act. The Partnership is unable at this time to predict the
outcome of the challenge or what effect, if any, it might have on the Grizzly
Bear Agreement, if successful.
Although the HCP and Grizzly Bear Agreement have been implemented and
are functioning as expected, there can be no assurance that the terms of such
agreements will remain in force or be sufficient to protect against subsequent
amendment of the ESA or additional listings thereunder, or against changes to
other applicable laws and regulations. Any such changes could materially and
adversely affect the Partnership's operations. In addition, legal challenges
such as those described above could disrupt the continued operation of the HCP
and the Grizzly Bear Agreement and thereby reduce the level of certainty the
Partnership anticipates gaining from such plans.
The ESA also prohibits the federal government from jeopardizing species
listed under the ESA or from destroying or adversely modifying their designated
critical habitat. Private landowners are potentially affected by these
restrictions if a private activity requires federal action, such as the granting
of access or federal funding. Where there is such a federal connection, the
federal agency involved must consult with the USFWS or, in the case of
anadromous fish, NMFS to determine that the proposed activity would not
jeopardize the listed species or cause direct or indirect adverse modification
of its designated critical habitat. If the landowner's proposed activity would
have such effects, the USFWS or NMFS must propose, where possible, alternatives
or modifications to the proposed activity.
The Northwest Timberlands are often intermingled with federal land in
or near areas that include the habitats of a number of threatened or endangered
species such as the Owl and the grizzly bear. Access across federal lands may
require federal approval. In the past, the Partnership's access to such areas
has been delayed by administrative processes and legal challenges and has been
restricted under the ESA. The Partnership believes that access to its lands in
the Planning Area and the Swan Valley should be facilitated by the HCP and the
Grizzly Bear Agreement, although no assurance can be given that further such
delays will not occur.
At this time, the Partnership believes that federal and state laws and
regulations related to the environment and the protection of endangered species
will not have a material adverse effect on the Partnership's financial position,
results of operations or liquidity. The Partnership anticipates, however, that
increasingly strict laws and regulations relating to the environment, natural
resources and forestry operations, as well as increased social concern over
environmental issues, may result in additional restrictions on the Partnership
leading to increased costs, additional capital expenditures and reduced
operating flexibility.
LEGISLATION RESTRICTING LOG EXPORTS. Federal legislation currently
prohibits the sale of unprocessed logs harvested from federal lands located in
the western half of the U.S. if such logs will be exported from the U.S. by the
purchaser thereof, or if such logs will be used by the purchaser thereof, as a
substitute for timber from private lands which is exported by such purchaser. In
order to enforce this substitution prohibition, the legislation requires persons
who export private logs and who wish to purchase federal timber to obtain an
approved federal timber "sourcing area".
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<PAGE> 14
To obtain approval it must be shown that the desired federal timber sourcing
area is economically and geographically separate from the area from which such
person exports private logs. In 1991, the Company applied for and obtained an
approved sourcing area for the Partnership's conversion facilities. Under the
legislation, sourcing areas are subject to review and renewal at least every
five years.
In October 1995, the United States Forest Service issued final
regulations implementing the 1990 legislation that could have made it more
difficult to obtain sourcing areas. These regulations, along with regulations
providing for periodic review of sourcing areas, however, have been temporarily
withdrawn pursuant to Congressional action to allow time for further public
comment and for Congress to consider modifications to the export law. Revisions
to the law and regulations have not yet been proposed. Although the uncertainty
surrounding the export regulations makes it difficult to predict the timing or
the outcome of a review, the Company believes that its sourcing area meets the
current statutory test and should be renewed.
In addition, federal legislation prohibits the export of unprocessed
logs harvested from certain state lands. Initially, Washington and Oregon
prohibited the export of all logs harvested from state lands. The legislation
provided, however, that the ban in Washington state on the export of state logs
would become a partial ban beginning January 1, 1996. Pending finalization of
the rules, the full ban is being maintained. Proposals have also been made from
time to time, but to date have been unsuccessful, to either ban or tax the
export of unprocessed logs harvested from private lands.
INCOME TAX CONSIDERATIONS
PARTNERSHIP STATUS. The Partnership is not a taxable entity and incurs
no federal income tax liability. Each partner is required to take into account
in computing his or her federal income tax liability, his or her allocable share
of income, gains, losses, deductions and credits of the Partnership, regardless
of whether cash distributions are made. Distributions by the Partnership to a
partner are generally not taxable.
Publicly traded partnerships will, as a general rule, be taxed as
corporations. However, an exception (the "Qualifying Income Exception") exists
with respect to publicly traded partnerships of which 90% or more of the gross
income for every taxable year consists of qualifying income. Qualifying income
includes income from the processing, refining, marketing or transportation of
timber and land sales. The Partnership's principal sources of income include
income from the sale of timber, the transportation of timber, the operation of
sawmills and the production of plywood and MDF. The Internal Revenue Service
("IRS") has issued two rulings to the Partnership that income from the operation
of sawmills and the production of plywood and MDF is qualified for this purpose.
SECTION 754 ELECTION. The Partnership has made the election permitted
by Section 754 of the Internal Revenue Code (the "Code"). The election requires
a purchaser of depositary units representing limited partner interests ("Units")
to adjust his or her share of the basis in the
14
<PAGE> 15
Partnership's properties ("Inside Basis") pursuant to Section 743(b) of the Code
to fair market value (as reflected by his or her Unit cost). A Unitholder's
allocable share of Partnership income, gains, losses and deductions is
determined in accordance with the Unitholder's unique basis under this election.
Such election is irrevocable and may not be changed without the consent of the
IRS. The Section 743(b) adjustment is attributed solely to a purchaser of Units
and is not added to the basis of the Partnership's assets associated with all of
the Unitholders.
FEDERAL INCOME TAXATION - GENERAL. Marketing, organized as a separate
corporation, reports all of its income, gains, losses, deductions and credits
arising from its operations on its own tax return and pays a corporate tax on
any resulting net income. Under current law, Marketing's net income is subject
to federal income tax at rates of up to 35%. Losses realized by Marketing do not
flow through to the Partnership, but are carried back and forward, within
certain limitations, to offset taxable income of Marketing in past or future
years. Distributions, if any, received by the Partnership from Marketing
generally would be characterized as either taxable dividends of current or
accumulated earnings and profits or in the absence of earnings and profits, as a
nontaxable return of capital (to the extent of the Partnership's tax basis in
Marketing's stock) or as taxable capital gain (after the Partnership's basis in
such stock is reduced to zero).
STATE TAX INFORMATION. The Partnership conducts operations in six
states, four of which (Arkansas, Idaho, Louisiana and Montana) have a state
income tax. To simplify the Unitholders' state filing requirements, the
Partnership files composite returns in each of those states and pays the state
income tax due on behalf of non-resident Unitholders. Marketing conducts
operations in approximately 25 states for which it pays state corporate income
taxes.
TAX-EXEMPT ENTITIES. Certain entities otherwise generally exempt from
federal income taxes (such as individual retirement accounts ("IRAs"), employee
benefit plans and other charitable or exempt organizations) may be subject to
federal income tax if their share of Unrelated Business Taxable Income ("UBTI")
exceeds $1,000. For years prior to 1994, all income derived from publicly traded
partnerships was classified as UBTI. For years after 1993, income is classified
as UBTI dependent upon source. Most of the Partnership's income continues to be
classified as UBTI. Regulated investment companies are required to derive 90% or
more of their gross income from qualified sources, such as interest or security
trading income; gross income from the Partnership is not qualifying income for
purposes of this test.
TIMBER INCOME. Section 631 of the Code provides special rules by which
gains from the sale of timber or cut logs, which would otherwise be taxable as
ordinary income, are treated in whole or in part as capital gains from the sale
of property used in a trade or business. The Partnership has elected to apply
the provisions of Section 631. Substantially all of the Partnership's 1996
taxable income is expected to qualify for capital gains treatment.
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<PAGE> 16
ENCUMBRANCES
Under the terms of the Partnership's debt agreements, the Partnership
has agreed not to pledge, assign or transfer the Timberlands, except under
limited circumstances. Under the terms of the First Mortgage Notes of
Manufacturing, the holders of these notes have a first mortgage lien on a
significant portion of the Conversion Facilities. In addition, the Partnership
guarantees the First Mortgage Notes of Manufacturing.
The Partnership's title to the timberlands acquired during the
formation of the Company on June 8, 1989 and in the Southern Region Acquisition
includes substantially all the related hard rock mineral interests. However, the
Partnership did not obtain the hard rock mineral interests to a significant
portion of the 865,000 acres of timberland purchased in the Montana Timberland
Acquisition. In addition, the Partnership does not own oil and gas interests to
any of its Timberlands. The title to the Timberlands is subject to presently
existing easements, rights of way, flowage and flooding rights, servitudes,
cemeteries, camping sites, hunting and other leases, licenses and permits, none
of which materially adversely affect the value of the Timberlands or materially
restrict the harvesting of timber or other operations of the Partnership.
EMPLOYEES
The Company currently has approximately 425 salaried and 1,950 hourly
employees, including employees of the General Partner that manage the businesses
of the Company. The Company believes that its employee relations are good. The
Company's wage scale and benefits are generally competitive with other forest
products companies. Hourly employees (154 employees) at the Huttig, Arkansas
lumber mill participated in the UBC Southern Council of Industrial Workers,
Local Union No. 2346, AFL-CIO under a contract with Riverwood International
Corporation. The Company is currently meeting with union representatives
regarding contract negotiation. The harvesting and delivery of logs are
conducted by independent contractors who are not employees of the Company.
ITEM 2. PROPERTIES
The Company believes that its Timberlands and Conversion Facilities are
suitable and adequate for current operations. The Conversion Facilities are
maintained through on-going capital investments, regular maintenance and
equipment upgrades. The majority of the Conversion Facilities are modern, state
of the art facilities. The Company owns all of the Conversion Facilities.
Substantially all of the Conversion Facilities are operated at, or near, maximum
capacity levels year round. See Item 1. Business for discussion of the location
and description of properties and encumbrances related to properties.
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<PAGE> 17
ITEM 3. LEGAL PROCEEDINGS
In June 1995, the Company received a Compliance Order ("Order") from
the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order
alleges that the startup in 1990 of a boiler at the Company's Pablo sawmill did
not meet new source performance standards ("NSPS"). Work on the boiler project
commenced in March 1989, when NSPS did not apply to boilers of this size. Prior
to final startup of the boiler, however, new rules were proposed that, if
applicable, would have required meeting these standards. The EPA has taken the
position that the new rules applied, and is seeking compliance with NSPS. In
December 1995, the Company voluntarily installed a pollution control device and
an opacity monitor on the boiler at a cost of $700,000 without waiving any
defenses to the EPA claim. The Company believes it is in full compliance with
both the Order and NSPS. On March 12, 1996, the Department of Justice, on behalf
of the EPA, filed suit in federal court seeking civil penalties and injunctive
relief for the alleged violation of NSPS in accordance with the Clean Air Act
which contemplates civil penalties. The Company believes it has meritorious
defenses to the claim. However, due to the inherent nature of litigation, the
Company cannot predict the outcome of the enforcement case. If not resolved
earlier, it is likely that the matter will go to trial in 1997. The General
Partner believes, based upon available information and current EPA enforcement
policies, that the ultimate outcome of this action will not have a material
adverse effect on the Company's financial position, results of operations or
liquidity.
The Company has worked with the State of Washington Department of
Ecology ("DOE") concerning opacity above permitted levels associated with
emissions at the Arden Sawmill that may have occurred prior to the sale of the
mill to Stimson Lumber Company in October of 1996 as part of the Newport Asset
Sale. Prior to the sale of the mill, the Company received a letter from DOE
requesting information concerning such emissions. DOE has not taken any other
compliance actions with respect to this matter. As part of the Newport Asset
Sale, the Company agreed to indemnify Stimson for any liabilities that arise
relating to the period when the Company owned the Arden Sawmill. The Company
believes that this matter will not materially affect the Company's financial
position, results of operations or liquidity.
There is no pending litigation, and to the knowledge of the General
Partner there is no threatened litigation involving the Company which would have
a material adverse effect on the financial position, the results of operations
or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE> 18
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED UNITHOLDER MATTERS
The Partnership's Units are traded on the New York Stock Exchange. As
of February 28, 1997, there were approximately 61,000 beneficial owners of
46,323,300 outstanding Units.
Trading price data, as reported by the New York Stock Exchange, and
declared cash distribution information for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- - ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
High $ 27-3/4 $ 27-5/8 $ 27 $ 27-1/8
Low 23-3/4 23-1/4 22-7/8 25
Cash Distribution per Unit $ 0.49 $ 0.51 $ 0.51 $ 0.51
</TABLE>
<TABLE>
<CAPTION>
1995 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- - ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
High $ 24 $ 26-1/8 $ 26-5/8 $ 25-1/4
Low 19-7/8 21-7/8 23-5/8 21-7/8
Cash Distribution per Unit $ 0.49 $ 0.49 $ 0.49 $ 0.49
</TABLE>
Cash distributions are paid from available cash as defined by the
Partnership's partnership agreement. It is the Company's intention to maintain
the distribution into the foreseeable future; however, there can be no
guarantee. In addition, the Company's debt agreements have certain restrictive
covenants limiting the amount of cash distributions.
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<PAGE> 19
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996(1) 1995 1994 1993(2) 1992(3)
------- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
For the year:
(In millions, except per Unit):
Revenues $ 633.7 $ 585.1 $ 578.7 $ 501.0 $ 439.9
Depreciation, Depletion and Amortization 56.9 54.1 54.1 38.8 39.0
Operating Income 165.0 159.0 164.1 126.6 97.8
Net Income 223.6 110.7 112.2 91.4 64.2
Capital Expenditures (4) 19.3 30.7 25.8 29.3 25.6
Net Cash Provided by Operations 171.9 165.2 155.1 115.3 78.0
Net Income per Unit (5) 4.71 2.17 2.36 1.92 1.34
Cash Distributions Declared per Unit (5) 2.02 1.96 1.67 1.38 1.17
At year end (in millions):
Working Capital 153.0 111.5 90.5 51.0 99.7
Total Assets 1,336.4 826.1 826.2 818.7 587.0
Total Debt 780.8 531.4 544.4 569.9 318.5
Partners' Capital (6) $ 491.6 $ 233.9 $ 223.0 $ 192.6 $ 225.3
Operating Data:
Northwest Timberlands Fee Timber
Harvested (MMBF) 577 562 559 458 469
Southern Timberlands Fee Timber Harvested
(thousand Cunits) 127
Northwest Timberlands Non-Fee Timber
Harvested (MMBF) 128 116 71 77 117
Southern Timberlands Non-Fee Timber
Harvested (thousand Cunits) 21
Lumber Production (MMBF) 461 433 388 352 395
Plywood Production (MMSF) (3/8" basis) 334 294 290 289 294
MDF Production (MMSF) (3/4" basis) 113 102 123 106 109
</TABLE>
(1) Included in 1996 results of operations was a gain of $105.7 million related
to the Newport Asset Sale. Results include the impact of the Southern Region
Acquisition from October 19, 1996 and the Newport Asset Sale from October 12,
1996.
(2) During 1993, the Company elected to change its method for valuing
inventories from average cost to the last-in, first-out ("LIFO") method. This
change in accounting lowered 1993 earnings by $8.0 million or $0.18 per Unit.
The cumulative effect of the accounting change and pro forma effects on prior
years' earnings have not been included because such effects are not reasonably
determinable. In addition, on August 30, 1993, the Partnership redeemed the 1.25
million Deferred Participation Interests (on a pre-Unit split basis) for $63.0
million. Results subsequent to 1993 include the impact of the November 1993
Montana Timberland Acquisition.
(3) Included in 1992 results of operations was the sale of the 164,000 acre
Gallatin Unit, together with the Belgrade sawmill for $23 million plus the value
of inventory. The sale resulted in a net gain of $15.6 million.
(4) Does not include $560.7 million related to the Southern Region Acquisition
in 1996 or $255.3 million related to the timberlands acquired as part of the
Montana Timberland Acquisition in 1993.
(5) Per Unit amounts have been restated for the December 6, 1993 three-for-one
Unit split.
(6) The Partnership issued 5.7 million Units during 1996 for net proceeds of
$144.3 million.
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<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EVENTS AND TRENDS AFFECTING OPERATING RESULTS
MARKET FORCES. The demand for logs and manufactured wood products
depends upon international and domestic market conditions, the value of the U.S.
dollar in foreign exchange markets, competition, the availability of substitute
products and other factors. In particular, the demand for logs, lumber, plywood
and MDF is affected by residential and industrial construction, and repair and
remodel activity. These activities are subject to fluctuations due to changes in
economic conditions, tariffs, interest rates, population growth and other
economic, demographic and environmental factors. Additionally, the demand for
logs is impacted by the demand for wood chips in the pulp and paper markets.
CURRENT MARKET CONDITIONS. Prices for domestic logs in the Cascades
Region for 1996 decreased from levels experienced in 1995, primarily as a result
of weak pulp and chip markets. Pulp and paper markets have been weak for the
past year resulting in an excess supply of wood chips. The over-supply has
depressed chip prices and caused downward pressure on the price of domestic logs
in the Cascades Region. However, prices have improved slightly since the third
quarter of 1996 as a result of the robust housing market, the strong export
market and reduced log production due to winter weather. Prices for domestic
logs in the Rockies Region for 1996 have remained relatively flat from those
experienced during 1995. The downward pressure due to weak chip prices and
declining commodity plywood prices has been offset by favorable lumber prices.
Prices have declined since the third quarter of 1996 due to seasonal declines in
building activity and declining commodity plywood prices. Pulp log prices
declined significantly during 1996 in both regions as a result of weakness in
the pulp and paper markets. Domestic and pulp log prices in the Southern Region
increased during the fourth quarter of 1996 as a result of wet weather limiting
supply.
In the export market, 1996 Douglas-fir prices were stable compared to
1995. Japanese demand was strong due to a robust Japanese housing market as a
result of an improving economy, record low interest rates and an upcoming
increase in the Japanese consumption tax. At year end, prices for Douglas-fir
began to soften as a result of importers adjusting to an anticipated decline in
demand following an April 1, 1997 consumption tax increase. Export prices for
whitewoods have declined as compared to 1995 due to ample supply and increased
acceptance of substitute products. However, whitewood prices improved during the
fourth quarter of 1996 due to a temporary supply shortage which resulted from
strong domestic demand and prior production curtailments.
Industry composite indices for lumber commodity prices were 19% higher
in 1996 than in 1995. The increase in lumber prices was a result of the robust
housing market, the reduced supply of Canadian lumber and strength in the repair
and remodel markets in the retail sector. The housing sector has been strong
throughout 1996 due to favorable interest rates and a good economy. As a result,
the backlog of unsold homes has been declining and housing starts have remained
strong. Effective April 1, 1996 the United States and Canada agreed to place a
quota on the amount of duty- free lumber that can be exported to the United
States. Additionally, the cost of manufacturing
20
<PAGE> 21
lumber in the Canadian Provence of British Columbia has increased due to higher
stumpage prices and environmental costs. Both the quota and higher costs have
contributed to the upward pressure on the price of lumber. Lumber prices in the
repair and remodel markets continued to improve as a result of supply
limitations caused by a decline in the supply of preferred western species and
numerous mills targeting production toward the housing market sector.
Industry composite indices for plywood commodity prices were 12% lower
than in 1995 primarily due to increased competition from OSB. North American OSB
capacity increased by over 20% in 1996, and capacity is expected to increase by
approximately 50% in 1997 through 2001. In the fourth quarter of 1996, OSB
prices declined to a record five-year low due to seasonal declines in building
activity and increased capacity. This has resulted in an unusually high plywood
to OSB price premium. Prices for the Company's MDF were 16% lower in 1996,
compared to 1995, due to significant capacity expansion during 1996. Between
1995 and 1996, North American MDF capacity increased from approximately 1.5
billion square feet to approximately 1.7 billion square feet and is expected to
expand even faster in 1997. At the same time demand has been reduced as
distributors reduce inventory levels in anticipation of further price declines.
COMPARABILITY OF FINANCIAL STATEMENT PERIODS. As part of its business
strategy, the Company has pursued and will continue to pursue the acquisition of
additional timberlands to increase inventories of fee timber. On November 1,
1993, the Company completed the Montana Timberland Acquisition. In addition, on
October 18, 1996, the Company completed the Southern Region Acquisition. (See
Note 2 to Notes to Combined Financial Statements.) The Company may also, from
time to time, sell timberlands and facilities if attractive opportunities arise.
The Newport Asset Sale was completed on October 11, 1996. Revenues and operating
income generated by the assets sold in the Newport Asset Sale were $61.0 million
and $15.7 million, respectively, in 1996 and were $67.8 million and $14.6
million, respectively in 1995. Accordingly, the comparability of periods covered
by the Company's financial statements is, and in the future may be, affected by
the impact of acquisitions and divestitures.
HARVEST PLANS. The Partnership determines its harvesting plans based on
a number of factors, including age and size of, and species distribution within,
its timber acreage, economic maturity of each harvest area, environmental
considerations and mill requirements both in the Conversion Facilities and at
unaffiliated mills. The timing of harvests of merchantable timber depends in
part on growth cycles and in part on economic conditions. Harvest levels in the
Rocky Mountain Region have averaged approximately 360 MMBF (excluding the
harvest from the timberlands sold in the Newport Asset Sale) over the last three
years. These harvest levels are expected, on average, to remain relatively
stable over the next several years. By the year 2001, the Partnership
anticipates that it will have nearly completed the conversion of slower growing
forests to younger, more productive stands in the Rocky Mountain Region, at
which time it anticipates a moderate reduction in the region's harvest levels.
Harvest levels in the Cascades Region have averaged 155 MMBF over the past three
years. The Partnership expects its harvest levels to decline gradually for the
foreseeable future as the conversion process in the region approaches
completion.
Harvest levels in the Southern Region are expected to increase modestly
between 1997 and 2000 as we complete the conversion of mature second growth pine
timberlands into intensively
21
<PAGE> 22
managed pine plantations. Following the completion of the conversion process,
harvest levels should decline and then gradually increase as the Company
benefits from the faster growing, intensively managed plantations.
Since harvest plans are influenced by projections of demand, price,
availability of timber from other sources and other factors that may be outside
of the Partnership's control, actual harvest levels may vary. The Partnership
believes that its harvest plans are sufficiently flexible to permit modification
in response to short-term fluctuations in the markets for logs and lumber.
RESULTS OF OPERATIONS
The following table compares operating income by segment for the years
ended December 31, 1996, 1995 and 1994.
Operating Income by Segment
(In Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Resources ......................... $ 163,306 $ 139,192 $ 150,730
Manufacturing ..................... 22,516 35,567 32,175
Other & Eliminations .............. (20,834) (15,783) (18,771)
--------- --------- ---------
Total ............................. $ 164,988 $ 158,976 $ 164,134
--------- --------- ---------
</TABLE>
1996 COMPARED TO 1995
Resources Segment revenues increased by $42.3 million, or 12.9%, to
$369.3 million in 1996, as compared to $327.0 million in 1995. Such increase was
primarily due to a $38.2 million increase in land sales revenue and an $18.3
million increase as a result of the addition of the Southern Timberlands in the
Southern Region Acquisition, offset in part by a decrease of $14.4 million in
revenues from Northwest Timberland pulpwood and chip sales. The increase in land
sales revenue was due to approximately 21,600 acres of higher and better use
land sales in 1996 resulting in revenues of $42.3 million, compared to $4.1
million in 1995. (See Item 1. Business Resources Segment - Land Management.) The
decrease in pulpwood and chip revenues was a result of weak pulp and paper
markets and the over supply of available wood fiber. Domestic log sales volume
in the Northwest Timberlands increased by 5%, compared to 1995, as a result of
increased harvest levels to take advantage of favorable pricing resulting from
strong product markets. Export prices decreased by 8%, compared to 1995, due to
a higher percentage of lower valued logs in the 1996 sales mix.
Resources Segment costs and expenses increased by $18.2 million, or
9.7%, to $206.0 million in 1996 compared to $187.8 million in 1995. Such
increase was primarily due to $10.1
22
<PAGE> 23
million of additional costs related to the Southern Region, the increase in land
sales, the increase in Northwest Timberlands domestic log sales volume and
increased costs related to longer hauling distances, offset in part by reduced
pulpwood and chip operations.
Manufacturing Segment revenues increased by $12.2 million, or 3.2%, to
$387.9 million in 1996 compared to $375.7 million in 1995. Such increase was due
to additional revenues of $24.7 million from the Southern Conversion Facilities,
increased lumber sales prices and increased MDF sales volumes, offset in part by
lower MDF sales prices and decreased chip revenues. Lumber sales prices in the
Northwest increased by 6% as compared to the year earlier period as a result of
the robust housing market, strength in the repair and remodel markets and supply
constraints. The U.S. housing market remained unusually strong throughout most
of the summer and fall. Additionally, as a result of the U.S. - Canada trade
agreement, Canada was not able to significantly increase its output to take full
advantage of the improving U.S. housing market. The Partnership also experienced
favorable pricing in the repair and remodel markets due to reduced supply as a
result of a number of mills targeting production toward the home construction
segment. MDF sales volume was restored to normal levels during the second half
of 1996 and was 8% higher than the sales volume for 1995. MDF sales volume was
unusually low during 1995 due to production downtime associated with the
conversion of production processes to manufacture high quality, super-refined
MDF(2) and weak market conditions. MDF prices decreased by 16% as a result of
significant 1996 capacity expansion. However, the Company experienced less
downward price pressure than the industry as a whole due to increasing demand
for its higher quality MDF(2) product. Residual chip prices decreased by 29%
over 1995 due to excess chip inventories throughout the entire industry. The
chip plant was closed during most of 1996 as a result of weak chip markets.
Manufacturing Segment costs and expenses increased by $25.3 million, or
7.4%, to $365.4 million in 1996 compared to $340.1 million in 1995. Such
increase was primarily due to $24.0 million of additional costs related to the
Southern Conversion Facilities and increased MDF sales volumes.
Other Costs and Eliminations (which consists of corporate overhead,
intercompany log profit elimination, and intercompany LIFO elimination)
decreased operating income by $20.8 million in 1996 compared to $15.8 million in
1995. The variance of $5.0 million was primarily due to the release of more
intercompany log profit in 1995 than in 1996 as a result of reducing inventory
levels in 1995. On a combined basis, the Resources Segment's profit on
intercompany log sales is deferred until Manufacturing converts existing log
inventories into finished products and sells them to third parties.
Interest expense increased by $3.3 million as a result of both an
increase in outstanding debt and debt issuance costs related to the October 1996
Southern Region Acquisition. Gain on disposition of assets increased in 1996
primarily as a result of a $105.7 million gain related to the Newport Asset
Sale.
The income allocated to the General Partner increased by $5.3 million
during 1996 compared to 1995 as a result of higher quarterly distributions to
the Unitholders which increased the incentive distribution paid to the General
Partner and an increase in net income. Net income is allocated to
23
<PAGE> 24
the General Partner based on two percent of the Company's net income (adjusted
for the incentive distribution paid), plus the incentive distribution. The
incentive distribution is based on a percentage of the quarterly distribution
paid which totaled $2.00 per Unit for the year ended 1996, compared to $1.90 per
Unit in 1995.
1995 COMPARED TO 1994
Resources Segment revenues increased by $2.6 million, or 0.8%, to
$327.0 million in 1995, as compared to $324.4 million in 1994. Such increase was
primarily due to a $21.7 million increase in revenues from pulpwood and chip
sales offset in part by lower export log sales volume and lower domestic log
prices. The increase in pulpwood and chip revenues was due to the addition in
1995 of in-woods chipping operations, which utilize small tops of trees and
small trees from thinning operations, and a significant increase in pulp log
prices and sales volume as compared to 1994 due to strong pulp and paper
markets. Export log sales volume decreased by 18% as compared to 1994 due to the
shifting of lower quality export logs to the domestic market as a result of a
weaker Japanese economy and a planned reduction in harvest levels. Domestic log
prices decreased by 8% as compared to 1994. The decrease was attributable
entirely to the Rocky Mountain Region and was due to weak lumber markets and
aggressive competition from Canadian lumber producers.
Resources Segment costs and expenses increased by $14.1 million, or
8.1%, to $187.8 million in 1995 as compared to $173.7 million in 1994. Such
increase was primarily due to the costs relating to higher volumes of pulpwood
and chip sales.
Manufacturing Segment revenues increased by $3.5 million, or 0.9%, to
$375.7 million in 1995 as compared to $372.2 million in 1994. Such increase was
due to an increase in lumber sales volume and a 60% increase in revenues from
residual chip sales, offset in part by lower lumber prices and lower MDF sales
volume. Lumber sales volume increased by 8% as compared to 1994 due to increased
production as a result of the Partnership's new lumber remanufacturing facility,
higher productivity due to improved log merchandising specifications and capital
improvements, and additional production shifts. Lumber prices decreased by 13%
as compared to 1994 due to a weaker housing market as a result of generally
slower economic conditions, and increased competition from both Canadian imports
and substitute products. While the Partnership's lumber prices are influenced by
commodity prices, it is able to maintain sales volume due to its high
concentration of sales in the repair and remodel and industrial markets, which
are less affected by the slow housing market. MDF sales volume decreased by 15%
as compared to 1994 as a result of production downtime associated with weak
market conditions and operational issues encountered during the start-up of new
high-energy refiners for the Partnership's new MDF(2) product. Residual chip
revenues increased due to a substantial increase in prices over 1994 due to
strong pulp and paper markets.
Manufacturing Segment costs and expenses were $340.1 million for each
of the years ended 1995 and 1994. Increased costs due to increased lumber sales
volumes were offset by lower log costs (14% and 4% lower for lumber and plywood,
respectively) and lower MDF
24
<PAGE> 25
production costs as a result of downtime.
Other Costs and Eliminations reduced operating income by $15.8 million
in 1995 as compared to reducing income by $18.8 million in 1994. The variance
was primarily due to lower intercompany profit elimination, offset in part by an
increase in the intercompany LIFO elimination. On a combined basis, the
Resources Segment's profit on intercompany log sales is deferred until
Manufacturing converts existing log inventories into finished products and sells
them to third parties. The 1995 intercompany profit elimination was lower than
the prior year's due to a decrease in log inventory levels, and a lower log
transfer price as a result of a weaker domestic log market. On a combined basis,
the LIFO impact related to price fluctuations on the sale of intercompany logs
is eliminated. The 1995 intercompany LIFO elimination was greater than the prior
year's due to a lower log transfer price, which resulted in a greater decrement
in Manufacturing's separate company LIFO reserve as compared to the combined
LIFO reserve.
The income allocated to the General Partner increased by $6.2 million
during 1995 compared to 1994 as a result of higher quarterly distributions to
the Unitholders which increased the incentive distribution paid to the General
Partner. Net income is allocated to the General Partner based on 2% of the
Company's net income (adjusted for the incentive distribution paid), plus the
incentive distribution. The incentive distribution is based on a percentage of
the quarterly distribution paid which totaled $1.90 per Unit for the year ended
1995, as compared to $1.62 per Unit in 1994.
EXPORT SALES
The Company sells logs and finished wood products for export. These
sales are denominated in U.S. dollars and are generally sold to Pacific Rim
countries, principally Japan, Canada and Europe. Combined export revenues as a
percentage of total revenues were 11%, 13% and 15% for 1996, 1995, and 1994,
respectively.
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities was $171.9 million, $165.2
million and $155.1 million for 1996, 1995 and 1994, respectively. The increase
of $6.7 million in 1996 is primarily a result of increased operating income
compared to 1995. In 1994, operating cash flow was reduced by $9.2 million, net
of expense, for the funding of certain employee benefit plans. There was no such
funding in 1996 or 1995. For further discussion of these benefit plans, see Note
11 of Notes to Combined Financial Statements. On December 31, 1996, the Company
had $123.9 million of cash and cash equivalents.
On October 18, 1996, the Partnership acquired approximately 529,000
acres (plus approximately 9,000 leased acres) of timberland in Louisiana and
Arkansas, along with two sawmills, a plywood plant and a nursery in the Southern
Region Acquisition for a total purchase price of $540 million, plus $11.9
million for working capital. The Partnership financed the Southern Region
Acquisition from cash on hand, including proceeds from certain ordinary course
asset dispositions, the proceeds from the Newport Asset Sale, and two new bank
credit
25
<PAGE> 26
facilities dated as of October 17, 1996, (the "New Bank Facilities"), consisting
of a five-year $400 million unsecured, revolving credit facility (the "New Line
of Credit") and an 18-month $250 million unsecured bridge facility (the "Bridge
Facility"). The Partnership borrowed $50 million under the Bridge Facility and
$322 million under the New Line of Credit to finance the Southern Region
Acquisition. No further borrowings are permitted under the Bridge Facility. On
October 22, 1996, the Partnership issued 5,600,000 Units for net proceeds of
$141.4 million. On November 5, 1996, 115,000 additional Units were issued by the
Partnership for net proceeds of $2.9 million. The combined net proceeds were
used to repay the Bridge Facility and a portion of the amount outstanding under
the New Line of Credit.
On November 13, 1996, the Partnership issued $200 million of senior
notes (the "New Notes") in a private placement. The New Notes have an average
life of 13 years and bear interest at a weighted average rate of 7.88% annually.
The New Notes are unsecured obligations of the Partnership and the terms of the
New Notes are substantially similar to the terms of its existing senior notes.
The proceeds from the New Notes were used to repay a portion of the outstanding
borrowings under the New Line of Credit. The commitment under the New Line of
Credit was reduced to $225 million in November 1996. See Note 2 and 6 of Notes
to Combined Financial Statements.
As of December 31, 1996, the Partnership had $161.0 million outstanding
under the New Line of Credit. The New Line of Credit permits the Partnership to
borrow up to $225 million for general corporate purposes, including standby
letters of credit issued on behalf of the Partnership or Manufacturing. The New
Line of Credit matures on December 13, 2001 and bears interest at a floating
rate. Borrowings on the New Line of Credit fluctuate daily based on cash needs.
As of January 3, 1997, the Partnership had repaid $126.0 million of the
borrowings under the New Line of Credit.
The Company's loan agreements contain certain restrictive covenants,
including limitations on harvest levels, sale of assets, cash distributions and
the amount of future indebtedness. In addition, the New Line of Credit requires
the maintenance of a required interest coverage ratio. The Company was in
compliance with its debt covenants as of December 31, 1996.
The Partnership will distribute $0.51 per Unit for the fourth quarter
of 1996. The distribution will equal $31.0 million (including $7.4 million to
the General Partner), and will be paid on February 28, 1997 to Unitholders of
record on February 14, 1997. The computation of cash available for distribution
includes required reserves for the payment of principal and interest, as well as
other reserves established at the discretion of the General Partner for working
capital, capital expenditures, and future cash distributions.
Cash required to meet the Partnership's quarterly cash distributions,
capital expenditures and to satisfy interest and principal payments on the
Company's debt will be significant. The General Partner expects that all debt
service will be funded from cash generated by operations. The Partnership
expects to make cash distributions from current funds and cash generated from
operations. It is anticipated that future capital expenditures will be funded
from cash on hand,
26
<PAGE> 27
cash generated from operations, and borrowings under the New Line of Credit.
The Company is involved in certain environmental and regulatory
proceedings and other related matters. Although it is possible that new
information or future developments could require the Company to reassess its
potential exposure related to these matters, the Company believes, based upon
available information, that the resolution of these issues will not have a
materially adverse effect on its results of operations, financial position or
liquidity.
CAPITAL EXPENDITURES. Capital expenditures for the Resources Segment
were $6.5 million, $8.5 million and $7.1 million for 1996, 1995 and 1994,
respectively, excluding $514.9 million related to the Southern Region
Acquisition in 1996. Resources Segment capital expenditures included the
construction of logging roads and reforestation. Capital expenditures for the
Manufacturing Segment were $12.8 million, $22.2 million and $18.7 million for
1996, 1995 and 1994, respectively, excluding $45.8 million related to the
Southern Region Acquisition in 1996. Capital expenditures in 1996 included the
purchase and installation of various lumber and plywood optimization projects,
as well as replacements and upgrades of other equipment in several of the
Conversion Facilities. Capital expenditures have decreased as compared to 1995
and 1994 due to the completion of major improvements at the majority of the
manufacturing facilities.
Planned capital expenditures for the Resources Segment in 1997 are $12
million, primarily for logging roads and reforestation. The Manufacturing
Segment's 1997 planned capital expenditures are $12 million which includes
various lumber and plywood projects to improve productivity and increase
recovery, as well as replacements and upgrades of equipment in several of the
Conversion Facilities.
EFFECT OF INFLATION
During recent years the Company has generally experienced increased
costs due to the effect of inflation, particularly in the Manufacturing Segment,
on the cost of raw materials, labor, supplies and energy and, in the Resources
Segment, on logging and hauling costs. However, the Company utilizes the LIFO
inventory valuation method for its raw materials, work-in-process and finished
goods inventory which generally matches current costs to current revenues and
thus, tends to reflect the impact of inflation on cost of goods sold.
27
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
PLUM CREEK TIMBER COMPANY, L. P.
COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1996 1995 1994
(In Thousands, Except Per Unit)
<S> <C> <C> <C>
Revenues ....................................... $633,741 $585,074 $578,657
-------- -------- --------
Costs and Expenses:
Cost of Goods Sold ....................... 429,897 388,450 375,782
Selling, General and Administrative ...... 38,856 37,648 38,741
-------- -------- --------
Total Costs and Expenses ............... 468,753 426,098 414,523
-------- -------- --------
Operating Income ............................... 164,988 158,976 164,134
Interest Expense ............................... (50,141) (46,836) (47,410)
Interest Income ................................ 1,291 1,073 889
Gain (Loss) on Disposition of Assets - Net ..... 108,852 (133) (1,074)
Other Expense - Net ............................ (1,777) (3,403)
-------- -------- --------
Income before Income Taxes ..................... 224,990 111,303 113,136
Provision for Income Taxes ..................... 1,391 572 924
-------- -------- --------
Net Income ..................................... $223,599 $110,731 $112,212
General Partner Interest ....................... 27,777 22,487 16,325
-------- -------- --------
Net Income Allocable to Unitholders ............ $195,822 $ 88,244 $ 95,887
======== ======== ========
Net Income per Unit ............................ $ 4.71 $ 2.17 $ 2.36
======== ======== ========
</TABLE>
See accompanying Notes to Combined Financial Statements.
28
<PAGE> 29
PLUM CREEK TIMBER COMPANY, L.P.
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
(In Thousands)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents............ $ 123,892 $ 87,604
Accounts Receivable.................. 23,697 31,750
Inventories.......................... 53,884 47,366
Timber Contract Deposits............. 5,987 2,320
Other Current Assets................. 15,025 4,949
------------ ------------
222,485 173,989
Timber and Timberlands - Net............ 922,652 467,992
Property, Plant and Equipment - Net..... 172,688 166,152
Other Assets............................ 18,609 17,953
------------ ------------
Total Assets............................ $ 1,336,434 $ 826,086
============ ============
LIABILITIES
Current Liabilities:
Current Portion of Long-Term Debt.... $ 17,400 $ 14,100
Accounts Payable..................... 13,443 15,771
Interest Payable..................... 9,530 7,543
Wages Payable........................ 13,187 11,513
Taxes Payable........................ 5,275 5,122
Workers' Compensation Liabilities.... 1,450 2,318
Other Current Liabilities............ 9,212 6,081
------------ ------------
69,497 62,448
Long-Term Debt.......................... 602,400 419,800
Lines of Credit......................... 161,000 97,500
Workers' Compensation Liabilities....... 8,533 8,405
Other Liabilities....................... 3,356 4,065
------------ ------------
Total Liabilities....................... 844,786 592,218
------------ ------------
Commitments and Contingencies
PARTNERS' CAPITAL
Limited Partners' Units................. 490,105 234,117
General Partner......................... 1,543 (249)
------------ ------------
Total Partners' Capital................. 491,648 233,868
------------ ------------
Total Liabilities and Partners' Capital. $ 1,336,434 $ 826,086
============ ============
See accompanying Notes to Combined Financial Statements.
</TABLE>
29
<PAGE> 30
PLUM CREEK TIMBER COMPANY, L. P.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income ...................................................... $223,599 $110,731 $112,212
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization ..................... 56,945 54,097 54,143
Gain on Property Dispositions - Net .......................... (108,852) (2,986) (419)
Working Capital Changes, net of effect of business
acquisition and disposition:
Accounts Receivable ......................................... 8,053 (4,884) 1,845
Inventories ................................................. (1,052) 7,319 (6,583)
Timber Contract Deposits .................................... 1,663 503 164
Other Current Assets ........................................ (10,579) (936) 1,386
Accounts Payable ............................................ (2,328) 2,540 193
Interest Payable ............................................ 1,987 (138) 4,676
Wages Payable ............................................... (77) 2,089 (645)
Taxes Payable ............................................... (661) (972) 446
Workers' Compensation Liabilities ........................... (868) (292)
Other Current Liabilities ................................... 2,148 (697) (1,560)
Funding of Benefit Plans - Net ............................... 4,375 2,411 (9,198)
Other ........................................................ (2,405) (3,571) (1,545)
-------- -------- --------
Net Cash Provided By Operating Activities ....................... 171,948 165,214 155,115
-------- -------- --------
Cash Flows From Investing Activities:
Southern Region Acquisition ..................................... (555,966)
Proceeds from Newport Asset Sale ................................ 148,676
Additions to Other Properties ................................... (19,280) (30,683) (25,837)
Proceeds from Other Property Dispositions ....................... 7,329 6,777 4,472
Other ........................................................... (1,806) 458
-------- -------- --------
Net Cash Used In Investing Activities ........................... (419,241) (25,712) (20,907)
-------- -------- --------
Cash Flows From Financing Activities:
Cash Distributions .............................................. (110,116) (99,840) (81,790)
Borrowings on Lines of Credit and Bridge Facility ............... 948,250 399,000 368,345
Payments on Lines of Credit and Bridge Facility ................. (884,750) (399,000) (530,846)
Issuance of Long-Term Debt ...................................... 200,000 150,000
Retirement of Long-Term Debt .................................... (14,100) (13,000) (13,000)
Issuance of Limited Partner Units ............................... 144,297
-------- -------- --------
Net Cash Provided By (Used In)
Financing Activities .......................................... 283,581 (112,840) (107,291)
-------- -------- --------
Increase in Cash
and Cash Equivalents ........................................... 36,288 26,662 26,917
Cash and Cash Equivalents:
Beginning of Year ............................................... 87,604 60,942 34,025
-------- -------- --------
End of Year ..................................................... $123,892 $ 87,604 $ 60,942
======== ======== ========
Supplementary Cash Flow Information
Interest Paid ................................................... $ 46,635 $ 46,904 $ 42,734
Income Taxes Paid - Net ......................................... $ 972 $ 952 $ 973
</TABLE>
See accompanying Notes to Combined Financial Statements.
30
<PAGE> 31
PLUM CREEK TIMBER COMPANY, L. P.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. ACCOUNTING POLICIES
BASIS OF PRESENTATION. Plum Creek Timber Company, L.P. (the
"Partnership"), a Delaware limited partnership, Plum Creek Manufacturing, L.P.
("Manufacturing"), and Plum Creek Marketing, Inc. ("Marketing"), own, manage and
operate approximately 2.4 million acres of timberland and twelve wood products
conversion facilities in the northwestern and southeastern United States. See
Note 2 to Notes to Combined Financial Statements. The Partnership owns 98
percent of Manufacturing and 96 percent of Marketing. Plum Creek Management
Company, L.P. (the "General Partner"), manages the businesses of the
Partnership, Manufacturing and Marketing and owns the remaining two percent
general partner interest of Manufacturing and four percent of Marketing. As used
herein, "Company" refers to the combined entities of the Partnership,
Manufacturing and Marketing. "Resources Segment" refers to the timber and land
management business of the Partnership, and "Manufacturing Segment" refers to
the combined businesses of Manufacturing and Marketing.
The Resources Segment grows and harvests timber for sale in export
markets, primarily Pacific Rim countries, and domestic markets, primarily in
Arkansas, Idaho, Louisiana, Montana and Washington. The Manufacturing Segment
produces a wide variety of lumber, plywood and medium density fiberboard ("MDF")
products. The Manufacturing Segment targets these products to retail home
centers and various specialty niche markets as well as housing related markets.
The principal markets for lumber and plywood products are in the United States
and, to a lesser extent, Pacific Rim countries and Europe. MDF markets primarily
consist of North America and, to a lesser extent, Pacific Rim countries.
The combined financial statements of the Company include all the
accounts of the Partnership, Manufacturing and Marketing. All significant
intercompany transactions have been eliminated in combination. Certain financial
statement reclassifications have been made to the 1995 and 1994 amounts
presented for comparability purposes and have no impact on net income.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NET INCOME PER UNIT. Net income per Unit is calculated using the
weighted average number of Units outstanding, divided into the combined
Partnership net income, after adjusting for the General Partner interest. The
weighted average number of Units outstanding was 41,619,803, 40,608,300 and
40,608,300 for the years ended December 31, 1996, 1995 and 1994, respectively.
31
<PAGE> 32
REVENUE RECOGNITION. Revenues received from the sale of logs, wood
products and by-products, primarily wood chips, are generally recorded as
revenue at the time of shipment. Sales are denominated in U.S. dollars. Sales of
timberlands identified by the Partnership as higher and better use lands (for
use other than for forest management purposes) are included in revenues when the
sale is consummated.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. Substantially all of the cash and cash equivalents are
deposited with one financial institution.
INVENTORIES. Logs, work-in-process, and finished goods inventories are
stated at the lower of cost or market on the last-in, first-out ("LIFO") method.
Cost for manufactured inventories includes raw materials, labor, supplies,
energy, depreciation and production overhead. Cost of log inventories includes
timber depletion, stumpage, associated logging and harvesting costs, road costs
and production overhead. The average cost method is used to value the Company's
supplies inventories.
TIMBER AND TIMBERLANDS. Timber and timberlands, including logging
roads, are stated at cost less depletion for timber previously harvested and
accumulated amortization. Cost of the Partnership's timber harvested is
determined based on the volume of timber harvested in relation to the amount of
estimated recoverable timber. The Partnership estimates its timber inventory
using statistical information and data obtained from physical measurements, site
maps, photo-types and other information gathering techniques. For timberlands
located in the southern United States, estimates of future growth and costs
related thereto are also made. The cost of logging roads is amortized over the
estimated useful life on a straight-line basis.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is stated
at cost. Improvements and replacements are capitalized. Depreciation is provided
for on a straight-line basis for buildings and on a unit-of-production basis for
machinery and equipment, which approximates a straight-line basis. Maintenance
and repairs necessary to maintain properties in operating condition are expensed
as incurred. The cost and related accumulated depreciation of property sold or
retired are removed from the accounts and any gain or loss is recorded.
INCOME TAXES. The Partnership and Manufacturing are not subject to
federal income tax and their income or loss is included in the tax returns of
individual Unitholders. The Partnership files composite returns in the states in
which it does business, paying taxes on behalf of nonresident Unitholders. State
taxes paid on behalf of nonresident Unitholders are included in other expense.
Marketing, as a separate taxable corporation, provides for income taxes on a
separate company basis.
UNIT-BASED COMPENSATION PLANS. The Company accounts for Unit-based
compensation plans under the provisions of Accounting Principles Board Opinion
No. 25 ("APB 25"). The Company has adopted the disclosure-only provisions of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123") for the year ended December 31, 1996.
32
<PAGE> 33
The difference between compensation cost under APB 25 and FAS 123 is not
material. See Note 11 to Notes to Combined Financial Statements for discussion
of the above referenced plans.
NOTE 2. ACQUISITION AND DISPOSITION
On October 18, 1996, the Partnership acquired approximately 529,000
acres (plus approximately 9,000 leased acres) of timberlands in Louisiana and
Arkansas, along with two sawmills, a plywood plant and a nursery from Riverwood
International Corporation for a total cash purchase price of $540 million, plus
$11.9 million for working capital (the "Southern Region Acquisition"). The
acquisition was accounted for as a purchase and the operations of the business
acquired have been included in the Company's combined financial statements from
the date of acquisition. The total purchase price of $560.7 million, including
$4.1 million of acquisition costs and $4.7 million of assumed liabilities, was
allocated as follows (in thousands):
<TABLE>
<S> <C>
Timber and Timberlands $508,834
Property, Plant and Equipment 33,477
Other Assets 18,429
--------
Total Assets Acquired $560,740
========
Total Liabilities Assumed $ 4,745
========
</TABLE>
The Southern Region Acquisition was initially financed with the New
Bank Facilities (see Note 6 to Notes to Combined Financial Statements) and cash
on hand, including the proceeds from the Newport Asset Sale (discussed below).
The proceeds from the issuance of Limited Partner Units (see Note 8 to Notes to
Combined Financial Statements) and the Senior Notes due 2016 (see Note 6 to
Notes to Combined Financial Statements) were used to repay a portion of the New
Bank Facilities.
The unaudited combined results of operations of the Company on a pro
forma basis as though the Southern Region Acquisition, the issuance of Limited
Partner Units and borrowings on the New Bank Facilities and Senior Notes due
2016 had occurred as of the beginning of the years ended December 31, 1996 and
1995 are as follows (in thousands, except per Unit):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues $771,153 $756,569
Net Income 240,540 122,653
Net Income Allocable to Unitholders 210,080 97,073
Net Income per Unit $ 4.54 $ 2.10
</TABLE>
The pro forma financial information is not necessarily indicative of
results of operations that would have occurred had the Southern Region
Acquisition occurred as of those dates or of results which may occur in the
future.
33
<PAGE> 34
On October 11, 1996, the Company consummated the sale to Stimson Lumber
Company ("Stimson") of 107,000 acres of timberland in northeastern Washington
and northern Idaho and its sawmill near Colville, Washington (the "Newport Asset
Sale") for approximately $141.9 million, plus $8.7 million for working capital
as of the closing date. The Company used the net proceeds from the Newport Asset
Sale to pay a portion of the purchase price for the Southern Region Acquisition.
The sale resulted in a net gain of approximately $105.7 million, net of expenses
of approximately $2.0 million.
NOTE 3. ACCOUNTS RECEIVABLE
Accounts receivable were presented net of allowances for doubtful
accounts of $1,425,000 and $1,316,000 at December 31, 1996 and 1995,
respectively.
NOTE 4. INVENTORIES
Inventories consisted of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials (logs) ....................... $23,171 $18,967
Work-in-process ............................ 7,227 5,798
Export logs ................................ 1,048 420
Finished goods ............................. 15,034 16,012
------- -------
46,480 41,197
Supplies ................................... 7,404 6,169
------- -------
Total ...................................... $53,884 $47,366
======= =======
</TABLE>
Excluding supplies, which are valued at average cost, the cost of the
LIFO inventories valued at the lower of average cost or market (which
approximates current cost) at December 31, 1996 and 1995 was $46.4 million and
$46.3 million, respectively.
NOTE 5. TIMBER AND TIMBERLANDS AND PROPERTY, PLANT AND EQUIPMENT
Timber and timberlands consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Timber and logging roads - net ............... $824,160 $423,475
Timberlands .................................. 98,492 44,517
-------- --------
Timber and Timberlands - net ................. $922,652 $467,992
======== ========
</TABLE>
34
<PAGE> 35
Property, plant and equipment consisted of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land, buildings and improvements ............. $ 60,173 $ 50,056
Machinery and equipment ...................... 229,513 227,598
--------- ---------
289,686 277,654
Accumulated depreciation ..................... (116,998) (111,502)
--------- ---------
Property, Plant and Equipment - net .......... $ 172,688 $ 166,152
========= =========
</TABLE>
NOTE 6. BORROWINGS
Long-term debt and lines of credit consisted of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Senior Notes due 2007 ................................ $ 138,600 $ 145,200
Senior Notes due 2009 ............................... 150,000 150,000
First Mortgage Notes ................................. 131,200 138,700
Senior Notes due 2016 ................................ 200,000
Lines of Credit ...................................... 161,000 97,500
--------- ---------
Total Long-term Debt ................................. 780,800 531,400
Less: Current Portion ................................ (17,400) (14,100)
--------- ---------
Long-Term Portion .................................... $ 763,400 $ 517,300
========= =========
</TABLE>
In October 1996, the Partnership entered into two new bank credit
facilities (the "New Bank Facilities"), consisting of a five-year $400 million
unsecured, revolving credit facility (the "New Line of Credit") and an 18-month
$250 million unsecured bridge facility (the "Bridge Facility") which were used
to finance a portion of the Southern Region Acquisition. On October 28, 1996,
the Bridge Facility was terminated and on November 13, 1996 the commitment under
the New Line of Credit was reduced to $225 million, including standby letters of
credit issued on behalf of the Partnership or Manufacturing. The New Line of
Credit matures on December 13, 2001 and bears interest at a floating rate (7.0%
as of December 31, 1996). The weighted average interest rate for borrowings
under the New Line of Credit during 1996 was 6.0%. Borrowings on the New Line of
Credit fluctuate daily based on cash needs. As of January 3, 1997, the
Partnership had repaid $126.0 million of the borrowings under the New Line of
Credit.
35
<PAGE> 36
The New Line of Credit replaced two revolving credit facilities which
allowed the Partnership to borrow up to $135 million and matured through October
2000. The revolving credit facilities bore interest at a variable rate (6.5% as
of December 31, 1995).
On November 13, 1996, the Partnership issued $200 million of senior
notes (the "Senior Notes due 2016") in a private placement. The Senior Notes due
2016 mature in 2006 through 2016 and bear interest at rates ranging from 7.74%
through 8.05%, payable semiannually. The proceeds from the Senior Notes due 2016
were used to repay a portion of the outstanding borrowings under the New Line of
Credit.
On August 1, 1994, the Partnership issued $150 million of senior notes
due in full on August 1, 2009 (the "Senior Notes due 2009") which bear interest
at 8.73%, payable semiannually. The proceeds obtained from the issuance of the
Senior Notes due 2009 were used to refinance a portion of the $260 million line
of credit incurred to finance the November 1, 1993 Montana Timberland
Acquisition.
The Senior Notes due 2007 and the First Mortgage Notes bear interest of
11.125%, payable semiannually. The Senior Notes and the First Mortgage Notes
(collectively, the "Note Agreements") are redeemable prior to maturity subject
to a premium on redemption, which is based upon interest rates of U.S. Treasury
securities having similar average maturity as the Note Agreements. At December
31, 1996 and 1995, the premium that would have been due upon early retirement
would have approximated $99 million and $119 million, respectively. The three
series of senior notes are unsecured. The First Mortgage Notes are
collateralized by a significant portion of the property, plant and equipment of
Manufacturing and are guaranteed by the Partnership.
The annual principal payments on the Note Agreements and mandatory
principal payments under the New Line of Credit are as follows (in thousands):
<TABLE>
<CAPTION>
Note New Line
Agreements Of Credit
---------- ---------
<S> <C> <C>
1997 $ 17,400
1998 18,400
1999 18,400
2000 26,950
2001 26,950 $ 161,000
Thereafter 511,700
</TABLE>
All principal and interest payments due under the Note Agreements are
nonrecourse to the General Partner.
The Note Agreements and the New Line of Credit contain certain
restrictive covenants, including limitations on harvest levels, sales of assets,
cash distributions and the amount of future
36
<PAGE> 37
indebtedness. In addition, the New Line of Credit requires the maintenance of a
required interest coverage ratio. The Company was in compliance with such
covenants at December 31, 1996 and 1995.
NOTE 7. FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximate fair
value due to the short-term maturities of these instruments. The estimated fair
value of the Company's debt, based on current interest rates for similar
obligations with like maturities, was approximately $842 million and $615
million and was carried at $781 million and $531 million as of December 31, 1996
and 1995, respectively.
NOTE 8. PARTNERS' CAPITAL
The changes in Partners' Capital were as follows (in thousands):
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
--------- --------- ---------
<S> <C> <C> <C>
January 1, 1994 ...................... $ 192,925 $ (370) $ 192,555
Net Income ........................... 95,887 16,325 112,212
Cash Distributions ................... (65,784) (16,006) (81,790)
--------- --------- ---------
December 31, 1994 ................... 223,028 (51) 222,977
Net Income ........................... 88,244 22,487 110,731
Cash Distributions ................... (77,155) (22,685) (99,840)
--------- --------- ---------
December 31, 1995 .................... 234,117 (249) 233,868
Net Income ........................... 195,822 27,777 223,599
Cash Distributions ................... (84,131) (25,985) (110,116)
Issuance of Limited Partner Units .... 144,297 144,297
--------- --------- ---------
December 31, 1996 .................... $ 490,105 $ 1,543 $ 491,648
========= ========= =========
</TABLE>
The total number of Units outstanding at December 31, 1996 and 1995 was
46,323,300 and 40,608,300, respectively. On October 22, 1996, the Partnership
issued 5,600,000 Units for net proceeds of $141.4 million. On November 5, 1996,
115,000 additional Units were issued by the Partnership for net proceeds of $2.9
million. The combined proceeds are net of issuance costs of $8.6 million. The
combined net proceeds were used to repay the Bridge Facility and a portion of
the amounts outstanding under the New Line of Credit.
In accordance with the Partnership Agreement, the General Partner is
authorized to make quarterly cash distributions. For the years ended December
31, 1996, 1995 and 1994, the General Partner declared $2.02, $1.96 and $1.67 per
Unit, respectively, to be paid to the Partnership's Unitholders. If quarterly
cash distributions exceed $0.21-2/3 per Unit, the General Partner is provided
with an incentive distribution. See Note 11 to Notes to Combined Financial
Statements.
36
<PAGE> 38
NOTE 9. INCOME TAXES
The provision for income taxes was as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Current Federal ................... $1,201 $ 464 $ 829
Current State ..................... 190 108 95
------ ------ ------
Total ............................. $1,391 $ 572 $ 924
====== ====== ======
</TABLE>
Reconciliation of the federal statutory rate to the effective income
tax rate was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate ................................................. 35.0% 35.0% 35.0%
State tax net of federal tax benefit ............................... 0.1 0.1 0.1
Nontaxable partnership income ...................................... (34.6) (34.1) (33.6)
Net operating loss carryforward .................................... 0.0 0.0 (0.7)
Other .............................................................. 0.1 (0.5) 0.0
---- ---- ----
Effective tax rate ................................................. 0.6% 0.5% 0.8%
---- ---- ----
</TABLE>
NOTE 10. EMPLOYEE PENSION AND RETIREMENT PLANS
PENSION PLAN. The Company's pension plan is a non-contributory defined
benefit plan covering substantially all employees. The salaried employee
benefits are based on years of credited service and the highest five-year
average compensation levels, and the hourly employee benefits are based on years
of service. Contributions to the plan are based upon the Projected Unit Credit
actuarial funding method and are limited to amounts that are currently
deductible for tax purposes.
38
<PAGE> 39
The following table sets forth the funded status of the Company's
pension plan at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested .......................................... $ 34,704 $ 36,431
Non-vested ...................................... 882 926
-------- --------
Accumulated benefit obligation ...................... $ 35,586 $ 37,357
======== ========
Projected benefit obligation ........................ $ 44,386 $ 46,979
Plan assets, primarily marketable equity and debt
securities, at fair market value ................ 48,300 40,576
-------- --------
Projected benefit obligation in excess of plan assets 3,914 (6,403)
Unrecognized net loss ............................... 2,954 12,554
Prior service cost not yet recognized ............... (1,200) (78)
-------- --------
Prepaid pension cost ................................ $ 5,668 $ 6,073
======== ========
</TABLE>
The components of the Company's pension cost were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost ................................ $ 1,910 $ 1,277 $ 1,441
Interest cost on projected benefit obligation 3,103 2,886 2,709
Actual return on plan assets ................ (7,568) (6,210) 432
Net amortization and deferral ............... 4,548 3,273 (2,715)
------- ------- -------
Net pension cost ............................ $ 1,993 $ 1,226 $ 1,867
======= ======= =======
</TABLE>
The following assumptions were used in the accounting for the Company's
pension plan as of December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate ................. 7.5% 7.0% 8.5%
Rate of increase in compensation levels ........ 5.0% 5.0% 5.0%
Expected long-term rate of return on plan assets 8.5% 8.5% 8.0%
</TABLE>
The Company adopted two nonqualified defined benefit pension plans for
executives and key management employees effective January 1, 1993 and January 1,
1994, respectively. The projected benefit obligation for these plans was $4.4
million as of December 31, 1996 and 1995. The Company's pension expense for
these plans was $0.9 million, $0.6 million and $0.8 million for 1996, 1995 and
1994, respectively.
39
<PAGE> 40
THRIFT AND PROFIT SHARING PLAN. The Company sponsors an employee thrift
and profit sharing plan under section 401 of the Internal Revenue Code. This
plan covers substantially all full-time employees. The Company matches employee
contributions of up to six percent of compensation at rates ranging from 35 to
100 percent, depending upon the Company's financial performance. Amounts charged
to expense were $2.6 million, $2.7 million and $2.0 million during 1996, 1995
and 1994, respectively.
OTHER BENEFIT PLANS. Certain executives and key employees of the
General Partner participate in incentive benefit plans established by the
General Partner which provide for the granting of Units and/or cash bonuses upon
meeting performance objectives. See Note 11 to Notes to Combined Financial
Statements.
NOTE 11. RELATED-PARTY TRANSACTIONS
The General Partner has overall responsibility for the management of
the Company. The General Partner has a two percent general partner interest in
the income and cash distributions of the Partnership, subject to certain
adjustments, and owns two percent and four percent interests in Manufacturing
and Marketing, respectively. The Company reimburses the General Partner for the
actual cost of administering its businesses. Amounts reimbursed to the General
Partner for such costs were $5.7 million, $5.6 million and $5.0 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
Effective October 1, 1993, the General Partner established a Long-Term
Incentive Plan ("LTIP") which authorizes granting up to 2,000,000 Unit
Appreciation Rights ("UARs") to certain executives of the General Partner. When
any of five Unit Value Targets ("UVTs") established by the LTIP are met through
a combination of Unit market appreciation plus Partnership cash distributions, a
percentage of the UARs is triggered and Units are credited to the executives'
accounts. The performance period under the LTIP during which UVTs may be met
ends December 31, 1998, at which time any earned Units will be distributed.
Earned Units generally vest at the end of the performance period. Costs incurred
by the General Partner in administering and funding the LTIP are borne by the
Partnership.
The General Partner has granted 1,382,267 UARs, net of forfeitures,
which could result in a total of 695,085 Units being earned under the LTIP if
all UVTs were met. Units in the executives' accounts will earn additional Units
equal to the amount of any subsequent Partnership cash distributions. As of
December 31, 1996, three UVTs had been achieved and 309,737 Units had been
allocated to the executives' accounts. Total compensation expense with respect
to the achievement of these three UVTs will be approximately $8.3 million, of
which $3.1 million, $1.0 million and $0.8 million was recognized in 1996, 1995
and 1994, respectively. The remaining compensation expense of $3.4 million will
be recognized over the remaining performance period ending December 31, 1998.
40
<PAGE> 41
Effective January 1, 1994, the General Partner established a Key
Employee Long-Term Incentive Plan ("KLTIP") for certain of its other key
employees which authorizes granting up to 500,000 UARs. The KLTIP provisions are
similar to the LTIP described above. The General Partner has granted 391,334
UARs, net of forfeitures, which could result in a total of 196,786 Units being
earned under the KLTIP if all UVTs were met. Units in the participants' accounts
will earn additional Units equal to the amount of any subsequent Partnership
cash distributions. As of December 31, 1996, three UVTs had been achieved and
77,910 Units had been allocated to the key employees' accounts. Total
compensation expense with respect to the achievement of these three UVTs will be
approximately $2.1 million, of which $0.8 million and $0.5 million was
recognized in 1996 and 1995, respectively. The remaining compensation expense of
$0.8 million will be recognized over the remaining performance period ending
December 31, 1998. Costs incurred by the General Partner in administering and
funding the plan are borne by the Partnership.
The Partnership is required under the Partnership Agreement to
reimburse the General Partner for compensation costs related to the management
of the Partnership, including the purchase of Units associated with these
benefit plans. During 1994, the Partnership paid the General Partner for its
purchase of 496,800 Units at a total cost of $12.8 million, of which $10.5
million was funded from current operations and $2.3 million from funds held by
an employee benefit trust of the Partnership.
Effective January 1, 1994, the General Partner established a Management
Incentive Plan ("MIP") for certain executives of the General Partner. An annual
bonus of up to 100% of the respective executive's base salary may be awarded if
certain performance objectives established by the General Partner are met by the
Company and by the executive. One-half of the bonus will be paid annually in
cash and the remaining half will be converted into Units at fair market value
and will be distributed at the end of three years. Units in executives' accounts
will earn additional Units equal to the amount of any subsequent Partnership
cash distributions. Costs incurred in administering and funding the MIP have
been borne by the General Partner.
Net income is allocated to the General Partner based on two percent of
the Company's combined net income (adjusted for the incentive distribution),
plus the incentive distribution, as provided by the Partnership Agreement. The
incentive distributions paid in 1996, 1995 and 1994 were approximately $23.8
million, $20.7 million and $14.4 million, respectively.
Certain conflicts of interest could arise as a result of the
relationships described above. The Board of Directors and management of the
General Partner have a duty to manage the Company in the best interests of the
Unitholders and, consequently, must exercise good faith and integrity in
handling the assets and affairs of the Company. Related non-interest bearing
receivables and payables between the General Partner and the Company are settled
in the ordinary course of business. As of December 31, 1996, the Company had a
receivable from the General Partner of $168,600. As of December 31, 1995, the
Company had a payable to the General Partner of $42,000.
41
<PAGE> 42
NOTE 12. COMMITMENTS AND CONTINGENCIES
A portion of the Company's log requirements is acquired through
contracts with public and private sources. Except for required deposits, no
amounts are recorded until such time as the Company harvests the timber. At
December 31, 1996 and 1995, the unrecorded amounts of those contract commitments
were approximately $14.6 million and $18.2 million, respectively. During 1993,
the Partnership entered into a log sourcing contract to sell logs to a customer
over a ten-year period ending in 2003, at prevailing market rates. The
Partnership has an annual commitment to supply pulpwood and residual chips to a
customer for a twenty-year period ending in 2016, at prevailing market rates.
There are no contingent liabilities which would have a materially
adverse effect on the financial position, the results of operations or liquidity
of the Company.
The Company is subject to regulations regarding harvest practices and
is involved in various legal proceedings, including environmental matters,
incidental to its business. While administration of current regulations and any
new regulations or proceedings have elements of uncertainty, the General Partner
believes that none of the pending legal proceedings or regulatory matters will
have a materially adverse effect on the financial position, the results of
operations or liquidity of the Company.
The Company leases buildings and equipment under non-cancelable
operating lease agreements. The Company's operating lease expense was $2.3
million, $2.2 million and $1.8 million for 1996, 1995 and 1994, respectively.
The following summarizes the future minimum lease payments (in thousands):
1997 ............... $ 3,066
1998 ............... 2,636
1999 ............... 1,676
2000 ............... 1,342
2001 ............... 887
Thereafter 2,121
-------
Total .............. $11,728
=======
42
<PAGE> 43
NOTE 13. SEGMENT INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(In Thousands)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues
Resources .................... $ 369,335 $ 327,043 $ 324,426
Manufacturing ................ 387,875 375,677 372,248
Eliminations ................. (123,469) (117,646) (118,017)
----------- ----------- -----------
$ 633,741 $ 585,074 $ 578,657
=========== =========== ===========
Operating Income
Resources .................... $ 163,306 $ 139,192 $ 150,730
Manufacturing ................ 22,516 35,567 32,175
Other and Eliminations ....... (20,834) (15,783) (18,771)
----------- ----------- -----------
$ 164,988 $ 158,976 $ 164,134
=========== =========== ===========
Depreciation, Depletion and
Amortization
Resources .................... $ 36,160 $ 35,394 $ 36,782
Manufacturing ................ 20,785 18,703 17,361
----------- ----------- -----------
$ 56,945 $ 54,097 $ 54,143
=========== =========== ===========
Identifiable Assets
Resources .................... $ 1,098,203 $ 604,510 $ 617,934
Manufacturing ................ 262,380 244,877 247,415
Eliminations ................. (24,149) (23,301) (39,129)
----------- ----------- -----------
$ 1,336,434 $ 826,086 $ 826,220
=========== =========== ===========
Capital Expenditures
Resources .................... $ 6,470 $ 8,481 $ 7,139
Manufacturing ................ 12,810 22,202 18,698
----------- ----------- -----------
$ 19,280 $ 30,683 $ 25,837
=========== =========== ===========
</TABLE>
Revenues include both sales to unaffiliated customers and intersegment
sales. Intersegment sales prices are determined quarterly, based upon estimated
market prices and terms in effect at that time and are eliminated in
combination. Intersegment sales from the Resources Segment to the Manufacturing
Segment were $123.5 million, $117.6 million and $118.0 million for 1996, 1995
and 1994, respectively.
Operating income from the Resources Segment includes land sales of
$35.4 million, $1.6 million and $1.9 million, for 1996, 1995 and 1994,
respectively. Combined export revenues, primarily to Pacific Rim countries, as a
percentage of total revenues were 11%, 13% and 15%, for 1996, 1995 and 1994,
respectively. During 1995 and 1994, net sales to one Resources Segment customer
were approximately 10% and 11% of combined revenues, respectively.
Capital expenditures do not include $514.9 million and $45.8 million in
1996 for the Resources Segment and Manufacturing Segment, respectively, related
to the Southern Region
43
<PAGE> 44
Acquisition.
NOTE 14. SUBSEQUENT EVENT
On January 21, 1997, the Board of Directors of the General Partner
authorized the Partnership to make a distribution of $0.51 per Unit for the
fourth quarter of 1996. Total distributions will approximate $31.0 million
(including $7.4 million to the General Partner) and will be paid on February 28,
1997 to Unitholders of record on February 14, 1997.
44
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Unitholders and Directors of the General Partner of Plum Creek Timber
Company, L.P.
We have audited the accompanying combined balance sheet of Plum Creek Timber
Company, L.P. as of December 31, 1996 and 1995, and the related combined
statements of income and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Plum Creek Timber
Company, L.P. at December 31, 1996 and 1995, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Seattle, Washington
January 21, 1997
45
<PAGE> 46
REPORT OF MANAGEMENT
The management of Plum Creek Timber Company, L.P. is responsible for
the preparation, fair presentation, and integrity of the information contained
in the financial statements in this Annual Report on Form 10-K. These statements
have been prepared in accordance with generally accepted accounting principles
and include amounts determined using management's best estimates and judgements.
The Company maintains a system of internal controls to provide
reasonable assurance that assets are safeguarded and that transactions are
recorded properly to produce reliable financial records. The system of internal
controls includes appropriate divisions of responsibility, established policies
and procedures (including a code of conduct to foster a strong ethical climate)
that are communicated throughout the Company, and careful selection, training
and development of our people. The Company conducts a corporate audit program to
provide assurance that the system of internal controls is operating effectively.
Our independent certified public accountants have performed audit
procedures deemed appropriate to obtain reasonable assurance that the financial
statements are free of material misstatement.
The Board of Directors provides oversight to the financial reporting
process through its Audit and Compliance Committee, which meets regularly with
management, corporate audit, and the independent certified public accountants to
review the activities of each and to ensure that each is meeting its
responsibilities with respect to financial reporting and internal controls.
/s/ RICK R. HOLLEY
Rick R. Holley
President and Chief Executive Officer
/s/ DIANE M. IRVINE
Diane M. Irvine
Vice President and Chief Financial Officer
46
<PAGE> 47
SUPPLEMENTARY FINANCIAL INFORMATION
Combined Quarterly Information
(Unaudited)
(In Thousands, Except per Unit)
<TABLE>
<CAPTION>
1996 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr(2)
- - ---- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues ....................... $127,694 $138,744 $173,039 $194,264
Operating Income ............... 27,398 32,750 48,449 56,391
Net Income ..................... 15,915 20,977 36,776 149,931
Net Income Allocable
to Unitholders ................ 10,197 15,158 30,198 140,269
Net Income per Unit(1) ......... $ 0.25 $ 0.37 $ 0.75 $ 3.14
<CAPTION>
1995 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
- - ---- ------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues ....................... $144,094 $139,372 $152,296 $149,312
Operating Income ............... 40,958 36,655 42,382 38,981
Net Income ..................... 28,392 24,534 30,173 27,632
Net Income Allocable
to Unitholders ................ 23,751 18,644 24,170 21,679
Net Income per Unit ............ $ 0.58 $ 0.46 $ 0.60 $ 0.53
</TABLE>
(1) Net income per Unit is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly net income per Unit does
not equal the total computed for the year due to the issuance of Units
during the fourth quarter of 1996. See Note 8 to Notes to Combined
Financial Statements.
(2) Included in fourth quarter 1996 results of operations was a gain of $105.7
million related to the Newport Asset Sale.
47
<PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Items 10. and 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
and EXECUTIVE COMPENSATION, Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT and Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS will be filed by amendment to this Form 10-K on Form 10-K/A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
The following combined financial statements of the Company are included
in Part II, Item 8 of this Form 10-K:
Combined Statement of Income .................................... 28
Combined Balance Sheet .......................................... 29
Combined Statement of Cash Flows ................................ 30
Notes to Combined Financial Statements .......................... 31
Report of Independent Accountants ............................... 45
Report of Management ............................................ 46
Supplementary Financial Information ............................. 47
(2) FINANCIAL STATEMENT SCHEDULES
Not applicable.
48
<PAGE> 49
(3) LIST OF EXHIBITS
Each exhibit set forth below in the Index to Exhibits is filed as
a part of this report. Exhibits not incorporated by reference to a
prior filing are designated by an asterisk ("*"); all exhibits not
so designated are incorporated herein by reference to a prior
filing as indicated. Exhibits designated by a positive sign ("+")
indicates management contracts or compensatory plans or
arrangements required to be filed as an exhibit to this report.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Designation Nature of Exhibit
<S> <C>
2.1 Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood
International Corporation and New River Timber, LLC, dated August 6, 1996 (Previously
filed as Exhibit 2 to the Current Report on Form 8-K dated August 7, 1996, filed by
Riverwood Holding, Inc., Commission file no. 1-11113, and incorporated herein by
reference).
2.2 Amendment to Asset Purchase Agreement Among Plum Creek Timber Company, L.P.,
Riverwood International Corporation and New River Timber, LLC, dated October 18, 1996
(Form 8-K, File No. 1-10239, filed October 23, 1996).
2.3 Timberland Purchase and Sale Agreement for Newport Unit Timberlands by and between
Plum Creek Timber Company, L.P. as Seller, and Stimson Lumber Company as Purchaser,
dated as of September 27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996).
2.4 Mill Asset Purchase and Sale Agreement By and Between Plum Creek Manufacturing, L.P.
as Seller, and Stimson Lumber Company as Purchaser, dated as of September 27, 1996
(Form 8-K, File No. 1-10239, filed October 23, 1996).
3.1 Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company,
L.P. dated June 8, 1989, as amended and restated through October 17, 1995 (Form 10-Q,
No. 1-10239, for the quarter ended September 31, 1995).
3.2 Certificate of Limited Partnership of Plum Creek Timber Company, L.P., as filed with the
Secretary of State of the state of Delaware on April 12, 1989 (Form S-1, Regis. No.
33-28094, filed May 1989).
4.1 Form of Deposit Agreement by and among Plum Creek Timber Company, L.P. and The First
National Bank of Boston, dated as of May 1989, (Form S-1, Regis. No. 33-28094, filed May
1989).
4.2 Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May 1989).
4.3 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007,
Plum Creek Timber Company, L. P. (Form 10-Q, No. 1-10239, for the quarter ended June
</TABLE>
49
<PAGE> 50
<TABLE>
<S> <C>
30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Senior Note
Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek
Timber Company, L.P. (Form 8 Amendment No. 1, for the year ended December 31, 1990).
Amendment No. 2, consent and waiver dated September 1, 1993 to the Senior Note
Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1993).
Amendment No. 3, Senior Note Agreement Amendment dated May 20, 1994 (Form 10-K/A,
Amendment No. 1, for the year ended December 31, 1994). Senior Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30,
1996).
4.4 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due
June 8, 2007, Plum Creek Manufacturing, Inc. (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1989). Amendment No. 1, consent and waiver dated January 1, 1991 to
Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due
June 8, 2007, Plum Creek Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form
8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent
and waiver dated September 1, 1993 to the Mortgage Note Agreement (Form 10-K/A,
Amendment No. 1, for the year ended December 31, 1993). Amendment No. 3, Mortgage
Note Agreement Amendment dated May 20, 1994 (Form 10-K/A, Amendment No. 1, for
the year ended December 31, 1994). Amendment to Mortgage Note Agreement dated June
15, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995). Mortgage
Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter
ended June 30, 1996).
4.5 Senior Note Agreement, dated August 1, 1994, 8.73% Senior Notes due August 1, 2009,
Plum Creek Timber Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended
December 31, 1994). Senior Note Agreement Amendment dated as of October 15, 1995
(Form 10-K, No. 1-10239, for the year ended December 31, 1995). Senior Note Agreement
Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June 30,
1996).
4.6* Senior Note Agreement, dated as of November 13, 1996, $75 million Series A due
November 13, 2006, $25 million Series B due November 13, 2008, $75 million Series C due
November 13, 2011, $25 million Series D due November 13, 2016. See attached exhibit.
10.1* Revolving Credit and Bridge Loan Agreement dated as of October 17, 1996 among Plum
Creek Timber Company, L.P., Bank of America National Trust and Savings Association, as
Agent, and the Other Financial Institutions Party Hereto. See attached exhibit.
10.2* Amended and Restated Revolving Credit Agreement dated as of December 13, 1996 among
Plum Creek Timber Company, L.P., Bank of America National Trust and Savings
Association, as Agent, NationsBank of North Carolina, N.A., as senior co-agent and the
Other Financial Institutions Party Hereto. See attached exhibit.
10.3+ Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment No. 1, for the year
ended December 31, 1994). First Amendment to the Plum Creek Supplemental Benefits
Plan (Form 10-Q, No. 1-10239, for the quarter ended September 30, 1995).
10.4+ Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A,
Amendment No. 1, for the year ended December 31, 1993). First Amendment to the Plum
Creek Management Company, L.P. Long-Term Incentive Plan (Form 10-Q, No. 1-10239,
</TABLE>
50
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C>
for the quarter ended September 30, 1995).
10.5+ Management Incentive Plan, Plum Creek Management Company, L.P.
(Form 10-K/A, Amendment No. 1, for the year ended December 31,
1993).
10.6+ Executive and Key Employee Salary and Incentive Compensation
Deferral Plan, Plum Creek Management Company, L.P. (Form
10-K/A, Amendment No. 1, for the year ended December 31,
1994).
10.7+ Deferred Compensation Plan for Directors, PC Advisory Corp. I
(Form 10-K/A, Amendment No. 1, for the year ended December 31,
1994).
10.8+* Plum Creek Director Unit Ownership and Deferral Plan. See
attached exhibit.
21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, for
the year ended December 31, 1990).
27* Financial Data Schedule for the year ended December 31, 1996.
See attached exhibit.
</TABLE>
(B) REPORTS ON FORM 8-K
The Partnership filed a current report on Form 8-K dated October 11,
1996, in which it reported the Southern Region Acquisition and the Newport
Asset Sale and related pro forma financial information under Item 2 -
Acquisition or Disposition of Assets and Item 7 - Financial Statements and
Exhibits.
51
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 (or 15(d)) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PLUM CREEK TIMBER COMPANY, L. P.
(Registrant)
By: Plum Creek Management Company, L.P.
as General Partner
BY: /s/ RICK R. HOLLEY
--------------------------------------
Rick R. Holley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons, in the capacities and on the
dates indicated, on behalf of, as applicable, Plum Creek Management Company,
L.P., the registrant's general partner, and/or PC Advisory Corp. I, the general
partner of the managing general partner of the registrant's general partner.
By /s/ DAVID D. LELAND Chairman of the Board of January 21, 1997
------------------------ Directors, PC Advisory Corp. I
David D. Leland
By /s/ IAN B. DAVIDSON Director, PC Advisory Corp. I January 21, 1997
------------------------
Ian B. Davidson
By /s/ GEORGE M. DENNISON Director, PC Advisory Corp. I January 21, 1997
------------------------
George M. Dennison
By /s/ CHARLES P. GRENIER Executive Vice President, Plum January 21, 1997
------------------------ Creek Management Co., L.P.
Charles P. Grenier Director, PC Advisory Corp. I
By /s/ RICK R. HOLLEY President and Chief Executive January 21, 1997
------------------------ Officer, Plum Creek Management
Rick R. Holley Co., L.P.
Director, PC Advisory Corp. I
52
<PAGE> 53
By /s/ WILLIAM E. OBERNDORF Director, PC Advisory Corp. I January 21, 1997
------------------------
William E. Oberndorf
By /s/ WILLIAM J. PATTERSON Director, PC Advisory Corp. I January 21, 1997
------------------------
William J. Patterson
By /s/ JOHN H. SCULLY Director, PC Advisory Corp. I January 21, 1997
------------------------
John H. Scully
By /s/ DIANE M. IRVINE Vice President and Chief January 21, 1997
------------------------ Financial Officer, Plum Creek
Diane M. Irvine Management Co., L.P. (Principal
Financial and Accounting Officer)
53
<PAGE> 54
INDEX TO EXHIBITS
Each exhibit set forth below in the Index to Exhibits is filed as a part of this
report. Exhibits not incorporated by reference to a prior filing are designated
by an asterisk ("*"); all exhibits not so designated are incorporated herein by
reference to a prior filing as indicated. Exhibits designated by a positive sign
("+") indicates management contracts or compensatory plans or arrangements
required to be filed as an exhibit to this report.
<TABLE>
<CAPTION>
Exhibit
Designation Nature of Exhibit
<S> <C>
2.1 Asset Purchase Agreement Among Plum Creek Timber Company, L.P., Riverwood International
Corporation and New River Timber, LLC, dated August 6, 1996 (Previously filed as Exhibit 2 to the
Current Report on Form 8-K dated August 7, 1996, filed by Riverwood Holding, Inc., Commission
file no. 1-11113, and incorporated herein by reference).
2.2 Amendment to Asset Purchase Agreement Among Plum Creek Timber
Company, L.P., Riverwood International Corporation and New
River Timber, LLC, dated October 18, 1996 (Form 8-K, File No.
1-10239, filed October 23, 1996).
2.3 Timberland Purchase and Sale Agreement for Newport Unit Timberlands by and between Plum Creek
Timber Company, L.P. as Seller, and Stimson Lumber Company as Purchaser, dated as of September
27, 1996 (Form 8-K, File No. 1-10239, filed October 23, 1996).
2.4 Mill Asset Purchase and Sale Agreement By and Between Plum Creek Manufacturing, L.P. as Seller,
and Stimson Lumber Company as Purchaser, dated as of September 27, 1996 (Form 8-K, File No.
1-10239, filed October 23, 1996).
3.1 Amended and Restated Agreement of Limited Partnership of Plum Creek Timber Company, L.P.
dated June 8, 1989, as amended and restated through October 17, 1995 (Form 10-Q, No. 1-10239,
for the quarter ended September 31, 1995).
3.2 Certificate of Limited Partnership of Plum Creek Timber Company, L.P., as filed with the Secretary
of State of the state of Delaware on April 12, 1989 (Form S-1, Regis. No. 33-28094, filed May 1989).
4.1 Form of Deposit Agreement by and among Plum Creek Timber Company, L.P. and The First National
Bank of Boston, dated as of May 1989, (Form S-1, Regis. No. 33-28094, filed May 1989).
4.2 Form of Transfer Application (Form S-1, Regis. No. 33-28094, filed May 1989).
4.3 Senior Note Agreement, dated May 31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum
Creek Timber Company, L. P. (Form 10-Q, No. 1-10239, for the quarter ended June 30, 1989).
Amendment No. 1, consent and waiver dated January 1, 1991 to Senior Note Agreement, dated May
31, 1989, 11 1/8 percent Senior Notes due June 8, 2007, Plum Creek Timber Company, L.P. (Form
8 Amendment No. 1, for the year ended December 31, 1990). Amendment No. 2, consent and waiver
dated September 1, 1993 to the Senior Note Agreement (Form 10-K/A, Amendment No. 1, for the
year ended December 31, 1993). Amendment No. 3, Senior Note Agreement Amendment dated May
20, 1994 (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994). Senior Note
Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for the quarter ended June
30, 1996).
</TABLE>
54
<PAGE> 55
<TABLE>
<S> <C>
4.4 Mortgage Note Agreement, dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8,
2007, Plum Creek Manufacturing, Inc. (Form 10-Q, No. 1-10239, for the quarter ended June 30,
1989). Amendment No. 1, consent and waiver dated January 1, 1991 to Mortgage Note Agreement,
dated May 31, 1989, 11 1/8 percent First Mortgage Notes due June 8, 2007, Plum Creek
Manufacturing, Inc., now Plum Creek Manufacturing, L.P. (Form 8 Amendment No. 1, for the year
ended December 31, 1990). Amendment No. 2, consent and waiver dated September 1, 1993 to the
Mortgage Note Agreement (Form 10-K/A, Amendment No. 1, for the year ended December 31,
1993). Amendment No. 3, Mortgage Note Agreement Amendment dated May 20, 1994 (Form 10-
K/A, Amendment No. 1, for the year ended December 31, 1994). Amendment to Mortgage Note
Agreement dated June 15, 1995 (Form 10-Q, No. 1-10239, for the quarter ended September 30,
1995). Mortgage Note Agreement Amendment dated May 31, 1996 (Form 10-Q, No. 1-10239, for
the quarter ended June 30, 1996).
4.5 Senior Note Agreement, dated August 1, 1994, 8.73% Senior Notes due August 1, 2009, Plum Creek
Timber Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31, 1994).
Senior Note Agreement Amendment dated as of October 15, 1995 (Form 10-K, No. 1-10239, for the
year ended December 31, 1995). Senior Note Agreement Amendment dated May 31, 1996 (Form
10-Q, No. 1-10239, for the quarter ended June 30, 1996).
4.6* Senior Note Agreement, dated as of November 13, 1996, $75 million Series A due November 13,
2006, $25 million Series B due November 13, 2008, $75 million Series C due November 13, 2011,
$25 million Series D due November 13, 2016. See attached exhibit.
10.1* Revolving Credit and Bridge Loan Agreement dated as of October 17, 1996 among Plum Creek
Timber Company, L.P., Bank of America National Trust and Savings Association, as Agent, and the
Other Financial Institutions Party Hereto. See attached exhibit.
10.2* Amended and Restated Revolving Credit Agreement dated as of December 13, 1996 among
Plum Creek Timber Company, L.P., Bank of America National Trust and Savings Association,
as Agent, NationsBank of North Carolina, N.A., as senior co-agent and the Other Financial
Institutions Party Hereto. See attached exhibit.
10.3+ Plum Creek Supplemental Benefits Plan (Form 10-K/A, Amendment No. 1, for the year ended
December 31, 1994). First Amendment to the Plum Creek Supplemental Benefits Plan (Form 10-Q,
No. 1-10239, for the quarter ended September 30, 1995).
10.4+ Long-Term Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment No.
1, for the year ended December 31, 1993). First Amendment to the Plum Creek Management
Company, L.P. Long-Term Incentive Plan (Form 10-Q, No. 1-10239, for the quarter ended
September 30, 1995).
10.5+ Management Incentive Plan, Plum Creek Management Company, L.P. (Form 10-K/A, Amendment
No. 1, for the year ended December 31, 1993).
10.6+ Executive and Key Employee Salary and Incentive Compensation Deferral Plan, Plum Creek
Management Company, L.P. (Form 10-K/A, Amendment No. 1, for the year ended December 31,
1994).
10.7+ Deferred Compensation Plan for Directors, PC Advisory Corp. I (Form 10-K/A, Amendment No. 1,
for the year ended December 31, 1994).
</TABLE>
55
<PAGE> 56
<TABLE>
<S> <C>
10.8+* Plum Creek Director Unit Ownership and Deferral Plan. See attached exhibit.
21 Subsidiaries of the Registrant. (Form 8 Amendment No. 1, for the year ended December 31, 1990).
27* Financial Data Schedule for the year ended December 31, 1996. See attached exhibit.
</TABLE>
56
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.6
<SEQUENCE>2
<DESCRIPTION>SENIOR NOTE AGREEMENT
<TEXT>
<PAGE> 1
EXHIBIT 4.6
[CONFORMED COPY]
================================================================================
PLUM CREEK TIMBER COMPANY, L.P.
$200,000,000
SENIOR NOTES
$75,000,000 Series A due November 13, 2006
$25,000,000 Series B due November 13, 2008
$75,000,000 Series C due November 13, 2011
$25,000,000 Series D due November 13, 2016
- - --------------------------------------------------------------------------------
SENIOR NOTE AGREEMENT
- - --------------------------------------------------------------------------------
Dated as of November 13, 1996
================================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S><C> <C>
1. Authorization of Issue of Notes . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Notes . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. Opinion of Purchaser's Special Counsel . . . . . . . . . . . . 2
3B. Opinion of Company's Counsel . . . . . . . . . . . . . . . . . 2
3C. Representations and Warranties; No Default . . . . . . . . . . 2
3D. Sale of Notes to All Purchasers . . . . . . . . . . . . . . . . 3
3E. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . 3
3F. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3G. Special Counsel's Fees . . . . . . . . . . . . . . . . . . . . 3
3H. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4A(1). Scheduled Prepayments of Series D Notes . . . . . . . . . . . . 4
4A(2). Optional Prepayment With Yield-Maintenance Premium . . . . . . 4
4B. Notice of Optional Prepayment . . . . . . . . . . . . . . . . . 4
4C. Partial Payments Pro Rata . . . . . . . . . . . . . . . . . . . 5
4D. Retirement of Notes . . . . . . . . . . . . . . . . . . . . . . 5
4E. Payments on Business Days . . . . . . . . . . . . . . . . . . . 5
5. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5A. Financial Statements . . . . . . . . . . . . . . . . . . . . . 6
5B. Inspection of Property . . . . . . . . . . . . . . . . . . . . 8
5C. Covenant to Secure Notes Equally . . . . . . . . . . . . . . . 9
5D. Partnership Existence, Etc . . . . . . . . . . . . . . . . . . 9
5E. Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . 9
5F. Compliance with Laws, Etc . . . . . . . . . . . . . . . . . . . 9
5G. Maintenance of Properties . . . . . . . . . . . . . . . . . . . 10
6. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6A. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 10
6B. Lien, Indebtedness and Other Restrictions . . . . . . . . . . . 11
6B(1) Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6B(2) Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6B(3) Loans, Advances, Investments and Contingent Liabilities . . . . 15
6B(4) Sale of Stock and Debt of Subsidiaries . . . . . . . . . . . . 16
6B(5) Merger and Sale of Assets . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
6B(6) Harvesting Restrictions . . . . . . . . . . . . . . . . . . . . 19
6B(7) Sale and Lease-Back . . . . . . . . . . . . . . . . . . . . . . 19
6B(8) Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . 20
6B(9) Transactions with Affiliates . . . . . . . . . . . . . . . . . 20
6C. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 21
6D. Issuance of Stock by Subsidiaries . . . . . . . . . . . . . . . 21
7. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7A. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . 21
7B. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Representations, Covenants and Warranties . . . . . . . . . . . . . . . . . 25
8A. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 25
8B. General Partner Net Worth . . . . . . . . . . . . . . . . . . . 26
8C. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 26
8D. Partnership Interests . . . . . . . . . . . . . . . . . . . . . 26
8E. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . 26
8F. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8G. Changes, etc . . . . . . . . . . . . . . . . . . . . . . . . . 27
8H. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . 27
8I. Franchises, Licenses, Agreements, etc . . . . . . . . . . . . . 27
8J. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . 28
8K. Title to Properties . . . . . . . . . . . . . . . . . . . . . . 28
8L. Compliance with Other Instruments, etc . . . . . . . . . . . . 28
8M. Governmental Consent . . . . . . . . . . . . . . . . . . . . . 29
8N. Foreign Assets Control Regulations, etc . . . . . . . . . . . . 29
8O. Offering of Notes . . . . . . . . . . . . . . . . . . . . . . . 29
8P. Regulation G, etc . . . . . . . . . . . . . . . . . . . . . . . 29
8Q. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8R. Status Under Certain Federal Statutes . . . . . . . . . . . . . 32
8S. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 32
8T. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 32
8U. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9. Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . 34
10. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10A. Yield-Maintenance Terms . . . . . . . . . . . . . . . . . . . . 36
10B. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 37
11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11A. Note Payments . . . . . . . . . . . . . . . . . . . . . . . . . 49
11B. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
11C. Consent to Amendments . . . . . . . . . . . . . . . . . . . . . 50
11D. Solicitation of Holders of Notes . . . . . . . . . . . . . . . 50
11E. Form, Registration, Transfer and Exchange of Notes; Lost Notes 51
11F. Persons Deemed Owners; Participations . . . . . . . . . . . . . 52
11G. Non-Recourse Nature of Liability . . . . . . . . . . . . . . . 52
11H. Survival of Representations and Warranties . . . . . . . . . . 52
11I. Successors and Assigns . . . . . . . . . . . . . . . . . . . . 52
11J. Disclosure to Other Persons . . . . . . . . . . . . . . . . . . 53
11K. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11L. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . 54
11M. Substitution of Purchaser . . . . . . . . . . . . . . . . . . . 54
11N. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . 54
11O. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 54
11P. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ATTACHMENTS TO SENIOR NOTE AGREEMENT
Schedule I --Names and Commitments of Purchasers
Exhibit A --Form of Note
Exhibit B-1 --Form of Opinion of Purchaser's Counsel
Exhibit B-2 --Form of Opinion of Company's Counsel
Exhibit D --Liens
Exhibit E --Investments
Exhibit F --Environmental Notices
Exhibit 8C --Other Subsidiaries
Exhibit 8G --Material Transactions
Exhibit 8K --Property Titles
Exhibit 8T --Environmental Permits and Licenses
Schedule 10B(1) -- Investment Policy
-iii-
<PAGE> 5
PLUM CREEK TIMBER COMPANY, L.P.
999 THIRD AVENUE
SEATTLE, WASHINGTON 98104
As of November 13, 1996
To the Purchasers named in
Schedule I to this Agreement
Dear Purchaser:
The undersigned, Plum Creek Timber Company, L.P. (together with any
Person who succeeds to all or substantially all Plum Creek Timber Company,
L.P.'s assets and business, herein called the "Company"), a Delaware limited
partnership, hereby agrees with the Purchasers named on Schedule I to this
Agreement (the "Purchasers") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES
The Company will authorize the issue of its senior promissory notes
(herein called the "Notes") in the aggregate principal amount of $200,000,000,
to be comprised of Series A Notes to mature on November 13, 2006 in an
aggregate principal amount of $75,000,000, Series B Notes to mature on November
13, 2008 in an aggregate principal amount of $25,000,000, Series C Notes to
mature on November 13, 2011 in an aggregate principal amount of $75,000,000 and
Series D Notes to mature on November 13, 2016 in an aggregate principal amount
of $25,000,000, in each case to be dated the date of issue thereof, and to bear
interest on the unpaid balance thereof from the date thereof to but excluding
the date the principal thereof shall have become due and payable at the rate of
7.74% per annum in the case of the Series A Notes, 7.87% per annum in the case
of the Series B Notes, 7.97% per annum in the case of the Series C Notes and
8.05% per annum in the case of the Series D Notes, and on overdue principal,
premium and interest at the respective rates specified therein, and to be
substantially in the form of Exhibit A attached hereto. Interest on the Notes
of each series will be computed on the basis of a 360-day year of twelve 30-day
months. The term "Notes" as used herein shall include each Note delivered
pursuant to any provision of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES
The Company hereby agrees to sell to each Purchaser and, subject to
the terms and conditions herein set forth, such Purchaser agrees to purchase
from the Company the Notes set forth opposite its name in Schedule I hereto at
a price of 100% of the aggregate principal amount thereof. The Company will
deliver to each Purchaser, at the offices of Chapman and Cutler, 111 West
Monroe Street, Chicago, Illinois 60603, one or more Notes registered in
<PAGE> 6
Plum Creek Timber Company, L.P. Senior Note Agreement
such Purchaser's name or in the name of its nominee, evidencing the aggregate
principal amount of Notes to be purchased by such Purchaser and in the
denomination or denominations specified with respect to it in Schedule I,
against payment of the purchase price thereof by transfer of immediately
available funds for credit to the Company's account #67327817 at Seafirst Bank,
Seattle, Washington, ABA #125-000-024, Message: Senior Note Funding Ref: Plum
Creek Timber Company, L.P. on the date of closing, which shall be November 13,
1996, or any other date on or before November 30, 1996 upon which the Company
and the Purchasers may mutually agree (herein called the "closing" or the "date
of closing"). If at the closing the Company shall fail to tender such Notes to
any Purchaser as provided above in this paragraph 2, or any of the conditions
specified in paragraph 3 shall not have been fulfilled to any Purchaser's
satisfaction, such Purchaser shall, at its election, be relieved of all further
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or such nonfulfillment. The sale of Notes
to the Purchasers pursuant to this Agreement shall be separate and several
sales. The obligations of each Purchaser hereunder shall be several and not
joint, and no Purchaser shall be liable or responsible for the acts or defaults
of any other Purchaser.
3. CONDITIONS OF CLOSING
The obligation of each Purchaser to purchase and pay for the Notes to
be purchased by it hereunder is subject to the satisfaction, on or before the
date of closing, of the following conditions:
3A. OPINION OF PURCHASER'S SPECIAL COUNSEL
Each Purchaser shall have received from Chapman and Cutler, who are
acting as special counsel for the Purchasers in connection with this
transaction, an opinion satisfactory to each Purchaser and substantially in the
form of Exhibit B-1 attached hereto and including such other matters as it may
reasonably request.
3B. OPINION OF COMPANY'S COUNSEL
Each Purchaser shall have received from James A. Kraft, Vice
President, General Counsel and Secretary for the Company, a favorable opinion
satisfactory to such Purchaser and substantially in the form of Exhibit B-2
attached hereto and including such other matters as it may reasonably request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT
The representations and warranties contained in paragraph 8 shall be
true in all material respects on and as of the date of closing, except to the
extent of changes caused by the transactions herein contemplated; there shall
exist on the date of closing no Event of Default or Default; and the Company
shall have delivered to each Purchaser a certificate signed by a Responsible
Officer, dated the date of closing, to both such effects.
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<PAGE> 7
Plum Creek Timber Company, L.P. Senior Note Agreement
3D. SALE OF NOTES TO ALL PURCHASERS
The Company shall have sold the entire aggregate principal amount of
the Notes scheduled to be sold on the date of closing pursuant to this
Agreement.
3E. PURCHASE PERMITTED BY APPLICABLE LAWS
The purchase of and payment for the Notes to be purchased by each
Purchaser on the date of closing on the terms and conditions herein provided
(including the use of the proceeds of such Notes by the Company) shall not
violate any applicable law or governmental regulation (including, without
limitation, section 5 of the Securities Act or Regulation G, T or X of the
Board of Governors of the Federal Reserve System), shall not subject such
Purchaser to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and shall be
permitted by the laws and regulations of each jurisdiction to which such
Purchaser is subject, but without recourse to provisions (such as section
1405(a)(8) of the New York Insurance Law) permitting limited investments by
life insurance companies without restriction as to the character of the
particular investment. If required by any Purchaser, such Purchaser shall have
received an Officers' Certificate of the Company certifying as to such matters
of fact as such Purchaser may reasonably specify to enable such Purchaser to
determine whether such purchase is permitted.
3F. INSURANCE
The Company shall have delivered to each Purchaser an Officers'
Certificate, dated the date of closing, certifying that insurance with respect
to its properties and business complying with the provisions of paragraph 5G
(including, without limitation, the provisions of paragraph 5G permitting the
Company to self-insure) is in full force and effect.
3G. SPECIAL COUNSEL'S FEES
The Company shall have paid the reasonable fees and expenses of
Chapman and Cutler, special counsel to the Purchasers, invoiced in connection
with the purchase of the Notes by the Purchasers.
3H. PROCEEDINGS
All proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in substance and form to each Purchaser, and each Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as it may reasonably request.
If the above conditions (other than the conditions stated in paragraph
3D) are satisfied, the obligation of the Company to sell to each Purchaser the
Notes to be purchased by it hereunder is subject to the tendering by the other
Purchasers of the purchase price of the Notes to be purchased by them pursuant
to this Agreement on the date of closing.
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<PAGE> 8
Plum Creek Timber Company, L.P. Senior Note Agreement
4. PREPAYMENTS
The Notes shall be subject to prepayment under the circumstances set
forth in paragraph 4A(1) and (2).
4A(1). SCHEDULED PREPAYMENTS OF SERIES D NOTES
The Company agrees that it will prepay and apply and there shall become
due and payable on the principal indebtedness evidenced by the Series D Notes on
each of the following dates an amount equal to the lesser of (i) the amount set
forth opposite such date or (ii) the principal amount of the Series D Notes then
outstanding:
<TABLE>
<S> <C>
November 13, 2010 $3,571,428.57
November 13, 2011 $3,571,428.57
November 13, 2012 $3,571,428.57
November 13, 2013 $3,571,428.57
November 13, 2014 $3,571,428.57
November 13, 2015 $3,571,428.57
</TABLE>
The entire remaining principal amount of the Series D Notes shall become due
and payable on November 13, 2016.
No premium shall be payable in connection with a required prepayment
made pursuant to this paragraph 4A(1). For purposes of this paragraph 4A(1),
any prepayment of less than all of the outstanding Series D Notes pursuant to
paragraph 4A(2) shall reduce the principal amount of the Series D Notes
required to be prepaid on November 13 in each subsequent year to and including
the stated maturity of the Series D Notes in the same proportion as the
aggregate principal amount of the Series D Notes outstanding immediately prior
to such prepayment has been reduced by such prepayment.
4A(2). OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE PREMIUM
In addition to prepayments required with respect to the Series D Notes
pursuant to paragraph 4A(1), the Notes shall be subject to prepayment on any
Business Day, in whole at any time or from time to time in part (other than in
the case of any prepayment pursuant to paragraph 6B(5)(viii) or 6B(6), in
multiples of $5,000,000; provided that, if the Company shall so prepay the
Notes in part, such prepayment shall be made on each series ratably in
accordance with the unpaid principal amount of such series) at the option of
the Company, at 100% of the principal amount so prepaid plus interest thereon
to the prepayment date and the Yield-Maintenance Premium, if any, with respect
to each Note.
4B. NOTICE OF OPTIONAL PREPAYMENT
The Company shall give the holder of each Note irrevocable written
notice of any prepayment pursuant to paragraph 4A(2) not less than 20 Business
Days prior to the prepayment date, specifying such prepayment date and the
principal amount of the Notes,
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<PAGE> 9
Plum Creek Timber Company, L.P. Senior Note Agreement
and of the Notes held by such holder, to be prepaid on such date and stating
that such prepayment is to be made pursuant to paragraph 4A(2). Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with interest thereon to the prepayment date
and together with the premium, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall deliver (i) two (2)
Business Days prior to each prepayment pursuant to paragraph 4A(2) an Officers'
Certificate stating whether a Yield-Maintenance Premium is payable in
connection with such prepayment and setting forth the calculations made in
making such determination based on an estimate of such Yield-Maintenance
Premium and (ii) on the date of such prepayment, an Officers' Certificate
stating whether such Yield-Maintenance Premium is payable and setting forth the
actual calculation.
4C. PARTIAL PAYMENTS PRO RATA
Upon any partial prepayment of the Notes (other than a partial
prepayment of the Series D Notes pursuant to paragraph 4A(1)), the principal
amount so prepaid shall be allocated to all Notes at the time outstanding
(including, for the purpose of this paragraph 4C only, all Notes prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates other than by prepayment pursuant to paragraph
4A(1) or (2)) in proportion to the respective outstanding principal amounts
thereof. Upon any partial prepayment of the Series D Notes pursuant to
paragraph 4A(1), the principal amount so prepaid shall be allocated to all
Series D Notes at the time outstanding (including, for the purpose of this
paragraph 4C only, all Series D Notes prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to paragraph 4A(1) or (2)) in proportion to
the respective outstanding principal amounts thereof.
4D. RETIREMENT OF NOTES
The Company shall not, and shall not permit any of its Subsidiaries or
Affiliates to, prepay or otherwise retire in whole or in part prior to their
stated final maturity (other than a prepayment pursuant to paragraph 4A(1) or
(2) or upon acceleration of such final maturity pursuant to paragraph 7A), or
purchase or otherwise acquire, directly or indirectly, Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered to prepay
or otherwise retire or purchase or otherwise acquire, as the case may be, the
same proportion of the aggregate principal amount of Notes held by each other
holder of Notes at the time outstanding upon the same terms and conditions.
Any Notes so prepaid or otherwise retired or purchased or otherwise acquired by
the Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
paragraph 4C.
4E. PAYMENTS ON BUSINESS DAYS
If the date specified for any required payment under this Agreement
falls on a day that is not a Business Day, the payment shall be made on the
next succeeding Business Day and interest shall be payable to the date of such
payment.
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<PAGE> 10
Plum Creek Timber Company, L.P. Senior Note Agreement
5. AFFIRMATIVE COVENANTS
5A. FINANCIAL STATEMENTS
The Company covenants that it will deliver to each Significant Holder
in duplicate:
(i) as soon as available, but not later than 90 days
after the end of each fiscal year, a copy of the audited combined
balance sheet of the Company and its combined Subsidiaries as of the
end of such year and the related combined statement of income and
combined statement of cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal
year, and accompanied by the opinion of Coopers & Lybrand, or another
nationally recognized independent public accounting firm, which report
shall state that such combined financial statements present fairly the
financial position for the dates specified and the results of
operations for the periods indicated in conformity with generally
accepted accounting principles applied on a basis consistent with
prior years;
(ii) as soon as available, but not later than 120 days
after the end of each fiscal year, a copy of a combining balance sheet
of the Company and each of its Subsidiaries as at the end of such
fiscal year and the related combining statement of income and
combining statement of cash flows for such fiscal year, all in
reasonable detail and satisfactory in scope to the Required Holder(s)
and unaudited but certified by an appropriate Responsible Officer as
having been used in connection with the preparation of the financial
statements referred to in clause (i) of this paragraph 5A;
(iii) as soon as available, but not later than 45 days
after the end of each fiscal quarter (other than the last fiscal
quarter) of each year, a copy of the unaudited combined balance sheet
of the Company and its combined Subsidiaries as of the end of such
quarter and the related combined statement of income and combined
statement of cash flows for the period commencing on the first day and
ending on the last day of such quarter, in each case setting forth in
comparative form figures for the corresponding period in the preceding
fiscal year, all in reasonable detail and satisfactory in scope to the
Required Holder(s) (information in detail and scope comparable to
information required to be included in a Quarterly Report on Form 10-Q
shall be deemed to be satisfactory for such purposes), such combined
balance sheets to be as of the end of such quarter and such combined
statements of income and combined statements of cash flows to be for
such quarterly period and for the period from the beginning of the
fiscal year to the end of such quarter, and certified by an
appropriate Responsible Officer as being complete and correct and
presenting fairly the financial position for the dates specified and
the results of operations of the Company and the Subsidiaries for the
periods indicated in conformity with generally accepted accounting
principles applied on a consistent basis;
(iv) as soon as available, but not later than 45 days
after the end of each fiscal quarter (other than the last fiscal
quarter) of each year, a copy of the unaudited combining balance sheet
of the Company and each of its Subsidiaries, and the related
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<PAGE> 11
Plum Creek Timber Company, L.P. Senior Note Agreement
combining statement of income and combining statement of cash flows
for such quarter, in each case setting forth in comparative form
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and satisfactory in scope to the Required
Holder(s), (information in detail and scope that would normally be
required on interim financial statements, except as provided for in
this paragraph, shall be deemed to be satisfactory for such purposes),
such combining balance sheets to be as of the end of such quarter and
such combining statements of income and combining statements of cash
flows to be for such quarterly period and for the period from the
beginning of the fiscal year to the end of such quarter, and certified
by an appropriate Responsible Officer of the Company as having been
used in connection with the preparation of the financial statements
referred to in clause (iii) of this paragraph 5A;
(v) to the extent not delivered pursuant to clauses (i),
(ii), (iii) and (iv) above, promptly upon transmission thereof, copies
of all such financial statements as are delivered to the Mortgage
Noteholders pursuant to the Mortgage Note Agreements;
(vi) to the extent not delivered pursuant to clause (i),
(ii), (iii), (iv) or (v), promptly upon transmission thereof, copies
of all such financial statements, proxy statements, notices and
reports as it sends to its public security holders and copies of all
registration statements (without exhibits) and all reports which it
files with the Securities and Exchange Commission and any governmental
body or agency succeeding to the functions of the Securities and
Exchange Commission;
(vii) as soon as practicable, and in any event within 10
Business Days after the Company, any of its Subsidiaries or any
Related Person knows of the occurrence or existence or expected
occurrence or existence of any event or condition or series of events
or conditions with respect to any Plan or Plans which are reasonably
likely to result in (a) a material liability to the Company, any of
its Subsidiaries or any Related Person pursuant to ERISA or the Code
(other than liability for PBGC premiums or regular periodic
contributions to any such Plan or Plans) or (b) the imposition of a
Lien on any of the assets or other properties of the Company, any of
its Subsidiaries or any Related Person pursuant to ERISA or the Code,
the Company shall deliver to each Significant Holder a statement
signed by the chief financial officer of the Company setting forth
details respecting such event or condition or series of events or
conditions and the action, if any, that the Company, any of its
Subsidiaries or any Related Person proposes to take with respect
thereto (and a copy of any notice, report or other written
communication, or a written description of any oral communication,
with or from the PBGC, the Internal Revenue Service or the Department
of Labor with respect to such event or condition or series of events
or conditions); and
(viii) with reasonable promptness, such other information
and financial data as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by
clauses (i) and (iii) above, the Company will deliver to each Significant
Holder an Officers' Certificate
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<PAGE> 12
Plum Creek Timber Company, L.P. Senior Note Agreement
demonstrating (with computations in reasonable detail) compliance by the
Company and its Subsidiaries with the provisions of paragraph 6 (including,
without limitation, paragraph 6A) and stating that there exists no continuing
Event of Default or Default, or, if any continuing Event of Default or Default
exists, specifying the nature and period of existence thereof and what action
the Company proposes to take or is taking with respect thereto. Together with
each delivery of financial statements required by clause (i) above, the Company
will deliver to each Significant Holder a certificate of such accountants
stating that, in making the audit necessary to the certification of such
financial statements, they have obtained no knowledge of any Event of Default
or Default continuing, or, if they have obtained knowledge of any Event of
Default or Default continuing, specifying the nature and period of existence
thereof. Such accountants, however, shall not be required to engage in any
auditing procedures other than those procedures required by generally accepted
auditing standards, and shall not be liable to anyone by reason of their
failure to obtain knowledge of any Event of Default or Default which would not
be disclosed in the course of an audit conducted in accordance with generally
accepted auditing standards. Notwithstanding the foregoing provisions of this
paragraph 5A, the Company shall not be required to deliver any financial
statements or other documents (other than documents or information which have
become public information) to any Person engaged in any Permitted Business in
competition with the Company or any Subsidiary. The Company also covenants
that forthwith upon the chief executive officer, principal financial officer or
principal accounting officer of the Company or the General Partner becoming
aware of an Event of Default and within 5 Business Days after the chief
executive officer, principal financial officer or principal accounting officer
of the Company or the General Partner becomes aware of a Default, it will
deliver to each Significant Holder an Officers' Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto, provided, however, no such officer shall be
obligated to provide a certificate with respect to any such Event of Default or
Default that has been cured on or before the date upon which such officer
becomes aware thereof.
5B. INSPECTION OF PROPERTY
The Company covenants that it will permit any Person designated in
writing by (a) any Purchaser named on Schedule I hereto or (b) any Significant
Holder or Significant Holders of not less than 5% in aggregate principal amount
of the Notes at the time outstanding (other than any Person acting on behalf of
any holder which is engaged directly in any Permitted Business in competition
with the Company or any Subsidiary), at such holder's or holders' expense
(except during the continuance of an Event of Default, in which case at the
expense of the Company), to visit and inspect any of the properties of the
Company and its Subsidiaries, to examine the books and financial records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of the Company or any of such
Subsidiaries with the principal officers of the Company and its independent
public accountants, all upon reasonable notice and at such reasonable times and
as often as such holder or holders may reasonably request.
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<PAGE> 13
Plum Creek Timber Company, L.P. Senior Note Agreement
5C. COVENANT TO SECURE NOTES EQUALLY
The Company covenants that, if it shall create or assume any Lien upon
any of its property or assets, whether now owned or hereafter acquired, other
than Liens permitted by the provisions of paragraph 6B(1) (unless prior written
consent to the creation or assumption thereof shall have been obtained pursuant
to paragraph 11C), it will make or cause to be made effective provision whereby
the Notes will be secured by such Lien equally and ratably with any and all
other Debt thereby secured so long as any such other Debt shall be so secured;
provided that, satisfaction of the foregoing requirements with respect to any
such Lien shall not remedy the Event of Default resulting from such Lien.
5D. PARTNERSHIP EXISTENCE, ETC.
Except as permitted by paragraph 6B(5) the Company covenants that it
will, and will cause each of its Restricted Subsidiaries to, at all times
preserve and keep in full force and effect its partnership or corporate
existence, as the case may be, and rights and franchises material to its
business, and those of each of its Restricted Subsidiaries, and will qualify,
and cause each of its Restricted Subsidiaries to qualify, to do business in any
jurisdiction where the failure to do so would have a material adverse effect on
the business, condition (financial or other), assets, properties or operations
of the Company or the Company and its Restricted Subsidiaries taken as a whole,
provided that the corporate existence of any Restricted Subsidiary or any
rights and franchises of the Company or any Restricted Subsidiary may be
terminated if, in the good faith judgment of the Company, such termination is
in the best interests of the Company and would not have a material adverse
effect on the business, condition (financial or other), assets, properties or
operations of the Company or the Company and its Restricted Subsidiaries taken
as a whole.
5E. PAYMENT OF TAXES AND CLAIMS
The Company covenants that it will, and will cause each of its
Restricted Subsidiaries to, pay all material taxes, assessments and other
governmental charges imposed upon it or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any
penalty accrues thereon, and all material claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien upon any
of its properties or assets, provided that no such tax, assessment, charge or
claim need be paid if it is being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual or
other appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made therefor.
5F. COMPLIANCE WITH LAWS, ETC.
The Company covenants that it will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, the noncompliance with
which would materially adversely affect the
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<PAGE> 14
Plum Creek Timber Company, L.P. Senior Note Agreement
business, condition (financial or other), assets, properties or operations of
the Company or the Company and its Restricted Subsidiaries taken as a whole.
5G. MAINTENANCE OF PROPERTIES; INSURANCE
The Company covenants that it will maintain or cause to be maintained
in good repair, working order and condition (normal wear and tear excepted) all
properties used or useful in the business of the Company and its Restricted
Subsidiaries and from time to time will make or cause to be made all
appropriate repairs, renewals and replacements thereof except where the failure
to make such repair, renewal or replacement would not have a material adverse
effect on the business, condition (financial or other), assets, properties or
results of operations of the Company or the Company and its Restricted
Subsidiaries taken as a whole. The Company will maintain or cause to be
maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Restricted Subsidiaries against loss or damage of the kinds customarily insured
against by corporations of established reputation of similar size engaged in
the same or similar business and similarly situated, of such types and in such
amounts as are customarily carried under similar circumstances by such other
corporations, provided that the Company may self-insure with respect to its
properties and business and the properties and business of its Restricted
Subsidiaries to the extent consistent with the practice of corporations of
established reputation of similar size engaged in the same or similar business
and similarly situated.
6. NEGATIVE COVENANTS
6A. RESTRICTED PAYMENTS
The Company covenants that it will not and will not permit any
Subsidiary to directly or indirectly pay, declare, order, make or set apart any
sum for any Restricted Payment, except that the Company may make, pay or set
apart during each calendar quarter one or more Restricted Payments if
(i) such Restricted Payments are in an aggregate amount
not exceeding the amount by which Available Cash with respect to the
immediately preceding calendar quarter exceeds any amount contributed
to Available Cash with respect to such immediately preceding calendar
quarter by any Subsidiary if and to the extent that the payment of
such amount as a dividend or distribution to the Company has not been
made and is not at the time permitted by the terms of such
Subsidiary's charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such
Subsidiary, provided that in determining Available Cash with respect
to such immediately preceding calendar quarter, the Company will
include in the amount of the reserves established during such quarter
pursuant to clause (b)(iv) of the definition of Available Cash an
amount not less than (x) 50% of the aggregate amount of all interest
in respect of the Notes, the 8.73% Senior Notes and the 11 1/8% Senior
Notes to be paid on the interest payment date immediately following
such immediately preceding calendar quarter, and (y) 25% of the
aggregate
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<PAGE> 15
Plum Creek Timber Company, L.P. Senior Note Agreement
amount of all principal in respect of the Series D Notes and the 11
1/8% Senior Notes scheduled to be paid during the 12 calendar months
immediately following such immediately preceding calendar quarter, and
the Company will not reduce the amount of the reserves so included, in
determining Available Cash for any calendar quarter subsequent to such
immediately preceding calendar quarter pursuant to clause (a)(iii) of
the definition of Available Cash, unless and until the amount of
interest or principal, as the case may be, in respect of which such
amount has been reserved has in fact been paid, and
(ii) immediately after giving effect to any such proposed
action no condition or event shall exist which constitutes an Event of
Default or Material Default.
The Company will not, in any event, directly or indirectly declare, order, pay
or make any Restricted Payment except in cash.
6B. LIEN, INDEBTEDNESS AND OTHER RESTRICTIONS
The Company covenants that it will not, and will not permit any
Restricted Subsidiary to:
6B(1) LIENS
Create, assume or suffer to exist any Lien upon any of its property or
assets, whether now owned or hereafter acquired, except
(i) Liens for taxes, assessments or other governmental
charges the payment of which is not at the time required by paragraph
5E,
(ii) Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers and materialmen and similar Liens
incurred in the ordinary course of business for sums not yet due or
the payment of which is not at the time required by paragraph 5E,
(iii) Liens incurred or deposits made incidental to the
conduct of its business or the ownership of its property including,
without limitation, (a) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social
security legislation, (b) deposits to secure insurance, the
performance of bids, tenders, contracts, leases, licenses, franchises
and statutory obligations, each in the ordinary course of business,
and (c) other obligations which were not incurred or made in
connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property and
which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use of such property or
assets in the operation of its business,
(iv) any attachment or judgment Lien, unless the judgment
it secures shall not, within 45 days after the entry thereof, have
been discharged or execution thereof
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Plum Creek Timber Company, L.P. Senior Note Agreement
stayed pending appeal, or shall not have been discharged within 45
days after expiration of any such stay,
(v) leases or subleases granted to others, easements,
rights-of-way, restrictions and other similar charges or encumbrances,
which, in each case, and in the aggregate, do not materially interfere
with the ordinary conduct of the business of the Company or any
Restricted Subsidiary,
(vi) Liens on property or assets of any Restricted
Subsidiary securing obligations of such Restricted Subsidiary owing to
the Company or another Restricted Subsidiary,
(vii) any Lien existing prior to the time of acquisition
upon any property acquired by the Company or any Restricted Subsidiary
after the date of closing through purchase, merger or consolidation or
otherwise, whether or not assumed by the Company or such Subsidiary,
or placed upon property at (or within 30 days after) the later of the
time of acquisition or the completion of construction by the Company
or any Restricted Subsidiary to secure all or a portion of (or to
secure Debt incurred to pay all or a portion of) the purchase price
thereof, provided that (w) any such Lien does not encumber any other
property of the Company or such Restricted Subsidiary, (x) the Debt
secured by such Lien is not prohibited by the provisions of paragraph
6B(2), (y) the aggregate principal amount of the Debt secured by any
such Lien at no time exceeds 80% of the cost to the Company and its
Restricted Subsidiaries of the property subject to such Lien, and (z)
the aggregate outstanding principal amount (without duplication) of
the Debt secured by all such Liens and the Debt of all Restricted
Subsidiaries at no time (a) during the period commencing on the date
of closing and ending on June 8, 1999 exceeds $25,000,000, (b) during
the period commencing on June 9, 1999 and ending June 8, 2004 exceeds
$50,000,000, and (c) thereafter exceeds $100,000,000,
(viii) Liens on the accounts, rights to payment for goods
sold or services rendered that are evidenced by chattel paper or
instruments, and rights against persons who guarantee payment or
collection of the foregoing, and on the Company's inventory and on the
proceeds (as defined in the Uniform Commercial Code in any applicable
jurisdiction) thereof securing the obligations of the Company under
the Revolving Credit Facility (and any extension, renewal, refunding
or refinancing thereof) permitted by paragraph 6B(2)(iv),
(ix) from and after the time that the Facilities
Subsidiary becomes a Restricted Subsidiary, Liens on the accounts,
rights to payment for goods sold or services rendered that are
evidenced by chattel paper or instruments, and rights against persons
who guarantee payment or collection of the foregoing, and on the
Facilities Subsidiary's inventory and on the proceeds (as defined in
the Uniform Commercial Code in any applicable jurisdiction) thereof
securing the obligations of the Facilities Subsidiary under the
Facilities Subsidiary's Revolving Credit Facility (and any
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Plum Creek Timber Company, L.P. Senior Note Agreement
extension, renewal, refunding or refinancing thereof) permitted by
paragraph 6B(2)(x),
(x) Liens existing on the property or assets of the
Company or any Subsidiary on the date of closing and set forth on
Exhibit D hereto, and
(xi) any Lien renewing, extending, refunding or
refinancing any Lien permitted by clause (vii) of this paragraph
6B(1), provided that the principal amount secured is not increased and
the Lien is not extended to other property and further provided, that
the maturity of the Lien is not extended beyond the maturity date of
the Debt which, at the time the Lien was initially placed upon the
property secured thereby, Responsible Representatives declare would
have been the maturity date of Debt customary for the type of asset
being financed;
6B(2) DEBT
Create, incur, assume or suffer to exist any Funded or Current Debt,
except
(i) Funded Debt represented by the Notes, the 8.73%
Senior Notes and the 11 1/8% Senior Notes,
(ii) Funded Debt which is unsecured and is incurred by the
Company to finance the making of capital improvements, expansions and
additions to the Company's property (including Timberlands), plant and
equipment, provided that the aggregate outstanding principal amount of
such Funded Debt shall at no time exceed $20,000,000,
(iii) Funded or Current Debt of any Restricted Subsidiary
owing to the Company or to a Restricted Subsidiary,
(iv) Debt incurred by the Company pursuant to (a) the
Revolving Credit Facility (and any extension, renewal, refunding or
refinancing thereof, including any refunding or refinancing in an
amount in excess of the principal amount then outstanding under the
Revolving Credit Facility), or (b) a bank credit facility which is
unsecured or is secured by Liens permitted by paragraph 6B(1)(viii),
provided that the aggregate outstanding principal amount of all Debt
permitted by this clause (iv) shall at no time exceed $15,000,000, and
provided, further, that the Company shall not suffer to exist any Debt
permitted by this clause (iv) on any day unless there shall have been
a period of at least 45 consecutive days within the 12 months
immediately preceding such day during which the Company shall have
been free from all Debt permitted by this clause (iv),
(v) Debt represented by the Guarantee in an amount not
greater than $131,200,000 at any time,
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Plum Creek Timber Company, L.P. Senior Note Agreement
(vi) the Company's guarantee of obligations incurred by
the Facilities Subsidiary pursuant to the Facilities Subsidiary's
Revolving Credit Facility (and any extension, renewal, refunding or
refinancing thereof permitted by clause (iv) of paragraph 6B(2) of the
Mortgage Note Agreements), provided that the aggregate outstanding
principal amount of such Debt shall at no time exceed $20,000,000, and
provided, further, that such guarantee shall be subordinated to the
Notes by subordination provisions substantially the same as those
contained in paragraph 7I of the Mortgage Note Agreements,
(vii) the Company's guarantee of Funded Debt (and related
obligations not constituting Debt) incurred by the Facilities
Subsidiary to finance the making of capital improvements, expansions
and additions to the Facilities Subsidiary's properties pursuant to
the Facilities Subsidiary's Facility, provided that such guarantee
shall be subordinated to the Notes by subordination provisions
substantially the same as those contained in paragraph 7I of the
Mortgage Note Agreements, and provided, further, that the aggregate
outstanding principal amount of such Funded Debt shall at no time
exceed $20,000,000,
(viii) Funded Debt of the Company or any Restricted
Subsidiary secured by a Lien permitted by clause (vii) of paragraph
6B(1), provided that immediately after the acquisition of the property
subject to such Lien or upon which such Lien is placed (or, if later,
the incurrence of the Debt secured by such Lien), the Company could
incur at least $1 of additional Funded Debt pursuant to clause (ix)
below,
(ix) Funded Debt of the Company (other than Funded Debt
owing to a Restricted Subsidiary) in addition to that otherwise
permitted by the foregoing clauses of this paragraph 6B(2), including
guarantees of Debt to the extent permitted by paragraph 6B(3) and not
otherwise permitted by the foregoing clauses of this paragraph 6B(2),
provided that, on the date the Company becomes liable with respect to
any such additional Funded Debt and immediately after giving effect
thereto and to the concurrent retirement of any other Funded Debt, the
ratio of Pro Forma Free Cash Flow to Maximum Pro Forma Annual Interest
Charges is not less than 2.25 to 1.0,
(x) from and after the time that the Facilities
Subsidiary becomes a Restricted Subsidiary, Debtincurred by the
Facilities Subsidiary pursuant to (a) the Facilities Subsidiary's
Revolving Credit Facility (and any extension, renewal, refunding or
refinancing thereof, including any refunding or refinancing in an
amount in excess of the principal amount then outstanding under the
Facilities Subsidiary's Revolving Credit Facility), or (b) a bank
credit facility which is unsecured or is secured by Liens permitted by
paragraph 6B(1)(ix), provided that the aggregate outstanding principal
amount of all Debt permitted by this clause (x) shall at no time
exceed $20,000,000, and provided, further, that to the extent that the
Facilities Subsidiary is a Restricted Subsidiary, the Facilities
Subsidiary shall not suffer to exist any Debt permitted by this clause
(x) on any day unless there shall have been a period of at least 45
consecutive
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Plum Creek Timber Company, L.P. Senior Note Agreement
days within the 12 months immediately preceding such day during which
the Facilities Subsidiary shall have been free from all Debt permitted
by this clause (x), and
(xi) from and after the time that the Facilities
Subsidiary or any Designated Immaterial Subsidiary becomes a
Restricted Subsidiary, Debt of the Facilities Subsidiary or any such
Designated Immaterial Subsidiary outstanding at the time the
Facilities Subsidiary or such Designated Immaterial Subsidiary becomes
a Restricted Subsidiary, provided that (a) immediately after the
Facilities Subsidiary or any such Designated Immaterial Subsidiary
becomes a Restricted Subsidiary, the Company could incur at least $1
of additional Funded Debt pursuant to clause (ix) above (the
Facilities Subsidiary or any such Designated Immaterial Subsidiary
shall be deemed to be a Restricted Subsidiary for the four consecutive
fiscal quarters immediately prior to its becoming a Restricted
Subsidiary for purposes of determining Pro Forma Free Cash Flow), and
(b) the aggregate amount (without duplication) of such Debt and all
other Debt which is secured by Liens and permitted by clause (vii) of
paragraph 6B(1) does not violate subclause (z) of the proviso to such
clause (vii);
provided that notwithstanding any other provision in this paragraph 6B(2), any
guarantee issued by the Company of any Funded Debt or Current Debt of any
Subsidiary shall be subordinated to the Notes by subordination provisions
substantially the same as those contained in paragraph 7I of the Mortgage Note
Agreements;
6B(3) LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES
Make or permit to remain outstanding any loan or advance to, or
guarantee, endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations, stock or dividends of, or own,
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person (all of the
foregoing, other than Designated Repurchases permitted by paragraph 6A hereof,
being referred to herein as "Investments"), except that the Company or any
Restricted Subsidiary may
(i) make Investments in the Facilities Subsidiary,
provided that the Company will not make or permit any Restricted
Subsidiary to make any such Investment (including any guaranty of
obligations of the Facilities Subsidiary not otherwise permitted by
this paragraph 6B(3)) unless (a) immediately after givingeffect to
such Investment, no Event of Default or Default, or "Default" or
"Event of Default" as defined in the Mortgage Note Agreements, shall
exist, (b) immediately prior to giving effect to such Investment, no
Default or Event of Default (other than under clause (xvi) of
paragraph 7A) shall exist, and (c) immediately after giving effect to
such Investment, the ratio of Pro Forma Free Cash Flow to Maximum Pro
Forma Annual Interest Charges is not less than 2.5 to 1.0,
(ii) own, purchase or acquire real or personal property to
be used in the ordinary course of its business,
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Plum Creek Timber Company, L.P. Senior Note Agreement
(iii) own, purchase or acquire Investments of the type
specified in, and in accordance with the requirements and limitations
of, the Investment Policy,
(iv) continue to own Investments owned on the date of
closing as set forth on Exhibit E,
(v) endorse negotiable instruments for collection in the
ordinary course of business,
(vi) become and be obligated under the Guarantee and under
the guarantees permitted by clauses (vi) and (vii) of paragraph 6B(2),
and acquire and own subordinated subrogation rights upon performance
of such guarantees,
(vii) make advances in the ordinary course of conducting
the business of the Company or any Restricted Subsidiary, including
deposits permitted under paragraph 6B(1)(iii), advances to employees
for travel, relocation and other employment related expenses, advances
to contractors performing services for the Company or such Restricted
Subsidiary, advances to owners of timber or timber properties to
acquire rights to harvest timber and other similar advances,
(viii) make Investments in Restricted Subsidiaries, or any
entity which immediately after such Investment will be a Restricted
Subsidiary, and
(ix) make Investments not otherwise permitted by this
paragraph 6B(3) in entities engaged solely in a Permitted Business,
provided that the cumulative aggregate amount of such Investments
(calculated at original cost and including the principal amount of any
obligations guaranteed to the extent such guarantees are not otherwise
permitted by this paragraph 6B(3)) outstanding from time to time made
pursuant to this clause (ix) between the date of closing and any date
thereafter shall not exceed the greater of $30,000,000 or 60% of the
average annual Pro Forma Free Cash Flow for the two fiscal years
preceding such date;
6B(4) SALE OF STOCK AND DEBT OF SUBSIDIARIES
Sell or otherwise dispose of, or part with control of, any shares of
stock or Debt of any Subsidiary, except to the Company or a Restricted
Subsidiary, and except that all shares of stock and Debt of any Subsidiary
(other than the Facilities Subsidiary) at the time owned by or owed to the
Company and its Restricted Subsidiaries may be sold as an entirety for a cash
consideration which represents the fair value (as determined in good faith by
the Responsible Representatives of the General Partner) at the time of sale of
the shares of stock and Debt so sold; provided that the assets of such
Subsidiary do not include any assets which could not be disposed of pursuant to
the provisions of paragraph 6B(5) unless the conditions to thesale of such
assets set forth in paragraph 6B(5) are complied with, and further provided
that, at the time of such sale, such Subsidiary shall not own, directly or
indirectly, any shares of stock or Debt of any other Subsidiary (unless all of
the shares of stock and
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Plum Creek Timber Company, L.P. Senior Note Agreement
Debt of such other Subsidiary owned, directly or indirectly, by the Company and
its Subsidiaries are simultaneously being sold as permitted by this paragraph
6B(4));
6B(5) MERGER AND SALE OF ASSETS
Merge or consolidate with any other Person or sell, lease or transfer
or otherwise dispose of any assets (other than inventory sold in the ordinary
course of business) except that
(i) any Restricted Subsidiary may merge with the Company
(provided that the Company shall be the continuing or surviving
entity) or with any one or more other Restricted Subsidiaries,
(ii) any Restricted Subsidiary may sell, lease, transfer
or otherwise dispose of any of its assets to the Company or a
Restricted Subsidiary,
(iii) any Restricted Subsidiary may merge or consolidate
with any other entity, provided that, immediately after giving effect
to such merger or consolidation, (a) the continuing or surviving
entity of such merger or consolidation shall be a solvent corporation
or partnership organized under the laws of any State of the United
States of America and shall constitute a Restricted Subsidiary, (b) no
Event of Default or Material Default shall exist, and (c) following
the merger, the entity surviving the merger is not engaged in any
business other than a Permitted Business, provided that, after giving
effect on a pro forma basis to such merger or consolidation, the gross
revenue contribution of pulp and paper manufacturing activities of the
Company and its Subsidiaries on a combined basis for the 12 months
preceding such merger or consolidation does not exceed 33% of the
total revenues of the Company and its Subsidiaries on a combined
basis,
(iv) the Company may merge or consolidate with, or sell or
dispose of all or substantially all of its assets to, any other
entity, provided that (a) either (x) the Company shall be the
continuing or surviving entity (in the case of any such merger), or
(y) the successor or acquiring entity shall be a solvent corporation
or partnership organized under the laws of any State of the United
States of America and shall expressly assume in writing all of the
obligations of the Company under this Agreement and on the Notes,
including all covenants herein and therein contained, and such
successor or acquiring corporation or partnership shall succeed to and
be substituted for the Company with the same effect as if it had been
named herein as a party hereto, provided, however, that no such sale
shall release the Company from any of its obligations and liabilities
under this Agreement or the Notes unless such sale is followed by the
complete liquidation of the Company and substantially all the assets
of the Company immediately following such sale are distributed in such
liquidation, and (b) immediately after such merger or consolidation or
such sale or other disposition, (x) no Event of Default or Material
Default shall exist, (y) the Company could incur at least $1 of
additional Funded Debt pursuant to paragraph 6B(2)(ix), and (z) the
entity surviving the merger or consolidation or to which such assets
have been transferred is
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Plum Creek Timber Company, L.P. Senior Note Agreement
not engaged in any business other than aPermitted Business, provided
that, after giving effect on a pro forma basis to such merger,
consolidation or sale, the gross revenue contribution of pulp and
paper manufacturing activities of the merged or consolidated entity
and its Subsidiaries on a combined basis for the 12 months preceding
such merger, consolidation or sale does not exceed 33% of total
revenues of the Company or such merged or consolidated entity, as the
case may be, and its Subsidiaries on a combined basis,
(v) the Company or any Restricted Subsidiary may sell
Designated Acres for the fair value thereof as reasonably determined
in good faith by the Responsible Representatives,
(vi) the Company and its Restricted Subsidiaries may
exchange Timberlands with other Persons in the ordinary course of
business, provided that (a) the fair value of the Timberlands plus any
net cash proceeds received in such exchange is, in the good faith
judgment of the Responsible Representatives, not less than the fair
value of Timberlands exchanged plus any other consideration paid, (b)
such exchange would not materially and adversely affect the business,
property or assets, condition or results of operations of the Company
and its Restricted Subsidiaries on a combined basis or of the
Facilities Subsidiary or impair the ability of the Company to perform
its obligations hereunder or under the Notes, and (c) any Timberlands
so exchanged shall be deemed sold to the extent of cash proceeds
received in such exchange and such sales shall be allowed only to the
extent otherwise permitted by this paragraph 6B(5),
(vii) the Company and its Restricted Subsidiaries may sell
properties for not less than the fair value thereof as determined in
good faith by the Responsible Representatives, provided that the
aggregate net proceeds of such sales in any calendar year do not
exceed an amount equal to one percent (1%) of Consolidated Total
Assets, determined as of the last day of the immediately preceding
calendar year, and
(viii) the Company and its Restricted Subsidiaries may
otherwise sell for cash properties in an amount not less than the fair
value thereof as determined in good faith by the Responsible
Representatives if and only if (a) immediately after giving effect to
such proposed sale, no condition or event shall exist which
constitutes an Event of Default or Material Default, (b) the net
proceeds of any such sale (x) are applied, within 180 days after such
sale, to the repayment of Qualified Debt selected by the Company,
which, in the case of the Notes, shall be a prepayment pursuant to
paragraph 4A(2), or (y) are applied, within 180 days after such sale,
to the purchase of productive assets in the same line of business, and
(c) immediately after giving effect to such sale (giving effect on a
pro forma basis to any proposed retirement of Qualified Debt out of
the proceeds thereof), the Company could incur $1 of additional Funded
Debt pursuant to paragraph 6B(2)(ix); provided that, if (I) the net
proceeds of any such sale exceed $50,000,000 (and such proceeds are
not immediately applied in accordance with clause (b) above), or (II)
the unapplied net proceeds of all such sales exceed $100,000,000 in
the aggregate at any time, all the net proceeds of any such sale
described in clause (I) and/or all the unapplied net proceeds of such
sales described in
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Plum Creek Timber Company, L.P. Senior Note Agreement
clause (II), as the case may be, shall be placed immediately in an
escrow or cash collateral account or accounts, pursuant to an
agreement or agreements in form and substance reasonably satisfactory
to the holders of greater than 50% of the outstanding principal amount
of Qualified Debt, for the purpose of application in accordance with
clause (b) above;
6B(6) HARVESTING RESTRICTIONS
In any calendar year, harvest Timber on the Timberlands then owned by
the Company in excess of the amount set forth for such calendar year in the
following table:
<TABLE>
<S> <C>
MAXIMUM CUNITS
CALENDAR YEAR TO BE HARVESTED
1996 1,470 MCCF
1997 through 2000 1,970 MCCF
2001 and each calendar year thereafter 1,910 MCCF
</TABLE>
plus, in each year, the amount, if any, by which (a) the sum of (x) the
cumulative amount set forth in the table above for the years preceding such
year of determination and (y) 2,130 MCCF, exceeds (b) the cumulative amount
actually harvested in such years preceding such year of determination;
unless the net cash proceeds from such excess harvest are either (i) applied,
within 180 days after any such excess harvest, to the repayment of Qualified
Debt selected by the Company, which, in the case of the Notes, shall be a
prepayment pursuant to paragraph 4A(2), or (ii) applied, within 180 days after
any such excess harvest, to purchase Timber (including Timber on Timberlands
purchased) having a fair value (in the good faith judgment of the Responsible
Representatives) not less than the fair value of the Timber subject to such
excess harvest; provided that, if the net proceeds of any such excess harvest
exceed $50,000,000 (and such proceeds are not immediately applied in accordance
with clause (i) or (ii) above), all the net proceeds of such excess harvest
shall be placed immediately in an escrow or cash collateral account or
accounts, pursuant to an agreement or agreements in form and substance
reasonably satisfactory to the holders of greater than 50% of the outstanding
principal amount of Qualified Debt, for the purpose of application in
accordance with clause (i) or (ii) above;
6B(7) SALE AND LEASE-BACK
Enter into any arrangement with any lender or investor or to which
such lender or investor is a party providing for the leasing by the Company or
any Restricted Subsidiary of real or personal property which has been or is to
be sold or transferred by the Company or any Restricted Subsidiary to such
lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or
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Plum Creek Timber Company, L.P. Senior Note Agreement
rental obligations of the Company or any Restricted Subsidiary, provided that
this paragraph 6B(7) shall not apply to any property sold pursuant to clause
(vii) of paragraph 6B(5);
6B(8) CERTAIN CONTRACTS
Enter into or be a party to
(i) any contract providing for the making of loans,
advances or capital contributions to any Person or for the purchase of
any property from any Person, in each case in order primarily to
enable such Person to maintain working capital, net worth or any other
balance sheet condition or to pay debts, dividends or expenses, or
(ii) any contract for the purchase of materials, supplies
or other property or services if such contract (or any related
document) requires that payment for such materials, supplies or other
property or services shall be made regardless of whether or not
delivery of such materials, supplies or other property or services is
ever made or tendered, provided that nothing in this clause (ii) shall
prevent the Company from (a) entering into take-or-pay contracts in
the ordinary course of business with the United States Forest Service,
the Bureau of Land Management, the Washington Department of Natural
Resources or similar state or federal governmental agencies, or (b)
making payments in satisfaction of contracts with such Persons which
contracts are deemed by the Responsible Representatives to be
disadvantageous to perform, or
(iii) any contract to rent or lease (as lessee) any real or
personal property if such contract (or any related document) provides
that the obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in commercial
leases then in general use or requires that the lessee purchase or
otherwise acquire securities or obligations of the lessor, or
(iv) any contract for the sale or use of materials,
supplies or other property, or the rendering of services, if such
contract (or any related document) requires that payment for such
materials, supplies or other property, or the use thereof, or payment
for such services, shall be subordinated to any indebtedness (of the
purchaser or user of such materials, supplies or other property or the
Person entitled to the benefit of such services) owed or to be owed to
any Person, or
(v) any other contract which in economic effect, is
substantially equivalent to a guarantee
except as permitted by the provisions of clauses (i), (v), (vi), (vii), (viii)
or (ix) of paragraph 6B(3);
6B(9) TRANSACTIONS WITH AFFILIATES
Directly or indirectly engage in any transaction (including, without
limitation, the purchase, sale or exchange of assets or the rendering of any
service) with any Affiliate
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Plum Creek Timber Company, L.P. Senior Note Agreement
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Restricted Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such Restricted
Subsidiary, as the case may be, than those which might be obtained in an arm's
length transaction at the time from Persons which are not such an Affiliate.
The foregoing shall not prohibit Designated Repurchases otherwise permitted by
this Agreement.
6C. CONDUCT OF BUSINESS
The Company covenants that it will not, and will not permit any
Subsidiary to, engage in any business other than Permitted Businesses.
6D. ISSUANCE OF STOCK BY SUBSIDIARIES
The Company covenants that it will not permit any Subsidiary (either
directly, or indirectly by the issuance of rights or options for, or securities
convertible into, such shares) to issue, sell or otherwise dispose of any
shares of any class of its stock or partnership or other ownership interests
(other than directors' qualifying shares) except to the Company or a Restricted
Subsidiary and except to the extent that holders of minority interests may be
entitled to purchase stock by reason of preemptive rights.
7. EVENTS OF DEFAULT
7A. ACCELERATION
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or otherwise):
(i) the Company defaults in the payment of any principal
or of premium on any Note when the same shall become due, either by
the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest
on any Note for more than 10 days after the date due; or
(iii) the Company or any Restricted Subsidiary (a) defaults
in any payment of principal of or interest on any other obligation for
money borrowed (or any payment obligation under the Guarantee, any
Capital Lease Obligation, any obligation under a conditional sale or
other title retention agreement, any obligation issued or assumed as
full or partial payment for property whether or not secured by a
purchase money mortgage or any obligation under notes payable or
drafts accepted representing extensions of credit) beyond any period
of grace provided with respect thereto, or (b) fails to perform or
observe any other agreement, term or condition contained in any
agreement under which any such obligation is created within any
applicable grace period provided therein (or if any other event
thereunder or under any such
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Plum Creek Timber Company, L.P. Senior Note Agreement
agreement shall occur and be continuing) and the effect of such
failure or other event is (x) to then cause such obligation to become
due prior to any stated maturity or (y) to then permit the holder or
holders of such obligation (or a trustee on behalf of such holder or
holders) to cause such obligation to become due prior to any stated
maturity, provided that the aggregate outstanding principal amount of
all obligations as to which such payment defaults shall occur and be
continuing or such failures or other events causing or permitting
acceleration shall occur and be continuing exceeds $5,000,000; or
(iv) any representation or warranty made by the Company
herein or in any writing furnished in connection with or pursuant to
this Agreement shall be false in any material respect on the date as
of which made; or
(v) the Company fails to perform or observe any agreement
contained in the last sentence of paragraph 5A or in paragraph 6; or
(vi) the Company fails to perform or observe any other
agreement, term or condition contained herein and such failure shall
not be remedied within 30 consecutive days after written notice
thereof shall have been received by the Company from any holder of any
Note; or
(vii) the Company or the General Partner or any Restricted
Subsidiary makes a general assignment for the benefit of creditors or
is generally not paying its debts as such debts become due; or
(viii) any decree or order for relief in respect of the
Company or the General Partner or any Restricted Subsidiary is entered
under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (herein called the
"Bankruptcy Law"), of any jurisdiction; or
(ix) the Company or the General Partner or any Restricted
Subsidiary petitions or applies to any tribunal for, or consents to,
the appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official of the Company or the
General Partner or any Restricted Subsidiary, or of any substantial
part of the assets of the Company or the General Partner or any
Restricted Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a
Restricted Subsidiary) relating to the Company or the General Partner
or any Restricted Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(x) any such petition or application is filed, or any
such proceedings as described in clause (ix) above are commenced,
against the Company or the General Partner or any Restricted
Subsidiary and the Company or the General Partner or such Restricted
Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such
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Plum Creek Timber Company, L.P. Senior Note Agreement
trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company or the General Partner or any
Restricted Subsidiary decreeing the dissolution, winding-up or
liquidation of the Company or the General Partner or any Restricted
Subsidiary and such order, judgment or decree remains unstayed and in
effect for more than 60 consecutive days; or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Restricted Subsidiary decreeing
a split-up of the Company or such Restricted Subsidiary which requires
the divestiture of assets representing a substantial part, or the
divestiture of the stock of or partnership or other ownership interest
in a Subsidiary whose assets represent a substantial part, of the
combined assets of the Company and its Restricted Subsidiaries
(determined in accordance with generally accepted accounting
principles) or which requires the divestiture of assets, or stock of
or partnership or other ownership interest in a Subsidiary, which
shall have contributed a substantial part of the combined net income
of the Company and its Restricted Subsidiaries (determined in
accordance with generally accepted accounting principles) for any of
the three fiscal years then most recently ended, and such order,
judgment or decree remains unstayed and in effect for more than 60
consecutive days; or
(xiii) a final judgment (which is non-appealable or has not
been stayed pending appeal or as to which all rights to appeal have
expired or been exhausted) in an amount in excess of $5,000,000 is
rendered against the Company or any Restricted Subsidiary and, within
60 consecutive days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within 60
consecutive days after the expiration of any such stay, such judgment
is not discharged; or
(xiv) this Agreement shall at any time, for any reason,
cease to be in full force and effect or shall be declared to be null
and void in whole or in any material part by the final judgment (which
is nonappealable or has not been stayed pending appeal or as to which
all rights to appeal have expired or been exhausted) of any court or
other governmental or regulatory authority having jurisdiction in
respect thereof, or the validity or the enforceability of this
Agreement shall be contested by or on behalf of the Company, or the
Company shall renounce this Agreement, or deny that it is bound by the
terms hereof or has any further liability hereunder; or
(xv) any "Event of Default" as defined in the Mortgage
Note Agreements shall exist; or
(xvi) the Facilities Subsidiary, any Subsidiary of the
Facilities Subsidiary or any Designated Immaterial Subsidiary,
immediately after they become Restricted Subsidiaries under the
definition of "Restricted Subsidiary" contained in
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Plum Creek Timber Company, L.P. Senior Note Agreement
paragraph 10B, shall have any Debt outstanding which is not permitted
by clause (x) or (xi) of paragraph 6B(2) insofar as it relates to such
Facilities Subsidiary, Subsidiary of the Facilities Subsidiary or
Designated Immaterial Subsidiary; or
(xvii) if any of the events or conditions or series of
events or conditions described in subparagraph (vii) of paragraph 5A
occurs which events or conditions or series of events or conditions
have, or could reasonably be expected to have, a material adverse
effect on the business, condition (financial or other), assets,
properties or operations of the Company or the Company and its
Restricted Subsidiaries taken as a whole;
then (a) if such event is an Event of Default specified in clause (viii) , (ix)
or (x) of this paragraph 7A with respect to the Company, all of the Notes at
the time outstanding shall automatically become immediately due and payable at
par together with interest accrued thereon, without presentment, demand,
protest or notice of any kind, all of which are hereby waived by the Company,
and (b) if such event is any other continuing Event of Default, the holder or
holders of a majority of the aggregate principal amount of the Notes at the
time outstanding may at its or their option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall thereupon
be and become, immediately due and payable together with interest accrued
thereon and together with the Yield-Maintenance Premium, if any, with respect
to each Note, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Company andthe Company shall give notice
in writing of such declaration to the other holders, provided that (x) if such
event is a continuing Event of Default specified in clause (i) or (ii) of this
paragraph 7A in respect of any Note, any Significant Holder may, at its option,
by notice in writing to the Company, declare all of the Notes held by such
Significant Holder to be, and all of such Notes shall thereupon be and become,
immediately due and payable together with interest accrued thereon and together
with the Yield-Maintenance Premium, if any, with respect to each such Note,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (y) if any Significant Holder shall have
declared all of the Notes held by such Significant Holder to be due and payable
pursuant to clause (x) of this proviso, then the Company shall give notice in
writing of such declaration to the other holders and any other holder may at
any time thereafter and until the later of (A) the expiration of 60 days after
such other holder shall have received notice from the Company of such
declaration and (B) the date on which all Events of Default and Defaults have
been cured or waived pursuant to paragraph 11C, by notice in writing to the
Company, declare all of the Notes held by such other holder to be immediately
due and payable, together with interest accrued thereon and together with the
Yield-Maintenance Premium, if any, with respect to each such Note without
presentment, demand, protest or any other notice of any kind, all of which are
hereby waived by the Company, and (z) the Yield-Maintenance Premium, if any,
with respect to each Note shall be due and payable upon any such declaration
only if (1) such event is a continuing Event of Default specified in any of
clauses (i) through (vi), inclusive, (xiii), (xiv), (xv), (xvi) and (xvii) of
this paragraph 7A, (2) the holder or holders effecting such declaration shall
have given to the Company, at least 10 Business Days before such declaration,
written notice stating its or their intention so to declare the Notes to be
immediately due and payable and identifying one or more such
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Plum Creek Timber Company, L.P. Senior Note Agreement
Events of Default whose occurrence on or before the date of such notice permits
such declaration and (3) one or more of the Events of Default so identified
shall be continuing at the time of such declaration.
At any time after the principal of, and interest accrued on, any or
all of the Notes are declared due and payable, the holders of not less than 66
2/3% aggregate principal amount of the Notes then outstanding, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (x) the Company has paid all overdue interest on the Notes, the
principal of and premium, if any, on any Notes which have become due otherwise
than by reason of such declaration, and interest on such overdue principal and
premium and (to the extent permuted by applicable law) any overdue interest in
respect of such Notes of each series at a rate per annum from time to time
equal to the greater of (i) one percent over the rate of interest borne by the
Notes of such series or (ii) the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time in New York as its Prime
Rate plus 2.0%, (y) all Events of Default and Defaults, other than non-payment
of amounts which have become due solely by reason of such declaration, have
been cured or waived pursuant to paragraph 11C, and (z) no judgment or decree
has been entered for the payment of any monies due pursuant to the Notes or
this Agreement; but no such rescission andannulment shall extend to or affect
any subsequent Event of Default or Default or impair any right consequent
thereon.
7B. OTHER REMEDIES
If any Event of Default shall occur and be continuing, the holder of
any Note may proceed to protect and enforce its rights under this Agreement and
such Note by exercising such remedies as are available to such holder in
respect thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any covenant or other
agreement contained in this Agreement or in aid of the exercise of any power
granted in this Agreement. No remedy conferred in this Agreement upon the
holder of any Note is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy conferred herein or now or hereafter existing at law or in equity
or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES
The Company represents, covenants and warrants:
8A. ORGANIZATION
The Company is a limited partnership duly organized, validly existing
and in good standing under the Delaware Revised Uniform Limited Partnership Act
and has all requisite partnership power and authority to own and operate its
properties, to conduct its business as currently conducted, to enter into this
Agreement, to issue and sell the Notes and to carry out the terms of this
Agreement and the Notes.
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Plum Creek Timber Company, L.P. Senior Note Agreement
8B. GENERAL PARTNER NET WORTH
On the date of closing the General Partner will have a net worth
(excluding its interest in the Company and any notes receivable from or payable
to the Company) at least equal to the amount sufficient to meet the tax
requirements for a general partner of a Delaware limited partnership (based on
the fair market value of its assets).
8C. SUBSIDIARIES
The General Partner owns 2% and the Company owns 98% of the limited
partnership interest in Manufacturing. The General Partner owns 4% and the
Company owns 96% of the issued and outstanding stock of Marketing. The
Facilities Subsidiary Stock has been duly authorized and validly issued, is
fully paid and non-assessable and is owned free and clear of any Liens. The
Facilities Subsidiary has issued no rights, warrants or options to acquire or
instruments convertible into or exchangeable for any equity interest in the
Facilities Subsidiary. On the date of closing the Company will have no
Subsidiaries other than the Facilities Subsidiary and those listed on Exhibit
8C.
8D. PARTNERSHIP INTERESTS
The only general partner of the Company is the General Partner, which
on the date of closing will own a 2% interest in the Company.
8E. QUALIFICATION
The Company is duly qualified or registered for the transaction of
business and in good standing as a foreign limited partnership in each of the
State of Arkansas, the State of Idaho, the State of Louisiana, the State of
Montana, the State of Texas and the State of Washington, which are the only
jurisdictions in which the failure so to qualify or be registered would have a
material adverse effect on the business, property or assets, condition, or
results of operations of the Company, or on the ability of the Company to
perform its obligations under this Agreement and the Notes.
8F. BUSINESS; FINANCIAL STATEMENTS
(a) The Company and its Subsidiaries have not engaged in any
business or activities prior to the date of this Agreement other than (i)
owning, acquiring and disposing of Timber and Timberlands, and (ii) owning and
operating lumber mills, plywood and fiberboard manufacturing plants, and wood
chip plants. The Company and its Subsidiaries do not have any significant
assets other than Timber, Timberlands and the facilities described in clause
(ii) above, and, after giving effect to the application of the proceeds of the
Notes in accordance with paragraph 8S, on the date of closing will not have any
significant liabilities other than the Notes, the 11 1/8% Senior Notes, the
8.73% Senior Notes, the Guarantee and the Mortgage Notes or indebtedness under
the Bank of America Revolving Credit and Bridge Loan Agreement.
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Plum Creek Timber Company, L.P. Senior Note Agreement
(b) The Company has delivered or caused to be delivered to each
Purchaser complete and correct copies of (i) the Company's Form 10-K as filed
with the Securities and Exchange Commission on March 6, 1996 and the Company's
Form 10-Qs as filed with the Securities and Exchange Commission on May 13, 1996
and August 14, 1996 (together, the "1934 Act Reports") and (ii) the memorandum
dated October 1996 prepared by the Company for use in connection with the
Company's private placement of the Notes (such memorandum, including, without
limitation, the preliminary prospectus contained therein, being herein called
the "Memorandum"). The annual financial statements and schedules included in
the 1934 Act Reports have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
specified and present fairly the financial position for the dates specified,
and the results of their operations and cash flows of the Company for the
respective periods specified. The quarterly financial statements and schedules
included in the 1934 Act Reports present fairly the financial position for the
dates specified and the results of operations for the quarterly periods
presented. The pro forma financial information set forth in the Memorandum is
based upon assumptions stated in the Memorandum that are reasonable in all
material respects and the financial projections contained therein are
reasonable based upon such reasonable assumptions and the best information
available to the officers of the Company.
8G. CHANGES, ETC
Except as contemplated by this Agreement or disclosed in Exhibit 8G,
subsequent to December 31, 1995, (a) neither the Company nor the Facilities
Subsidiary has incurred any material liabilities or obligations, direct or
contingent, or entered into any material transactions not in the ordinary
course of business, and (b) there has not been (i) any material adverse change
in the financial condition or operations of the Company or the Facilities
Subsidiary or (ii) any Restricted Payment of any kind declared, paid or made by
the Company.
8H. TAX RETURNS AND PAYMENTS
The Company and each of its Restricted Subsidiaries has filed all tax
returns required by law to be filed by it (or obtained extensions with respect
thereto) and has paid all material taxes, assessments and other material
governmental charges levied upon it, or any of its properties, assets, income
or franchises which are due and payable by it, other than those which are not
past due or delinquent or the non-payment of which is permitted by paragraph
5E.
8I. FRANCHISES, LICENSES, AGREEMENTS, ETC.
Except as disclosed in Exhibit 8T, the Company is in possession of and
operating in substantial compliance with all franchises, grants,
authorizations, approvals, licenses, permits, easements, consents, certificates
and orders required to own or lease its properties and to permit the conduct of
its business, except for those franchises, grants, authorizations, approvals,
licenses, permits, easements, consents, certificates and orders the failure of
which to be obtained, given or complied with would not individually or in the
aggregate materially
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Plum Creek Timber Company, L.P. Senior Note Agreement
and adversely affect the business, property or assets, condition or operations
of the Company or impair the ability of the Company to perform its obligations
hereunder or under the Notes or impair the validity or enforceability of this
Agreement or the Notes.
8J. ACTIONS PENDING
There is no action, suit, investigation or proceeding pending or, to
the knowledge of the Company, threatened against the Company, or any properties
or rights of the Company, by or before any court, arbitrator or administrative
or governmental body which questions the validity of this Agreement or the
Notes or any action taken or to be taken pursuant to this Agreement or the
Notes or which would be reasonably likely to result in any material adverse
change in the business, property or assets, condition or operations of the
Company, or in the inability of the Company to perform its obligations
hereunder or under the Notes.
8K. TITLE TO PROPERTIES
Except as disclosed in Exhibit 8K, the Company has good title to its
real properties (other than properties which it leases) and good title to all
of its other properties and assets, subject to no Lien of any kind except Liens
permitted by paragraph 6B(l), and except such Liens as do not materially
interfere with the full ownership and enjoyment of such properties and assets.
All leases necessary in any material respect for the conduct of the respective
businesses of the Company and its Subsidiaries are valid and subsisting and are
in full force and effect.
8L. COMPLIANCE WITH OTHER INSTRUMENTS, ETC.
The Company is not in violation of any term of the Partnership
Agreement or of any term of any other agreement or instrument to which it is a
party or by which it or any of its properties is bound or any term of any
applicable law, ordinance, rule or regulation of any governmental authority or
any term of any applicable order, judgment or decree of any court, arbitrator or
governmental authority, the consequences of which violation would be reasonably
likely to have a material adverse effect on its business, property or assets,
condition or operations or on the ability of the Company to perform its
obligations under this Agreement or the Notes, and the execution, delivery and
performance by the Company of this Agreement and the Notes will not result in
any violation of or be in conflict with or constitute a default under any such
term or result in the creation of (or impose any obligation on the Company to
create) any Lien (other than the Liens contemplated by this Agreement) upon any
of the properties or assets of the Company, pursuant to any such term except
for Liens permitted by paragraph 6B(1); and there is no such term which
materially adversely affects or in the future would be likely to materially
adversely affect the business, property or assets, condition or operations of
the Company, or the ability of the Company to perform its obligations under
this Agreement or the Notes.
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Plum Creek Timber Company, L.P. Senior Note Agreement
8M. GOVERNMENTAL CONSENT
No consent, approval or authorization of, or declaration or filing
with, any governmental authority is required for the valid execution, delivery
and performance by the Company of this Agreement or the valid offer, issue,
sale and delivery of the Notes pursuant to this Agreement.
8N. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the issue and sale of the Notes by the Company nor its use of
the proceeds thereof as contemplated by this Agreement will violate any of the
regulations administered by the Office of Foreign Assets Control, United States
Department of the Treasury, including, without limitation, the Foreign Assets
Control Regulations, the Transaction Control Regulations, the Cuban Assets
Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets
Control Regulations, the Iranian Transactions Regulations, the Iraqi Sanctions
Regulations, the Haitian Transactions Regulations, the Libyan Sanctions
Regulations, and the Soviet Gold Coin Regulations (31 C.F.R., Subtitle B,
Chapter V, as amended) or the restrictions set forth in Executive Orders No.
12543 (Libya), 12544 (Libya), 12801 (Libya), 12722 (Iraq) or 12724 (Iraq),
12775 (Haiti), 12779 (Haiti), 12808 (Yugoslavia), 12810 (Yugoslavia) or 12831
(Yugoslavia), as amended, of the President of the United States of America or
of any rules or regulations issued thereunder.
8O. OFFERING OF NOTES
Neither the Company nor any agent acting on behalf of the Company has,
directly or indirectly, offered the Notes or any similar security of the
Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with
respect thereto with any Person other than 60 persons who are "accredited
investors" by reason of the provisions of clause (1), (3) or (7) of the
definition of that term in Regulation D under the Securities Act, each of whom
was offered a portion of the Notes at private sale for investment, and neither
the Company nor any agent acting on behalf of the Company has taken or will
take any action which would subject the issuance or sale of the Notes to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of anyapplicable jurisdiction.
8P. REGULATION G, ETC.
The Company does not own or have any present intention of acquiring
any "margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System (herein called "margin stock"). None
of the proceeds of the sale of the Notes will be used, directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any margin stock or for the purpose of maintaining, reducing or
retiring any indebtedness which was originally incurred to purchase or carry
any stock that is currently a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation G. Neither the Company nor any agent acting on its behalf has taken
or will take any action which might
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Plum Creek Timber Company, L.P. Senior Note Agreement
cause this Agreement or the Notes to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, as amended, in each case as in
effect now or as the same may hereafter be in effect.
8Q. ERISA
(a) Neither the Company nor any of its Subsidiaries has breached
the fiduciary rules of ERISA or engaged in any prohibited transaction which, in
any such case, could reasonably be expected to result in any direct or indirect
material liability (including, without limitation, as a result of an
indemnification obligation) to the Company or any of its Subsidiaries in
connection with a suit for damages or pursuant to section 409, 502(i) or 502(l)
of ERISA or section 4975 of the Code, which liability, either individually or
in the aggregate, has had or could reasonably be expected to have a material
adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company or the Company and its Restricted
Subsidiaries taken as a whole.
(b) None of the Company, any of its Subsidiaries or any Related
Person has incurred any direct or indirect material liability (including,
without limitation, as a result of an indemnification obligation) under or
pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of
the Code relating to employee benefit plans, which liability has had or could
reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties or operations of the Company
or the Company and its Restricted Subsidiaries taken as a whole. No event,
transaction or condition has occurred or exists or, to the Company's Knowledge,
is expected to occur or exist with respect to any Plan that could reasonably be
expected to result in any direct or indirect material liability to the Company,
any of its Subsidiaries or any Related Person (including, without limitation,
as a result of an indemnification obligation) under or pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans, which liability has had or could reasonably be expected
to have a material adverse effect on the business, condition (financial or
other), assets, properties or operations of the Company or the Company and its
Restricted Subsidiaries taken as a whole. There has been no reportableevent
(within the meaning of section 4043(b) of ERISA), other than reportable events
for which the notification requirements have been waived in regulations or
other pronouncements issued by the PBGC, or any other event or condition with
respect to any Plan which presents a risk of the termination of, or the
appointment of a trustee to administer, any such Plan by the PBGC.
(c) Full payment (made in a timely manner such that any incidental
delay in making a payment, if any, has not resulted in any Lien or any material
liability to the Company, any of its Subsidiaries or any Related Person) has
been made of all amounts which the Company, any of its Subsidiaries or any
Related Person is required under applicable law, the terms of each Plan or any
collective bargaining agreement to have paid as contributions to each such
Plan, and no accumulated funding deficiency (as defined in section 302 of ERISA
or section 412 of the Code), whether or not waived, exists or is expected to
exist with respect to any Plan (other than a Multiemployer Plan).
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Plum Creek Timber Company, L.P. Senior Note Agreement
(d) The present value of the accumulated benefit obligations
(whether or not vested) under each Plan (other than a Multiemployer Plan),
determined as of the end of each such Plan's most recently ended Plan year on
the basis of the actuarial assumptions specified for funding purposes in each
such Plan's actuarial valuation report for such Plan year, each of which
assumptions is reasonable and in compliance with section 412 of the Code, did
not exceed the current value of the assets of each such Plan allocable to such
accumulated benefit obligations by an amount which could have a material
adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company or the Company and its Restricted
Subsidiaries taken as a whole, and no event has occurred since such date that
could reasonably be expected to cause the present value of such accumulated
benefit obligations to increase by a material amount. The terms "present
value" and "current value" shall have the meanings assigned to such terms in
section 3 of ERISA, and the term "accumulated benefit obligations" shall have
the meaning assigned to such term in Statement of Financial Accounting
Standards No. 87.
(e) None of the Company, any of its Subsidiaries or any Related
Person has incurred or expects to incur any withdrawal liability under Title IV
of ERISA with respect to any Multiemployer Plan or any Plan that is a "multiple
employer plan" within the meaning of section 4063 or 4064 of ERISA, which
liability has had or could reasonably be expected to have a material adverse
effect on the business, condition (financial or other), assets, properties or
operations of the Company or the Company and its Restricted Subsidiaries taken
as a whole. The aggregate withdrawal liability of the Company, its
Subsidiaries and the Related Persons with respect to all Multiemployer Plans
and Plans that are "multiple employer plans" within the meaning of section 4063
or 4064 of ERISA, determined as if a complete withdrawal had occurred on the
date hereof, does not exceed $25,000,000. To the Company's Knowledge, no
Multiemployer Plan is insolvent or in reorganization within the meaning of
section 4241 or 4245 of ERISA.
(f) The "expected postretirement benefit obligation" (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries under Plans which are
"employee welfare benefit plans" (as defined in section 3(1) of ERISA) did not
exceed $25,000,000.
(g) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction which is
subject to the prohibitions of section 406(a)(1)(A)-(D) of ERISA or in
connection with which a tax could be imposed on the Company pursuant to section
4975(c)(1)(A)-(D) of the Code. With respect to each employee benefit plan
identified in writing to the Company in accordance with paragraph 9(c), neither
the Company nor any "affiliate" thereof (as defined in section V(c) of
Prohibited Transaction Class Exemption 84-14 (the "QPAM Exemption")) has at
this time, and has not exercised at any time within the preceding year, the
authority to appoint or terminate the "QPAM" (as defined in the QPAM Exemption)
identified in accordance with paragraph 9(c) as manager of any of the assets of
any plan identified in accordance with paragraph 9(c), or to negotiate the
terms of any management agreement with such QPAM on
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Plum Creek Timber Company, L.P. Senior Note Agreement
behalf of any such plan, the Company is not an "affiliate" (as defined in
section V(c) of the QPAM Exemption) of such QPAM, and the Company is not a
party in interest with respect to any plan identified in accordance with
paragraph 9(c). The representations by the Company in this subparagraph (g) of
paragraph 8Q are made in reliance upon and subject to the accuracy of each
Purchaser's representation in paragraph 9 of this Agreement as to the source of
the funds to be used by such Purchaser to pay the purchase price of the Notes
to be purchased by it hereunder.
As used in this paragraph 8Q, the terms "employee benefit plan" and
"party in interest" have the respective meanings assigned to such terms in
section 3 of ERISA.
8R. STATUS UNDER CERTAIN FEDERAL STATUTES
The Company is not (i) an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended, (ii) a "holding company" or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company or of
a "subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended, (iii) a "public
utility" as such term is defined in the Federal Power Act, as amended, nor (iv)
a "rail carrier" or a person controlled by or affiliated with a "rail carrier",
within the meaning of Title 49, U.S.C., and neither the Company, the General
Partner nor the Facilities Subsidiary is a "carrier" to which 49 U.S.C. Section
11301(b)(1) is applicable.
8S. USE OF PROCEEDS
The Company will apply the proceeds of the sale of the Notes to the
Purchasers to repay amounts owing under the Bank of America Revolving Credit
and Bridge Loan Agreement.
8T. ENVIRONMENTAL MATTERS
(a) Except as disclosed in Exhibit 8T, to the Company's Knowledge,
the Company and its Subsidiaries are in compliance in all material respects
with all Environmental Laws applicable to them or to real property owned or
leased by them, or to the ownership, use, operation or occupancy thereof except
where the failure to be in compliance with such Environmental Laws would not
result in liability of the Company or any of its Subsidiaries in an aggregate
amount in excess of $25,000,000. To the Company's Knowledge, neither the
Company, its Subsidiaries nor any other Person acting at the direction of or on
behalf of the Company has engaged in any activity in violation of any provision
of any applicable Environmental Laws, which violation could reasonably be
expected to have a material adverse effect on the business, condition
(financial or other), assets, properties or operations of the Company or the
Company and its Restricted Subsidiaries taken as a whole.
(b) Except as permitted by paragraph 8I or as disclosed in Exhibit
8T, the Company has or will have on the date of closing all environmental
permits or licenses necessary for the conduct of its business as conducted on
the date of closing and, as to any such permit or
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Plum Creek Timber Company, L.P. Senior Note Agreement
license that has expired or is about to expire or is needed for the proposed
conduct of its business, the Company has or will have timely and properly
applied for renewal or receipt of the same. Exhibit F lists all material
notices from Federal, state or local environmental agencies to the Company
citing environmental violations that have not been finally resolved and
disposed of; no such violation, individually or in the aggregate, is reasonably
expected to have a material adverse effect on the business, property or assets,
condition or operations of the Company, and the Company is acting in compliance
with all such notices. Notwithstanding any such notice, the Company is
currently operating in compliance with the limits set forth in such
environmental permits or licenses except for such noncompliance as would not
reasonably be expected to have a material adverse effect on the business,
condition (financial or other), assets, properties or operations of the Company
or the Company and its Restricted Subsidiaries taken as a whole and to the
Company's Knowledge there are no threatened or pending proceedings for the
revocation, loss or termination of any such environmental permits or licenses.
Neither the Company nor any of its Subsidiaries is subject to any
order or decree of any governmental authority under any Environmental Laws,
which order or decree would reasonably be likely to result in a material
adverse effect on the business, condition (financial or other), assets,
properties or operations of the Company or the Company and its Restricted
Subsidiaries taken as a whole, nor is there any basis for such order or decree.
(c) All facilities located on the real property owned by the
Company or the Facilities Subsidiary on the date of closing which are subject
to regulation by the Federal Resource Conservation and Recovery Act, as in
effect on the date hereof, are and to the knowledge of the Company have been
operated in material compliance with such Act and the Company (or the
Facilities Subsidiary, as the case may be) has not received or, to the
knowledge of the Company, has not been threatened with, a notice of violation
under such Act regarding such facilities which can reasonably be expected to
have a material adverse effect on the business, property or assets, conditions
or operations of the Company (or the Facilities Subsidiary, as the case may be),
or the ability of the Company to perform its obligations under this Agreement
or the Notes.
(d) Except as disclosed in Exhibit 8T, with respect to the real
property owned by the Company (or the Facilities Subsidiary, as the case may
be) on the date of closing, there has not occurred to the knowledge of the
Company (i) any Release of any Hazardous Substance in a Reportable Quantity,
(ii) any discharge of any substance into ground, surface, or navigable waters
for which a notice of violation has been received or threatened under any
Federal, state or local laws, rules or regulations concerning water pollution,
or (iii) any assertion of any Lien pursuant to Federal, state or local
environmental law resulting from any use, spill, discharge or clean-up of any
hazardous or toxic substance or waste, which occurrence can reasonably be
expected to have a material adverse effect on the business, property or assets,
condition or operations of the Company (or the Facilities Subsidiary, as the
case may be). As used in this paragraph, the terms "Release," "Hazardous
Substance," and "Reportable Quantity" shall have the meanings assigned such
terms under the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) as in effect on the date thereof.
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Plum Creek Timber Company, L.P. Senior Note Agreement
8U. DISCLOSURE
Neither this Agreement, the Memorandum, the 1934 Act Reports nor any
other document, certificate or statement furnished to any Purchaser by or on
behalf of the Company in writing, in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading.
There is no fact peculiar to the Company which materially adversely affects or
in the future may (so far as the Company can now reasonably foresee) materially
adversely affect the business, property or assets, condition or results of
operations of the Company and which has not been set forth in this Agreement,
the Memorandum or the 1934 Act Reports or in the other documents, certificates
and statements in writing furnished to any Purchaser by or on behalf of the
Company prior to the date hereof in connection with the transactions
contemplated hereby.
9. REPRESENTATIONS OF THE PURCHASER
Each Purchaser represents, and in making this sale to such Purchaser
it is specifically understood and agreed between the Company and such
Purchaser, that such Purchaser is not acquiring the Notes to be purchased by it
hereunder with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act, provided that the disposition
of its property shall at all times be and remain within its control. Each
Purchaser understands that the Notes have not been registered under the
Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except
under circumstances where neither such registration nor such an exemption is
required by law, and that the Company is not required to register the Notes.
Each Purchaser also represents that it is an "accredited investor" by reason of
the provisions of clause (1), (3) or (7) of the definition of that term in
Regulation D under the Securities Act and that at least one of the following
statements is an accurate representation as to each source of funds to be used
by it to pay the purchaseprice of the Notes purchased by it hereunder:
(a) such Purchaser is an insurance company subject to state
regulation and the source of the funds being used by such Purchaser to pay the
purchase price of the Notes being purchased by it hereunder is an "insurance
company general account" within the meaning of Department of Labor Prohibited
Transaction Exemption ("PTE") 95-60 (issued July 12, 1995), and there is no
employee benefit plan (treating as a single plan, all employee benefit plans
maintained by the same employer or an affiliate (as defined in section V(a)(1)
of such PTE) of such employer or by the same employee organization) with
respect to which the amount of the general account reserves and liabilities for
all contracts held by or on behalf of such employee benefit plan exceeds ten
percent (10%) of the total reserves and liabilities of such general account
(exclusive of separate account liabilities) plus surplus, as set forth in the
NAIC Annual Statement filed with such Purchaser's state of domicile; or
(b) such Purchaser is an insurance company subject to state
regulation and to the extent that any part of the funds being used by it to pay
the purchase price of the
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Plum Creek Timber Company, L.P. Senior Note Agreement
Notes being purchased by it hereunder constitutes assets allocated to any
separate account maintained by it, (i) such separate account is an "insurance
company pooled separate account" within the meaning of PTE 90-1, in which case
such Purchaser has disclosed to the Company the name of each employee benefit
plan whose assets in such separate account exceed 10% of the total assets or
are expected to exceed 10% of the total assets of such account as of the date
of such purchase (and for the purposes of this subparagraph (b), all employee
benefit plans maintained by the same employer or employee organization are
deemed to be a single plan), or (ii) such separate account contains only the
assets of a specific employee benefit plan, complete and accurate information
as to the identity of which such Purchaser has delivered to the Company; or
(c) all of the funds being used by such Purchaser to pay the
purchase price of the Notes being purchased by it hereunder constitute assets
of an "investment fund" (within the meaning of Part V of the QPAM Exemption)
managed by a "qualified professional asset manager" or QPAM (within the meaning
of Part V of the QPAM Exemption), no employee benefit plan's assets which are
included in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such
employer or by the same employee organization and managed by such QPAM, exceed
20% of the total client assets managed by such QPAM, the conditions of Part
I(g) of the QPAM Exemption are satisfied and the identity of such QPAM and the
names of each employee benefit plan whose assets are included in such
investment fund have been disclosed to the Company; or
(d) such Purchaser is not an insurance company and all or a
portion of the funds to be used by it to pay the purchase price of the Notes
being purchased by it hereunder does not constitute assets of any employee
benefit plan (other than a governmental plan exempt from the coverage of ERISA)
and the remaining portion, if any, of such funds consists of funds which may be
deemed to constitute assets of one or more specific employee benefit plans,
complete and accurate information as to the identity of each of which such
Purchaser has delivered to the Company.
As used in this paragraph 9, the terms "employee benefit plan", "party in
interest" and "separate account" shall have the respective meanings assigned to
such terms in section 3 of ERISA.
10. DEFINITIONS
For the purpose of this Agreement, the terms defined in paragraphs 1
and 2 shall have the respective meanings specified therein, and the following
terms shall have the meanings specified with respect thereto below:
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Plum Creek Timber Company, L.P. Senior Note Agreement
10A. YIELD-MAINTENANCE TERMS
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in New York City are required or authorized to be
closed.
"Called Principal" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4A(2) (including
partial prepayments made pursuant to paragraphs 6B(5)(viii) and 6B(6)) or is
declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"Discounted Value" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance
with accepted financial practice and at a discount factor (applied on a
semiannual basis) equal to 50 basis points above the Reinvestment Yield with
respect to such Called Principal.
"Reinvestment Yield" shall mean, with respect to the Called Principal
of any Note, the yield to maturity implied by (i) the yields reported, as of
10:00 A.M.. (New York City time) on the Business Day next preceding the
Settlement Date with respect to such Called Principal, on the display
designated as the USD page in the Bloomberg Financial Markets Service (or such
other display as may replace the USD page in the Bloomberg Financial Markets
Service) for actively traded U.S. Treasury securities having a maturity equal
to the Remaining Average Life of such Called Principal as of such Settlement
Date, or if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, including by way of
interpolation, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between reported yields.
"Remaining Average Life" shall mean, (a) with respect to the Called
Principal of any Series A, B or C Note, the number of years (calculated to the
nearest one-twelfth year) which will elapse between the Settlement Date with
respect to such Called Principal and the stated maturity of such Note, and (b)
with respect to any Called Principal of any Series D Note, the number of years
(calculated to the nearest one-twelfth year) obtained by dividing (i) such
Called Principal into (ii) the sum of the products obtained by multiplying (I)
the principal component of each Remaining Scheduled Payment with respect to
such Called Principal by (II) the number of years (calculated to the nearest
one-twelfth year) that will elapse between the Settlement Date with respect to
such Called Principal and the scheduled due date of such Remaining Scheduled
Payment.
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Plum Creek Timber Company, L.P. Senior Note Agreement
"Remaining Scheduled Payments" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"Settlement Date" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4A(2) (including partial prepayments made pursuant to paragraphs
6B(5)(viii) and 6B(6)) or is declared to be immediately due and payable
pursuant to paragraph 7A, as the context requires.
"Yield-Maintenance Premium" shall mean, with respect to any Note, a
premium equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Premium shall in
no event be less than zero.
10B. OTHER TERMS
"Affiliate" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Restricted Subsidiary. A Person shall be deemed to control a
corporation or other entity if such Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
such corporation or other entity, whether through the ownership of voting
securities, by contract or otherwise.
"Available Cash" shall mean, with respect to any calendar quarter, (a)
the sum of:
(i) the Company's net income (or net loss) (excluding
gain on the sale of any Capital Asset) for such quarter,
(ii) the amount of depletion, depreciation, amortization
and other noncash charges utilized in determining net income of the
Company for such quarter,
(iii) the amount of any reduction in reserves of the
Company of the types referred to in clause (b)(iv) below,
(iv) proceeds received by the Company from the sale of
Designated Acres, and
(v) any Cash from Capital Transactions received by the
Company during such quarter in specific contemplation that such Cash
from Capital Transactions will be used to refund or refinance any
payment of Debt of the type specified in clause (b)(i) below which was
made in either of the two immediately preceding quarters,
less (b) the sum of
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Plum Creek Timber Company, L.P. Senior Note Agreement
(i) all payments of principal on Debt made by the Company
in such quarter (excluding any payments of principal on Debt made with
Cash from Capital Transactions received by the Company during such
quarter or, to the extent such Cash from Capital Transactions remains
available, received by the Company during the four immediately
preceding quarters),
(ii) capital expenditures made by the Company during such
quarter (excluding any capital expenditures for such quarter made with
Cash from Capital Transactions received by the Company during such
quarter or, to the extent such Cash from Capital Transactions remains
available, received by the Company during the four immediately
preceding quarters, and capital expenditures which the General Partner
reasonably anticipates will be financed with Cash from Capital
Transactions within 90 days from the end of such quarter),
(iii) the amount of any capital expenditures made by the
Company in a prior quarter which was anticipated would be financed
from Cash from Capital Transactions but which have not been financed
from such source within 90 days from the end of such quarter,
(iv) the amount of any reserves of the Company established
during such quarter which are necessary or appropriate (A) to provide
funds for the future payment of items of the types specified in
clauses (b)(i) and (b)(ii) above, (B) to provide additional working
capital, (C) to provide funds for cash distributions with respect to
any one or more of the next four quarters, or (D) to provide funds for
the future payment of interest in an amount equal to the interest to
be accrued in the next quarter,
(v) the amount of any noncash items of income utilized in
determining net income of the Company for such quarter,
(vi) the amount of any Investments (other than guarantees,
contingent liabilities or endorsements, except to the extent payments
are actually made under such guarantees, contingent liabilities or
endorsements) made by the Company during such quarter pursuant to
clause (i), (viii) or (ix) of paragraph 6B(3) (or in the case of any
Subsidiary, Investments (other than guarantees, contingent liabilities
or endorsements, except to the extent payments are actually made under
such guarantees, contingent liabilities or endorsements) of similar
type) to the extent not included in capital expenditures or payments
on principal on Debt made by the Company during such quarter
(excluding any such Investments for such quarter made with Cash from
Capital Transactions received by the Company during such quarter or,
to the extent such Cash from Capital Transactions remains available,
received by the Company during the four immediately preceding
quarters, and Investments which the General Partner reasonably
anticipates will be financed with Cash from Capital Transactions
within 90 days from the end of such quarter), and
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Plum Creek Timber Company, L.P. Senior Note Agreement
(vii) the amount of any Investments (other than guarantees,
contingent liabilities or endorsements, except to the extent payments
are actually made under such guarantees, contingent liabilities or
endorsements) made by the Company in a prior quarter pursuant to
clause (i), (viii) or (ix) of paragraph 6B(3) (or in the case of any
Subsidiary, Investments (other than guarantees, contingent liabilities
orendorsements, except to the extent payments are actually made under
such guarantees, contingent liabilities or endorsements) of similar
type) to the extent not included in capital expenditures made by the
Company during such quarter which was anticipated would be financed
from Cash from Capital Transactions but which have not been financed
from such source within 90 days from the end of such quarter,
provided, however, (i) net proceeds to the Company from the issuance of SPUs
(as such term is defined in the Partnership Agreement) shall be deemed to be
Available Cash, and shall be deemed to be received, for purposes of determining
Available Cash, during the quarter in respect of which such SPUs are issued,
even if such cash is received by the Company after the last day of such
quarter, and (ii) any disbursements made of the types described in clauses
(b)(i), (ii), (iii), (vi) and (vii) or reserves established, in accordance with
clause (b)(iv), within 45 days after the end of any quarter as to which SPUs
were purchased in respect of such quarter in accordance with the Distribution
Support Agreement shall be deemed to be made or established, for purposes of
determining Available Cash, within such quarter if the General Partner so
determines, provided that the aggregate amount of such disbursements made or
reserves established which are so determined as being made within such quarter
shall not exceed the aggregate dollar amount of SPUs purchased in respect of
such quarter.
Notwithstanding the foregoing, "Available Cash" shall not take into
account any reductions in reserves or disbursements made or reserves
established after commencement of the dissolution and liquidation of the
Company. In determining "Available Cash", (i) all items under clauses (a)(i),
(ii), (iii), (iv) and (v) above and all items under clauses (b)(i), (ii),
(iii), (iv), (v), (vi) and (vii) above shall be calculated on a combined basis
with any Subsidiary of the Company whose income is accounted for on a
consolidated or combined basis with the Company and, in accordance therewith,
"Available Cash" shall include a percentage of each such item of each such
Subsidiary equal to the Company's percentage ownership interest in such
Subsidiary, provided, however, that the items under clauses (a)(i), (ii),
(iii), (iv) and (v) above shall only be included in Available Cash to the
extent that the General Partner determines such amount to be legally available
for dividends or distributions to the Company by such Subsidiary; (ii) the
amount of net income and the amount of depletion, depreciation, amortization
and other noncash charges, utilized in determining net income shall be
determined, with respect to the Company, by the General Partner in accordance
with generally accepted accounting principles and, with respect to any
Subsidiary,
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Plum Creek Timber Company, L.P. Senior Note Agreement
by its Board of Directors (or by such other body or Person which has the
ultimate management authority of such Subsidiary) in accordance with generally
accepted accounting principles; (iii) the net income of any Subsidiary shall be
determined on an after-tax basis; (iv) the amount of any reductions in, or
additions to, reserves for purposes of clauses (a)(iii) and (b)(iv) above shall
be determined, with respect to the Company, by the General Partner in its
reasonable good faith judgment and, with respect to any Subsidiary, by its
Board of Directors (or by such other body or Person which has the ultimate
management authority of such Subsidiary) in its reasonable good faith judgment;
and (v) any determination of whether any capital expenditures orInvestments are
financed, or anticipated to be financed, with Cash from Capital Transactions
for purposes of clause (b) (ii) or (b) (vi) above shall be made, with respect
to the Company, by the General Partner in its reasonable good faith judgment
and, with respect to any Subsidiary, by its Board of Directors (or by such
other body or Person which has the ultimate management authority of such
Subsidiary) in its reasonable good faith judgment.
"Bank of America Revolving Credit and Bridge Loan Agreement" shall
mean the revolving credit and bridge loan agreement between the Company, Bank
of America National Trust and Savings Association, as Administrative Agent, and
certain other lenders pursuant to which the lenders thereunder provide credit
facilities to the Company in an aggregate principal amount not to exceed
$650,000,000 and any extension, renewal, refunding or refinancing thereof
provided that such renewal, refunding or refinancing shall not contain terms
which are any less favorable to the Purchasers.
"Bankruptcy Law" shall have the meaning specified in clause (viii) of
paragraph 7A.
"Board Foot" shall mean a unit of measurement one foot square and one
inch thick.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banking institutions in New York, New York or
Seattle, Washington are authorized or required by law, regulation or executive
order to be closed.
"Capital Asset" shall mean any asset on the Company's or any
Subsidiary's balance sheet, as the case may be, other than inventory, accounts
receivable or any other current asset and assets disposed of in connection with
normal retirements or replacements.
"Capital Lease Obligation" shall mean, with respect to any Person, any
rental obligation which, under generally accepted accounting principles, is or
will be required to be capitalized on the books of such Person, taken at the
amount thereof accounted for as indebtedness (net of interest expenses) in
accordance with such principles.
"Capital Transaction" shall mean (i) borrowings and sales of debt
securities (other than for working capital purposes and other than for items
purchased on open account in the ordinary course of business) by the Company,
(ii) sales of equity interests by the Company and (iii) sales or other
voluntary or involuntary dispositions of any assets of the Company (other than
(x) sales or other dispositions of inventory in the ordinary course of
business, (y) sales or other dispositions of other current assets including
receivables and accounts and (z) sales or other dispositions of assets as a
part of normal retirements or replacements), in each case prior to the
commencement of the dissolution and liquidation of the Company provided, that
in determining Cash from Capital Transactions, items (i), (ii) and (iii) above
shall include, with respect to each Subsidiary of the Company whose income is
accounted for on a consolidated or combined basis with the Company, a
percentage of each such item of such Subsidiary equal to the Company's
percentage ownership interest in such Subsidiary.
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Plum Creek Timber Company, L.P. Senior Note Agreement
"Cash from Capital Transactions" shall mean at any date, such amounts
of cash as are determined by the General Partner to be cash made available to
the Company from or by reason of a Capital Transaction.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company's Knowledge" or "knowledge of the Company" shall mean the
actual knowledge of Rick R. Holley, President and Chief Executive Officer,
Charles P. Grenier, Executive Vice President, Diane M. Irvine, Vice President
and Chief Financial Officer, James A. Kraft, Vice President, General Counsel
and Secretary, Susanna N. Duke, Director, Law and Human Resources, William R.
Brown, Vice President, Resource Management, and Mitchell Leu, Environmental
Engineer and any successor to the offices and officers, such persons being the
principal persons employed by the Company ultimately responsible for
environmental operations and compliance, ERISA and legal matters relating to
the Company.
"Consolidated Total Assets" shall mean the total amount of all the
assets of the Company and its Restricted Subsidiaries, determined on a combined
basis in accordance with generally accepted accounting principles.
A "Cunit" is equal to 100 cubic feet of wood. For purposes of
conversion of Timber in the Company's northwest region, one MMBF shall equal
2.1 MCCF.
"Debt" shall mean, as to any Person, as of any date of determination,
without duplication, (i) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services, (ii) all amounts owed
by such Person to banks or other Persons in respect of reimbursement
obligations under letters of credit, surety bonds and other similar instruments
guaranteeing payment or other performance of obligations by such Person, (iii)
all indebtedness for borrowed money or for the deferred purchase price of
property or services secured by any Lien on any property owned by such Person,
to the extent attributable to such Person's interest in such property, even
though such Person has not assumed or become liable for the payment thereof,
(iv) lease obligations of such Person which, in accordance with generally
accepted accounting principles, should be capitalized, (v) lease obligations of
such Person under leases which have a term (including any option to renew
exercisable at the discretion of the lessee thereunder) longer than 10 years or
under leases under which the lessor, pursuant to an agreement with such Person,
has acquired the property specifically for the purpose of leasing it to such
Person, (vi) obligations payable out of the proceeds of production from
property of such Person, even though such Person has not assumed or become
liable for the payment thereof, and (vii) any obligations of any other Person
of the type described in the above clauses (i) through and including (vi),
inclusive, which are guaranteed or in effect guaranteed by such Person through
any agreement (contingent or otherwise) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
the solvency or any balance sheet or other financial condition of the obligor
of such obligation, or to make payment for any products, materials or supplies
or for any transportation or services regardless of the non-delivery or
nonfurnishing thereof, in any
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Plum Creek Timber Company, L.P. Senior Note Agreement
such case if the purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any agreements
relating theretowill be complied with, or that the holders of such obligation
will be protected against loss in respect thereof.
"Designated Acres" shall mean up to an aggregate of 150,000 acres
owned by the Company which (based on the good faith determination of the
Responsible Representatives that such acres have at the time such determination
is made a higher value as recreational, residential, grazing or agricultural
property than for timber production) may be reasonably designated by the
General Partner at the time of the sale thereof as constituting Designated
Acres (such aggregate number of acres to be determined over the term of
existence of this Agreement).
"Designated Immaterial Subsidiary" shall mean any entity which would
otherwise be a Restricted Subsidiary and which at any time is designated by the
Company as a Designated Immaterial Subsidiary, provided that no such
designation of any entity as a Designated Immaterial Subsidiary shall be
effective unless (i) at the time of such designation, such entity does not own
any shares of stock or Debt of any Restricted Subsidiary which is not
simultaneously being designated as a Designated Immaterial Subsidiary, (ii)
immediately after giving effect to such designation, (a) the Company could
incur at least $1 of additional Funded Debt pursuant to clause (ix) of
paragraph 6B(2), and (b) no condition or event shall exist which constitutes an
Event of Default or Material Default, (iii) the Company is permitted to make
the Investment in such entity resulting from such designation pursuant to, and
within the limitations specified in, clause (ix) of paragraph 6B(3), treating
the aggregate book value (including equity in retained earnings) of the
Investments of the Company and its Subsidiaries in such entity immediately
prior to such designation as the cost of such Investment, and provided,
further, that if at any time all Designated Immaterial Subsidiaries on a
combined basis would be a "significant subsidiary" (assuming the Company is the
registrant) within the meaning of Regulation S-X (17 CFR Part 210) the Company
shall designate one or more Designated Immaterial Subsidiaries which are
directly owned by the Company and its Restricted Subsidiaries as Restricted
Subsidiaries such that the condition in this proviso is no longer applicable
and the entities so designated shall no longer be Designated Immaterial
Subsidiaries. Any entity which has been designated a Designated Immaterial
Subsidiary shall not thereafter become a Restricted Subsidiary except pursuant
to a designation required by the last proviso in the preceding sentence, and
any Designated Immaterial Subsidiary which has been designated a Restricted
Subsidiary pursuant to the last proviso of the preceding sentence shall not
thereafter be redesignated as a Designated Immaterial Subsidiary.
"Designated Repurchases" shall mean and include purchases, redemptions
or other acquisitions, in each case at a price not to exceed fair market value,
of the publicly traded limited partnership interests in the Company, which are
retired by the Company within six months of such purchase, redemption or other
acquisition.
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Plum Creek Timber Company, L.P. Senior Note Agreement
"Distribution Support Agreement" shall mean the Distribution Support
Agreement, dated as of June 8, 1989, between the Company and Burlington
Resources Inc., a Delaware corporation.
"8.73% Senior Note Agreements" shall mean the Note Agreements, dated
as of August 1, 1994 and amended as of October 15, 1995 and May 31, 1996,
providing for the issuance and sale by the Company of its 8.73% Senior Notes to
the purchasers listed in the schedule of purchasers attached thereto.
"8.73% Senior Notes" shall mean the 8.73% Senior Notes Due August 1,
2009 of the Company issued and sold pursuant to the 8.73% Senior Note
Agreements.
"11 1/8% Senior Note Agreements" shall mean the Note Agreements, dated
as of May 31, 1989 and amended as of January 1, 1991, April 22, 1993, September
1, 1993, May 20, 1994 and May 31, 1996, providing for the issuance and sale by
the Company of its 11 1/8% Senior Notes to the purchasers listed in the
schedule of purchasers attached thereto.
"11 1/8% Senior Notes" shall mean the 11 1/8% Senior Notes Due June 8,
2007 of the Company issued and sold pursuant to the 11 1/8% Senior Note
Agreements.
"Environmental Laws" shall mean Federal, state, local and foreign
laws, rules or regulations relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, air, surface water, ground water or land), or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
"Facilities Subsidiary" shall mean, collectively, Manufacturing and
Marketing.
"Facilities Subsidiary's Facility" shall mean any facility pursuant to
which the Facilities Subsidiary may incur Debt for purposes of making capital
improvements, additions to, or expansions of, property, plant and equipment of
the Facilities Subsidiary or its Subsidiaries.
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Plum Creek Timber Company, L.P. Senior Note Agreement
"Facilities Subsidiary's Revolving Credit Facility" shall mean any
facility pursuant to which the Facilities Subsidiary may obtain revolving
credit, takedown credit, the issuance of standby and payment letters of credit
and backup for the issuance of commercial paper.
"Facilities Subsidiary Stock" shall mean, collectively, the limited
partner interest of the Company in Manufacturing and the capital stock of
Marketing that is owned by the Company.
"Funded Debt" shall mean, without duplication, any Debt payable more
than one year from the date of the creation thereof. "Current Debt" shall
mean, without duplication, any Debt payable on demand or within a period of one
year from the date of the creation thereof; provided that any Debt shall be
treated as Funded Debt, regardless of its term, if such Debt is renewable
pursuant to the terms thereof or of a revolving credit or similar agreement
effective for more than one year after the date of the creation of such Debt,
ormay be payable out of the proceeds of similar Debt pursuant to the terms of
such Debt or of any such agreement.
"General Partner" shall mean Plum Creek Management Company, L.P., a
limited partnership organized and existing under the laws of the State of
Delaware, and its successors and assigns.
"Guarantee" shall mean the guarantee in paragraph 7 of the Mortgage
Note Agreements.
"Investment Policy" shall mean the Corporate Investment Policy of the
Company, as it exists on April 5, 1993 and as attached hereto as Schedule
10B(1) .
"Investments" shall have the meaning specified in paragraph 6B(3).
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Manufacturing" shall mean Plum Creek Manufacturing, L.P., a Delaware
limited partnership.
"Marketing" shall mean Plum Creek Marketing, Inc., a Delaware
corporation.
"Material Default" shall mean any continuing Default as to which a
written notice of such Default (which notice has not been rescinded) shall have
been received by the Company or the General Partner from any holder of any
Note, or any continuing Event of Default.
"Maximum Pro Forma Annual Interest Charges" shall mean, as of any
date, the highest total amount payable during any period of four consecutive
fiscal quarters,
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Plum Creek Timber Company, L.P. Senior Note Agreement
commencing with the fiscal quarter in which such date occurs and ending with
the fiscal quarter in which November 13, 2016 occurs, by the Company and its
Restricted Subsidiaries on a combined basis, after eliminating all intercompany
transactions, in respect of interest charges ((a) including amortization of
debt discount and expense and imputed interest on Capital Lease Obligations and
on other obligations included in Debt which do not have stated interest, (b)
assuming, in the case of fluctuating interest rates which cannot be determined
in advance, that the rate in effect on such date will remain in effect
throughout such period, and (c) treating the principal amount of all Debt
outstanding as of such date under a revolving credit or similar agreement as
maturing and becoming due and payable on the scheduled maturity date thereof,
without regard to any provision permitting such maturity date to be extended)
on all Debt of the Company and its Restricted Subsidiaries outstanding on such
date (excluding the Guarantee and the guarantees of the Facilities Subsidiary's
Facility and the Facilities Subsidiary's Revolving Credit Facility but
including, to the extent not already included, all other Debt outstanding on
such date which is guaranteed or in effect guaranteed by the Company or any
Restricted Subsidiaries), after giving effect to any Debt proposed to be
created on such date and to the concurrent retirement of any other Debt.
"MCCF" shall mean one thousand Cunits.
"MMBF" shall mean one million Board Feet.
"Mortgage Note Agreements" shall mean the Note Agreements, dated as of
May 31, 1989 and amended as of January 1, 1991, April 22, 1993, September 1,
1993, May 20, 1994, June 15, 1995 and May 31, 1996, providing for the issuance
and sale by the Facilities Subsidiary of its 11 1/8% First Mortgage Notes to
the purchasers listed in the schedule of purchasers attached thereto.
"Mortgage Noteholder" shall mean and include each holder from time to
time of a Mortgage Note issued under the Mortgage Note Agreements.
"Mortgage Notes" shall mean the 11 1/8% First Mortgage Notes of the
Facilities Subsidiary issued and sold pursuant to the Mortgage Note Agreements.
"Multiemployer Plan" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Officers' Certificate" shall mean, as to any corporation, a
certificate executed on its behalf by the Chairman of the Board of Directors
(if an officer) or its President or one of its Vice Presidents and its
Treasurer, or Controller or one of its Assistant Treasurers or Assistant
Controllers, and, as to any partnership, a certificate executed on behalf of
such partnership by its general partner in a manner which would qualify such
certificate as an Officers' Certificate of such general partner hereunder.
"Partnership Agreement" shall mean the Amended and Restated Agreement
of Limited Partnership of the Company, as in effect on the date of closing, and
as the same may, from time to time, be amended, modified or supplemented in
accordance with the terms thereof.
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Plum Creek Timber Company, L.P. Senior Note Agreement
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
governmental authority succeeding to any of its functions.
"Permitted Business" shall mean any business engaged in by the Company
or the Facilities Subsidiary on the date of closing, pulp and paper
manufacturing, and any business substantially similar or related to any such
business.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Plan" shall mean an "employee benefit plan" (as defined in section
3(3) of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company, any of its Subsidiaries or
any Related Person or with respect to which the Company, any of its
Subsidiaries or any Related Person may have any liability.
"Pro Forma Free Cash Flow" as of any date shall mean (i) net income of
the Company and its Restricted Subsidiaries on a combined basis (excluding (a)
gain on the sale of any Capital Asset, (b) noncash items of income, and (c) any
distributions or other income received from, or equity of the Company or any
Restricted Subsidiary in the earnings of, any entity which is not a Restricted
Subsidiary) for the period of four consecutive fiscal quarters immediately
prior to such date (such period of four consecutive fiscal quarters being the
"Measurement Period"), determined in accordance with generally accepted
accounting principles plusdepreciation, depletion, amortization and other
noncash charges, interest expense on Debt and provision for income taxes, minus
(ii) capital expenditures made by the Company and its Restricted Subsidiaries
during the Measurement Period, to maintain their respective operations;
provided, however, if (A) the Company or a Restricted Subsidiary is acquiring a
Restricted Subsidiary or assets and (B) Pro Forma Free Cash Flow is being
determined in connection therewith, such Restricted Subsidiary shall be
considered to have been a Restricted Subsidiary during the entire Measurement
Period and such assets shall be considered to have been owned by the Company
during the entire Measurement Period if net income attributable to such
Restricted Subsidiary or such assets (as the case may be) for the entire
Measurement Period is readily determinable and confirmed pursuant to an audit
or a certification prepared in good faith by the Company's chief financial
officer; further provided, however, that portion of Pro Forma Free Cash Flow
allocable to such Restricted Subsidiary or assets shall be reduced on a pro
rata basis to the extent Timber has been harvested by such Restricted
Subsidiary or from such assets during the Measurement Period at a rate greater
than the rate at which the Company has harvested Timber from its Timberlands
during the Measurement Period, as certified in good faith by the chief
financial officer of the Company; and finally provided, however, if Pro Forma
Free Cash Flow is being determined for any Measurement Period and a Restricted
Subsidiary or assets have been sold or otherwise disposed of at any time during
such Measurement Period by the Company or any Restricted Subsidiary, such
Restricted Subsidiary shall not be considered to have been a Restricted
Subsidiary during any part of such Measurement Period and such assets shall not
be considered to have been owned by the Company during any part of such
Measurement Period, and the net income that otherwise would have been
attributable to such
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Plum Creek Timber Company, L.P. Senior Note Agreement
Restricted Subsidiary or asset during such Measurement Period shall be
certified in good faith by the chief financial officer of the Company.
"Qualified Debt" shall mean, as to the Company, as of any date of
determination, without duplication, all outstanding indebtedness of the Company
for borrowed money, including, without limitation, Debt represented by the
Notes, the 8.73% Senior Notes and the 11 1/8% Senior Notes.
"Related Person" shall mean, as of any date of determination, any
trade or business, whether or not incorporated, which, together with the
Company or any of its Subsidiaries, is treated as a single employer under
section 414(b) or (c) of the Code or the regulations promulgated thereunder.
"Required Holder(s)" shall mean the holder or holders of greater than
50% of the aggregate principal amount of the Notes from time to time
outstanding.
"Responsible Officer" means the chief executive officer, the president
or any vice president of the General Partner, or any other officer having
substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of the General Partner, or any other officer having substantially the
same authority and responsibility.
"Responsible Representatives" shall mean (a) in the case of any
transaction in which the value of any assets disposed of or received have a
value of less than $5,000,000 or in which payments made are less
than$5,000,000, the chief executive officer, chief financial officer or chief
operating officer of the Company, and (b) in the case of any other transaction,
the Board of Directors of the General Partner.
"Restricted Payment" shall mean (a) any payment or other distribution,
direct or indirect, in respect of any partnership interest in the Company,
except a distribution payable solely in additional partnership interests in the
Company, and (b) any payment, direct or indirect, on account of the redemption,
retirement, purchase or other acquisition of any partnership interest in the
Company including, without limitation, any Designated Repurchase; or, if the
Company is at any time reorganized as or changed (by merger, sale of assets or
otherwise) into a corporation, (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of the Company now
or hereafter outstanding, except a dividend payable solely in shares of stock
of the Company, and (ii) any redemption, retirement, purchase or other
acquisition, direct or indirect, of any shares of any class of stock of the
Company, now or hereafter outstanding, or of any warrants, rights or options to
acquire any such shares, except to the extent that the consideration therefor
consists of shares of stock of the Company.
"Restricted Subsidiary" shall mean any Wholly-Owned Subsidiary other
than (a) any Designated Immaterial Subsidiary and (b) the Facilities Subsidiary
or any Subsidiary directly or indirectly owned by the Facilities Subsidiary,
provided that after the Mortgage Notes shall
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Plum Creek Timber Company, L.P. Senior Note Agreement
have been paid in full and retired, the Facilities Subsidiary and its
Subsidiaries shall become and be Restricted Subsidiaries.
"Revolving Credit Facility" shall mean any facility pursuant to which
the Company may obtain revolving credit, take-down credit, the issuance of
standby and payment letters of credit and back-up for the issuance of
commercial paper.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Significant Holder" shall mean (i) each Purchaser named in Schedule I
hereto, so long as it shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other insurance company, bank, financial
institution, public or governmental retirement or pension fund or other similar
institutional holder of Notes, whether acting for itself or in a trust, agency
or other fiduciary capacity.
"Subsidiary" shall mean any corporation, partnership or other entity a
majority of (i) the total combined voting power of all classes of Voting Stock
of which or (ii) the outstanding equity interests of which shall, at the time
as of which any determination is being made, be owned by the Company either
directly or through Subsidiaries.
"Timber" shall mean standing trees not yet harvested.
"Timberlands" shall mean the timberlands owned by the Company as of
the date of closing and any timberlands acquired by the Company or any
Subsidiary after the date of closing.
"Transferee" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"Voting Stock" shall mean, with respect to any corporation or other
entity, any shares of stock or other ownership interests of such corporation or
entity whose holders are entitled under ordinary circumstances to vote for the
election of directors of such corporation or to manage any such other entity
(irrespective of whether at the time stock or ownership interests of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Western Europe" shall mean Belgium, Denmark, France, Germany, Greece,
Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and the United
Kingdom.
"Wholly-Owned Subsidiary" shall mean any Subsidiary organized under
the laws of any state of the United States of America which conducts the major
portion of its business in the United States of America and all of the stock or
other ownership interests of every class of which, except director's qualifying
shares, and except in the case of the Facilities Subsidiary not more than 5% of
the outstanding Voting Stock shall, at the time as of which any determination
is being made, be owned by the Company either directly or through Wholly-Owned
Subsidiaries.
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Plum Creek Timber Company, L.P. Senior Note Agreement
11. MISCELLANEOUS
11A. NOTE PAYMENTS
The Company agrees that, so long as any Purchaser shall hold any Note,
it will make payments of principal thereof and premium, if any, and interest
thereon, which comply with the terms of this Agreement, by wire or electronic
funds transfer of immediately available funds for credit to such Purchaser's
account or accounts as specified in the Schedule I attached hereto, or such
other account or accounts in the United States as such Purchaser may designate
in writing, notwithstanding any contrary provision herein or in any Note with
respect to the place of payment. Each Purchaser agrees that, before disposing
of any Note, it will make a notation thereon (or on a schedule attached
thereto) of all principal payments previously made thereon and of the date to
which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 11A to any Transferee which shall have made the same
agreement as the Purchasers have made in this paragraph 11A.
11B. EXPENSES
Whether or not the transactions contemplated by this Agreement shall
be consummated, the Company will pay and will indemnify and hold each Purchaser
and each holder of any Notes harmless in respect of all reasonable expenses
in connection with such transactions and in connection with any amendments or
waivers (whether or not the same become effective) under or in respect of this
Agreement or the Notes, including: (a) the cost and expenses of preparing and
reproducing this Agreement or the Notes, of furnishing all opinions by counsel
for the Company and all other opinions referred to herein (including any
opinions requested by Chapman and Cutler (or another firm selected by the
Purchasers and the other holders as Purchasers' special counsel) as to any
legal matter arising hereunder) and all certificates on behalf of the Company
or any of its Subsidiaries or Affiliates, and of the performance of and
compliance with all agreements and conditions contained herein on the part of
the Company to be performed or complied with, (b) the cost of delivering toeach
Purchaser's principal office, insured to its satisfaction, the Notes sold to it
hereunder and any Notes delivered to it upon any substitution of Notes pursuant
to paragraph 11E and of its delivering any Notes, insured to its satisfaction,
upon any such substitution, (c) the reasonable fees, expenses and disbursements
of Purchasers' special counsel in connection with such transactions and any
such amendments or waivers (whether or not such amendments or waivers become
effective), (d) the reasonable out-of-pocket expenses incurred by such
Purchaser in connection with such transactions (including the costs and
expenses incurred in connection with obtaining a private placement number) and
any such amendments or waivers and (e) the cost and expenses, including
attorneys' fees, incurred by each Purchaser or any Transferee in enforcing any
rights under this Agreement or the Notes or in responding to any subpoena or
any other legal process issued in connection with this Agreement or the
transactions contemplated hereby or thereby or by reason of any Purchaser or
any Transferee's having acquired any Note (as to any Person, other than under
circumstances in which such Person has contravened the understanding contained
in the second sentence of paragraph 9), including without limitation costs and
expenses incurred in any bankruptcy case. The Company shall have no obligation
to pay any
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Plum Creek Timber Company, L.P. Senior Note Agreement
legal fees incurred by any Purchaser or any other holder other than the
reasonable fees of special counsel for the Purchasers and the other holders.
The Company also will pay, and will indemnify and hold each Purchaser and each
holder of any Notes harmless from, all claims in respect of the fees, if any,
of brokers and finders (unless engaged by any Purchaser) and any and all
liabilities with respect to any and all taxes including interest and penalties
which may be payable in respect of the execution, delivery, filing or recording
of this Agreement, the issue of the Notes and any amendment or waiver under or
in respect of this Agreement or the Notes. In furtherance of the foregoing, on
the date of closing the Company will pay the fees and disbursements of Chapman
and Cutler, Purchasers' special counsel, which are reflected as unpaid in the
statement of Purchasers' special counsel delivered to the Company on or prior
to the date of closing. The obligations of the Company under this paragraph
11B shall survive the transfer of any Note or portion thereof or interest
therein by any Purchaser or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS
This Agreement (including, without limitation, paragraph 5, paragraph
6 and clauses (iii) through (xvii) of paragraph 7A) may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Company shall obtain the written
consent to such amendment, action or omission to act, of the Required Holder(s)
except that, without the written consent of the holder or holders of all Notes
at the time outstanding, no amendment to this Agreement shall change the
maturity of any Note, or change the principal of, or the rate or time of
payment of any scheduled payment of principal pursuant to paragraph 4A(1) or
payment of interest or any premium payable with respect to, any Note, or alter
or amend the right of any Significant Holder to declare all of the Notes held
by such Significant Holder to be due and payable in accordance with the
provisions of paragraph 7A, or change the proportion of the principal amount of
the Notes required with respect to any consent. Each holder of any Note at the
time orthereafter outstanding shall be bound by any consent authorized by this
paragraph 11C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring to any
such consent. No course of dealing between the Company and the holder of any
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein
and in the Notes, the term "this Agreement" and references thereto shall mean
this Agreement as it may from time to time be amended or supplemented.
11D. SOLICITATION OF HOLDERS OF NOTES
The Company will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this Agreement
or the Notes unless each holder of any Note shall concurrently be informed
thereof in writing by the Company and shall be afforded the opportunity to
consider the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of paragraph 11C shall be delivered by the Company to each
holder of outstanding Notes forthwith following the date on which the same
shall have been executed
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Plum Creek Timber Company, L.P. Senior Note Agreement
and delivered by the holder or holders of the requisite percentage of
outstanding Notes. In the event that the holder of a Note is a nominee for
another Person, any request for such amendment, waiver or consent shall be
delivered to both the nominee and such other Person, and, if acceptable to such
other Person, such amendment, waiver or consent shall be executed by such other
Person. The Company will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of any Note as consideration for or as an inducement
to the entering into by any such holder of any Note of any waiver or amendment
of any of the terms and provisions of this Agreement or the Notes unless such
remuneration is concurrently paid, on the same terms, ratably to each holder of
the then outstanding Notes.
11E. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES
The Notes are issuable as registered notes without coupons in minimum
denominations equal to the lesser of (a) $1,000,000 (except as may be necessary
to reflect any principal amount not evenly divisible by $1,000,000) and (b) the
aggregate principal amount of Notes purchased by each Purchaser hereunder (the
"Minimum Note Amount"). The Company shall keep at its principal office a
register in which the Company shall provide for the registration of Notes and
of transfers of Notes. In the event that the holder is a nominee for another
Person (and such fact is known to the Company), the name and address of such
other Person shall also be noted on the register. Upon surrender for
registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes of
like series and tenor and of a like aggregate principal amount, registered in
the name of such transferee or transferees, provided that no transfer shall be
made to any Transferee which does not acquire Notes in a principal amount equal
to not less than the lesser of the Minimum Note Amount or the entire principal
amount of the Notes owned by the transferor thereof, and no holder shall
transfer any Notes if thereafter suchholder retains ownership of Notes and the
aggregate principal amount retained is less than the Minimum Note Amount. At
the option of the holder of any Note, such Note may be exchanged for other
Notes of like series and tenor and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Note to be exchanged at the
principal office of the Company. Whenever any Notes are so surrendered for
exchange, the Company shall, at its expense, execute and deliver the Notes
which the holder making the exchange is entitled to receive. Every Note
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the holder
of such Note or such holder's attorney duly authorized in writing. Any Note or
Notes issued in exchange for any Note or upon transfer thereof shall carry the
rights to unpaid interest and interest to accrue which were carried by the Note
so exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the holder of any Note of the loss, theft, destruction or mutilation of such
Note and, in the case of any such loss, theft or destruction, upon receipt of
such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like series and tenor, in lieu of the lost, stolen,
destroyed or mutilated Note.
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Plum Creek Timber Company, L.P. Senior Note Agreement
11F. PERSONS DEEMED OWNERS; PARTICIPATIONS
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any Note is registered as the owner and holder
of such Note for the purpose of receiving payment of principal of and premium,
if any, and interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be
affected by notice to the contrary. Any Purchaser may without the consent of
the Company sell participations in principal amounts of not less than the
Minimum Note Amount or, in the case of any sale by a holder holding Notes in an
aggregate principal amount less than the Minimum Note Amount, such aggregate
principal amount of Notes so held, to one or more Persons who agree to be bound
by the provisions of paragraph 11J in all or a portion of its rights in the
Note or Notes held by it.
11G. NON-RECOURSE NATURE OF LIABILITY
Notwithstanding anything to the contrary contained in this Agreement,
each Purchaser hereby acknowledges and agrees that neither the General Partner
nor any general partner or limited partner, stockholder, officer, employee,
servant, controlling Person, executive, director or agent, as such, of the
General Partner, nor any past, present or future general partner or limited
partner, as such, of the General Partner, shall have any liability to such
Purchaser or any Transferee (such liability, including such as may arise by
operation of law, being hereby expressly waived) for the payment of any sums
now or hereafter owing by the Company under this Agreement or under the Notes
or for the performance of any of the obligations of the Company contained
herein.
11H. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein or made in writing
by or on behalf of the Company inconnection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. All representations, warranties and covenants contained herein
made by any Purchaser or any holder shall survive the execution and delivery of
this Agreement and the Notes, and may be relied upon by the Company and its
successors and assigns. No holder of any Notes (including each Purchaser)
shall be responsible for the truth, correctness or performance of the
representations or warranties of any other holder (including any Transferee).
Subject to the preceding sentences, this Agreement and the Notes embody the
entire agreement and understanding between each Purchaser and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
11I. SUCCESSORS AND ASSIGNS
All covenants and other agreements in this Agreement contained by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and
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Plum Creek Timber Company, L.P. Senior Note Agreement
assigns of the parties hereto (including, without limitation, any Transferee)
whether so expressed or not.
11J. DISCLOSURE TO OTHER PERSONS
Each Purchaser agrees to use its best efforts to keep any information
(other than information which has become public information) delivered or made
available by the Company or the General Partner to such Purchaser (including
any information obtained pursuant to paragraph 5A or 5B) in connection with or
pursuant to this Agreement which is proprietary in nature and clearly indicated
to be confidential information, confidential from any one other than Persons
employed or retained by such Purchaser who are or are expected to become
engaged in evaluating, approving, structuring or administering the Notes;
provided that nothing herein shall prevent any holder of any Notes from
disclosing such information to (i) such holder's trustees, directors, officers,
employees, agents and professional consultants, (ii) any other holder of any
Notes, (iii) any Person to whom such holder offers to sell such Note or any
part thereof which has agreed in writing to be bound by the provisions of this
paragraph 11J, (iv) any Person to whom such holder sells or offers to sell a
participation in all or any part of such Notes who has agreed in writing to be
bound by the provisions of this paragraph 11J, (v) any federal or state
regulatory authority having jurisdiction over such holder, (vi) the National
Association of Insurance Commissioners or any similar organization or (vii) any
other Person to whom such delivery or disclosure may be necessary or
appropriate (a) in compliance with any law, rule, regulation or order
applicable to such holder, (b) in response to any subpoena or other legal
process, (c) in connection with any litigation to which such holder is a party
or (d) in order to protect such holder's investment in such Note to the extent
reasonably required in connection with the exercise of any remedy hereunder.
11K. NOTICES
All written communications provided for hereunder shall be sent by
first class mail, if promptly confirmed byfacsimile transmission (to the extent
the recipient has provided a facsimile telephone number) and by telephone, or
nationwide overnight delivery service (with charges prepaid) and (i) if to any
Purchaser, addressed to such Purchaser at the address specified for such
communications in Schedule I attached hereto, or at such other address as such
Purchaser shall have specified to the Company in writing, (ii) if to any other
holder of any Note, addressed to such other holder at such address as such
other holder shall have specified to the Company in writing or, if any such
other holder shall not have so specified an address to the Company, then
addressed to such other holder in care of the last holder of such Note which
shall have so specified an address to the Company, and (iii) if to the Company,
addressed to it at 999 Third Avenue, Suite 2300, Seattle, Washington 98104, or
at such other address as the Company shall have specified to the holder of each
Note in writing; provided, however, that any such communication to the Company
may also, at the option of the holder of any Note, be delivered by any other
means either to the Company at its address specified above or to any officer of
the Company.
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<PAGE> 58
Plum Creek Timber Company, L.P. Senior Note Agreement
11L. DESCRIPTIVE HEADINGS
The descriptive headings of the several paragraphs of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
11M. SUBSTITUTION OF PURCHASER
Each Purchaser shall have the right to substitute any one of its
affiliates as the purchaser of the Notes which such Purchaser has agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both such Purchaser and such affiliate, shall contain such
affiliate's agreement to be bound by this Agreement and shall contain a
confirmation by such affiliate of the accuracy with respect to it of the
representations set forth in paragraph 9. Upon receipt of such notice, wherever
the word "Purchaser" is used in this Agreement (other than in this paragraph
11M), such word shall be deemed to refer to such affiliate in lieu of such
Purchaser. In the event such affiliate is so substituted as a Purchaser
hereunder and such affiliate thereafter transfers to such Purchaser all of the
Notes then held by such affiliate, upon receipt by the Company of notice of
such transfer, wherever the word "Purchaser" is used in this Agreement (other
than in paragraph 11M), such word shall no longer be deemed to refer to such
affiliate, but shall refer to such Purchaser, and such Purchaser shall have all
the rights of an original holder of the Notes under this Agreement.
11N. SATISFACTION REQUIREMENT
If any agreement, certificate or other writing, or any action taken or
to be taken, is by the terms of this Agreement required to be satisfactory to
any Purchaser or to the Required Holder(s), the determination of such
satisfaction shall be made by such Purchaser or the Required Holder(s), as the
case may be, in the sole and exclusive judgment (exercised in good faith) of
the Person or Persons making such determination.
11O. GOVERNING LAW
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE
RIGHTS OF THE PARTIES SHALL BEGOVERNED BY, THE LAW OF THE STATE OF NEW YORK.
11P. COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
-54-
<PAGE> 59
Plum Creek Timber Company, L.P. Senior Note Agreement
The execution hereof by the Purchasers shall constitute a contract
among the Company and the Purchasers for the uses and purposes hereinabove set
forth.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company,
L.P., its General Partner
By: /s/ Diane M. Irvine
----------------------------------
Diane M. Irvine
Its Vice President and Chief
Financial Officer
-55-
<PAGE> 60
Plum Creek Timber Company, L.P. Senior Note Agreement
NEW YORK LIFE INSURANCE COMPANY
By/s/ Lydia S. Sangree
-----------------------------------
Lydia S. Sangree
Its Investment Vice President
-56-
<PAGE> 61
Plum Creek Timber Company, L.P. Senior Note Agreement
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By/s/ Joseph Y. Alouf
-----------------------------------
Joseph Y. Alouf
Its Vice President
-57-
<PAGE> 62
Plum Creek Timber Company, L.P. Senior Note Agreement
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By/s/ AB Kyle
---------------------------------------
Angela Brock-Kyle
Its Associate Director-Private Placements
-58-
<PAGE> 63
Plum Creek Timber Company, L.P. Senior Note Agreement
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA Investments, Inc.
By/s/ Mary Stewart Law
-------------------------------------
Mary S. Law
Its Vice President
-59-
<PAGE> 64
Plum Creek Timber Company, L.P. Senior Note Agreement
CIGNA REINSURANCE COMPANY
By: CIGNA Investments, Inc.
By/s/ Mary Stewart Law
-----------------------------------
Mary S. Law
Its Vice President
-60-
<PAGE> 65
Plum Creek Timber Company, L.P. Senior Note Agreement
TRANSAMERICA LIFE INSURANCE AND
ANNUITY COMPANY
By/s/ John M. Casparian
---------------------------------
Its Investment Officer
-61-
<PAGE> 66
Plum Creek Timber Company, L.P. Senior Note Agreement
TRANSAMERICA OCCIDENTAL LIFE
INSURANCE COMPANY
By /s/ John M. Casparian
-------------------------------
Its Investment Officer
-62-
<PAGE> 67
Plum Creek Timber Company, L.P. Senior Note Agreement
AMERICAN GENERAL LIFE AND ACCIDENT
INSURANCE COMPANY
THE VARIABLE ANNUITY LIFE INSURANCE
COMPANY
By /s/ Julia S. Tucker
-------------------------------
Name: Julia S. Tucker
Title: Investment Officer
-63-
<PAGE> 68
Plum Creek Timber Company, L.P. Senior Note Agreement
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By /s/ Richard A. Strait
------------------------------
Richard A. Strait
Its Vice President
-64-
<PAGE> 69
Plum Creek Timber Company, L.P. Senior Note Agreement
THE MINNESOTA MUTUAL LIFE INSURANCE
COMPANY
By: MIMLIC Asset Management Company
By /s/ Kay L. Scow
---------------------------------------
Its Vice President
-65-
<PAGE> 70
Plum Creek Timber Company, L.P. Senior Note Agreement
FEDERATED MUTUAL INSURANCE COMPANY
By: MIMLIC Asset Management Company
By /s/ Marilyn Froelich
-------------------------------------
Its Vice President
-66-
<PAGE> 71
Plum Creek Timber Company, L.P. Senior Note Agreement
FARM BUREAU LIFE INSURANCE COMPANY
OF MICHIGAN
By: MIMLIC Asset Management Company
By /s/ Lynne M. Mills
----------------------------------------
Its Vice President
-67-
<PAGE> 72
Plum Creek Timber Company, L.P. Senior Note Agreement
FB ANNUITY COMPANY
By: MIMLIC Asset Management Company
By /s/ Guy de Lambert
------------------------------------
Its Vice President
-68-
<PAGE> 73
Plum Creek Timber Company, L.P. Senior Note Agreement
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Patricia W. Wilson
---------------------------------
Name: Patricia W. Wilson
Its: Ass't. Vice President
By /s/ Steven M. Laude
---------------------------------
Name: Steven M. Laude
Its: Authorized Signatory
Authorized Signatories
-69-
<PAGE> 74
Plum Creek Timber Company, L.P. Senior Note Agreement
THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
By /s/ William D. Goodwin
------------------------------------
William D. Goodwin
Its Senior Managing Director
-70-
<PAGE> 75
Plum Creek Timber Company, L.P. Senior Note Agreement
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By /s/ Beatriz M. Cuervo
---------------------------------------
Beatriz M. Cuervo
Its Investment Officer
-71-
<PAGE> 76
Plum Creek Timber Company, L.P. Senior Note Agreement
THE EQUITABLE OF COLORADO, INC.
By /s/ Beatriz M. Cuervo
-------------------------------
Beatriz M. Cuervo
Its Investment Officer
-72-
<PAGE> 77
Plum Creek Timber Company, L.P. Senior Note Agreement
PROVIDENT LIFE AND ACCIDENT INSURANCE
COMPANY
By /s/ James T. Rogers
--------------------------------------
Its Vice President
-73-
<PAGE> 78
Plum Creek Timber Company, L.P. Senior Note Agreement
AMERICAN ENTERPRISE LIFE INSURANCE
COMPANY
By /s/ Lorraine R. Hart
--------------------------------
Lorraine R. Hart
Its Vice President, Investments
-74-
<PAGE> 79
Plum Creek Timber Company, L.P. Senior Note Agreement
IDS LIFE INSURANCE COMPANY
By /s/ Lorraine R. Hart
--------------------------------
Lorraine R. Hart
Its Vice President, Investments
-75-
<PAGE> 80
Plum Creek Timber Company, L.P. Senior Note Agreement
AMERICAN CENTURION LIFE ASSURANCE
COMPANY
By /s/ David M. Kuplic
--------------------------------
David M. Kuplic
Its Vice President - Investments
-76-
<PAGE> 81
Plum Creek Timber Company, L.P. Senior Note Agreement
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Michael D. Groseclose
--------------------------------
Michael D. Groseclose
Its Associate Vice President
Corporate Fixed-Income Securities
-77-
<PAGE> 82
Plum Creek Timber Company, L.P. Senior Note Agreement
PROVIDIAN LIFE AND HEALTH INSURANCE
COMPANY
By /s/ Jon L. Skaggs
--------------------------------------
Its Second Vice President - Investments
-78-
<PAGE> 83
Plum Creek Timber Company, L.P. Senior Note Agreement
THE UNION CENTRAL LIFE INSURANCE
COMPANY
By /s/ Joseph A. Tucker III
---------------------------------
Joseph A. Tucker III
Its Assistant Treasurer
-79-
<PAGE> 84
Plum Creek Timber Company, L.P. Senior Note Agreement
RGA REINSURANCE COMPANY
By: Guarantee Life Insurance Company,
Agent
By /s/ Robert M. Jergovic
---------------------------------------
Robert M. Jergovic, CFA
Its Vice President-Private Placements
-80-
<PAGE> 85
Plum Creek Timber Company, L.P. Senior Note Agreement
GUARANTEE LIFE INSURANCE COMPANY
By /s/ Robert M. Jergovic
---------------------------------------
Robert M. Jergovic, CFA
Its Vice President-Private Placements
-81-
<PAGE> 86
Plum Creek Timber Company, L.P. Senior Note Agreement
AMERITAS LIFE INSURANCE CORP.
by Ameritas Investment Advisors, Inc. as
Agent
By /s/ Patrick J. Henry
---------------------------------------
Patrick J. Henry
Its Vice President - Fixed Income
Securities
-82-
<PAGE> 87
Plum Creek Timber Company, L.P. Senior Note Agreement
WOODMEN ACCIDENT AND LIFE COMPANY
By /s/ A.M. McCray
-----------------------------------
Its Vice President and Asst. Treasurer
-83-
<PAGE> 88
Schedule I
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
New York Life Insurance SERIES A Series B Series C Series D
Company $6,000,000 -0- $14,000,000 -0-
51 Madison Avenue
New York, New York 10010
Attention: Investment Department,
Private Finance Group, Room 206
Telefacsimile: (212) 447-4122
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as (i) in
the case of the Series A Notes, "Plum Creek Timber Company, L.P., 7.74% Senior
Notes, Series A due 2006, PPN: 729237 A# 4 and principal, premium or interest,"
and (ii) in the case of the Series C Notes, "Plum Creek Timber Company, L.P.,
7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5 and principal, premium
or interest") to:
Morgan Guaranty Trust Company of New York
New York, New York 10015
ABA #021-000-238
for the account of: New York Life Insurance Company
General Account Number 810-00-000
Notices
All notices with respect to payments and written confirmation of each such
payment, to be addressed:
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010-1603
Attention: Treasury Department, Securities Income Section, Room 209
Telefacsimile: (212) 447-4160
SCHEDULE I
(to Senior Note Agreement)
<PAGE> 89
All other notices and communications to be addressed as first provided above,
with a copy of any notices regarding defaults or Events of Default under this
operative document to:
New York Life Insurance Company
51 Madison Avenue
New York, New York 10010
Office of General Counsel
Investment Section, Room 1104
Telefacsimile: (212) 576-8340
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-5582869
I-2
<PAGE> 90
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
The Prudential Insurance SERIES A Series B Series C Series D
Company of America $10,000,000 $2,500,000 $2,000,000 $5,500,000
c/o Prudential Capital Group - Corporates
Four Embarcadero Center
Suite 2700
San Francisco, California 94111
Attention: Managing Director
</TABLE>
Payments
All payments on account of Notes held by such purchaser shall be made by wire
transfer of immediately available funds for credit to:
Account No. 890-0304-391
The Bank of New York
New York, New York
(ABA No.: 021-000-018)
Each such wire transfer shall set forth (a) the name of the Company, (b) the due
date and application (as among principal, interest and Yield-Maintenance
Premium) of the payment being made and (c) a reference to (i) in the case of the
Series A Notes, "7.74% Notes due November 13, 2006, PPN #729237\A", (ii) in the
case of the Series B Notes, "7.87% Notes due November 13, 2008, PPN #729237\B",
(iii) in the case of the Series C Notes, "7.97% Notes due November 13, 2011, PPN
#729237\C" and (iv) in the case of the Series D Notes, "8.05% Notes due November
13, 2016, PPN #729237\D".
Address for all notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: Manager, Investment Operations Group
Telephone: (201) 802-5260
Telefacsimile: (201) 802-8055
I-3
<PAGE> 91
Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group - Corporates
Four Embarcadero Center
Suite 2700
San Francisco, California 94111
Attention: Managing Director
Telefacsimile: (415) 296-5661
Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Telefacsimile: (201) 802-9425
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 22-1211670
I-4
<PAGE> 92
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
TEACHERS INSURANCE AND SERIES A Series B Series C Series D
ANNUITY ASSOCIATION OF -0- -0- $20,000,000 -0-
AMERICA (Two Notes: Each
730 Third Avenue $10,000,000)
New York, New York 10017-3263
</TABLE>
Payments
All payments on or in respect of the Series C Notes shall be made in immediately
available funds at the opening of business on the due date by electronic funds
transfer through the Automated Clearing House System (identifying each payment
as "Plum Creek Timber Company, L.P., 7.97% Senior Notes, Series C, due November
13, 2011, PPN: 729237 B@ 5, principal or interest") to:
For Note R-C-3 ($10,000,000):
Chase Manhattan Bank
ABA No. 021000021
New York, New York
Account of: Teachers Insurance and Annuity Association of America
Account Number 910-2-766475
On order of: Plum Creek Timber Company, L.P.
For Note R-C-4 ($10,000,000):
Citibank, N.A.
ABA No. 021000089
New York, New York
Account of: Teachers Insurance and Annuity Association of America
Account Number 4057-8501
On order of: Plum Creek Timber Company, L.P.
Notices
Contemporaneous with the above electronic funds transfer advice setting forth:
(1) the full name, private placement number, interest rate and maturity date of
the Series C Notes; (2) allocation of payment between principal, interest,
Yield-Maintenance Premium and any special payment; and (3) the name and address
of the bank from which such electronic funds transfer was sent, shall be
delivered, mailed or faxed to:
I-5
<PAGE> 93
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, NY 10017
Attention: Securities Accounting Division
Telephone: (212) 916-4188
Telefacsimile: (212) 916-6955
All other notices and communications to be addressed as first provided above,
except directed to:
Attention: Securities Division, Private Placements
Telephone: (212) 916-5724 (Angela Brock-Kyle) or
(212) 490-9000 (general number)
Telefacsimile: (212) 916-6901
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1624203
I-6
<PAGE> 94
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Connecticut General Life SERIES A Series B Series C Series D
Insurance Company $5,000,000 -0- $3,000,000 $7,700,000
900 Cottage Grove Road (TWO NOTES: (TWO NOTES:
Hartford, Connecticut 06152-2307 $3,000,000 $3,988,141.21
ATTENTION: Private Securities $2,000,000) $3,711,858.79)
Division - S-307
FAX: 203-726-7203
</TABLE>
Payments
All payments on or in respect of the Notes to be by Federal Funds Wire Transfer
to:
Chase Manhattan Bank, N.A.
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=[name of company; description of security; interest rate; maturity date;
PPN; due date and application (as among principal, premium and interest of
the payment being made); contact name and phone.]
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2209
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
I-7
<PAGE> 95
Address for All Other Notices:
CIG & Co.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
I-8
<PAGE> 96
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
SERIES A Series B Series C Series D
CIGNA Reinsurance Company -0- -0- $2,300,000 -0-
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division - S-307
Fax: 203-726-7203
</TABLE>
Payments
All payments on or in respect of the Notes to be by Federal Funds Wire Transfer
to:
Chase Manhattan Bank, N.A.
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=[name of company; description of security; interest rate; maturity date;
PPN; due date and application (as among principal, premium and interest of
the payment being made); contact name and phone.]
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
I-9
<PAGE> 97
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
I-10
<PAGE> 98
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Transamerica Life Insurance SERIES A Series B Series C Series D
and Annuity Company -0- $2,500,000 -0- $3,200,000
c/o Transamerica Investment Services
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
Attention: John Casparian
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as (i) in
the case of the Series B Notes, "Plum Creek Timber Company, L.P., 7.87% Senior
Notes, Series B due 2008, PPN: 729237 B* 7 and principal or interest", and (ii)
in the case of the Series D Notes, "Plum Creek Timber Company, L.P., 8.05%
Senior Notes, Series D due 2016, PPN: 729237 B# 3 and principal or interest")
to:
For Series B Note ($2,500,000):
Federal Reserve Bank of Boston
Boston Safe Deposit & Trust
Boston, Massachusetts
ABA 011-001-234
DDA: 12-526-1
FFC: Cost Center 1253
Re: Mellon Securities
Ref: Transamerica Life Insurance and Annuity Company (FLEX)
Account # TRAF 1506102
Ref: PPN and Description
For Series D Note ($3,200,000):
Federal Reserve Bank of Boston
Boston Safe Deposit & Trust
Boston, Massachusetts
ABA 011-001-234
DDA: 12-526-1
FFC: Cost Center 1253
Re: Mellon Securities
Ref: Transamerica Life Insurance and Annuity Company (SS)
Account # TRAF 1506502
Ref: PPN and Description
I-11
<PAGE> 99
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
and all account statements, to:
Transamerica Life Companies
P. O. Box 2101 - Securities Accounting
Los Angeles, California 90051-0101
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 95-6140222
I-12
<PAGE> 100
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Transamerica Occidental Life SERIES A Series B Series C Series D
Insurance Company -0- -0- $12,300,000 -0-
c/o Transamerica Investment Services
1150 South Olive Street, Suite 2700
Los Angeles, California 90015
Attention: John Casparian
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P. 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@
5 and principal or interest") to:
Federal Reserve Bank of Boston
Boston Safe Deposit & Trust
Boston, Massachusetts
ABA 011-001-234
Acct#: 12-526-1
FFC: Cost Center 1253
Transamerica Occidental Life Insurance Company
Account Segment: UNI
Account No. TRAF 1505102
Ref: PPN and Description
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
and all account statements, to:
Transamerica Life Companies
P. O. Box 2101 - Securities Accounting
Los Angeles, California 90051-0101
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 95-1060502
I-13
<PAGE> 101
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE VARIABLE ANNUITY LIFE Series A Series B Series C Series D
INSURANCE COMPANY $10,000,000 -0- -0- -0-
c/o American General Corporation
2929 Allen Parkway
Houston, Texas 77019-2155
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal, interest or premium") to:
State Street Bank and Trust Company
ABA #011000028
Boston, Massachusetts 02101
Re: The Variable Annuity Life Insurance Company
AC-0125-821-9
OBI=PPN Number and description of payment
Fund Number PA 54
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
The Variable Annuity Life Insurance Company and PA 54
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, MA 02171
Telefacsimile: (617) 985-4923
Duplicate payment notices and all other correspondences to:
The Variable Annuity Life Insurance Company
c/o American General Corporation
P. O. Box 3247
Houston, Texas 77253-3247
Attention: Investment Research Department, A37-01
Telefacsimile: (713) 831-1366
I-14
<PAGE> 102
Overnight Mailing Address:
2929 Allen Parkway
Houston, Texas 77019-2155
Telefacsimile: (713) 831-1366
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 74-1625348
I-15
<PAGE> 103
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
AMERICAN GENERAL LIFE AND Series A Series B Series C Series D
ACCIDENT INSURANCE COMPANY -0- $5,000,000 -0- -0-
c/o American General Corporation
2929 Allen Parkway, Suite 3701
Houston, Texas 77019-2155
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008, PPN: 729237
B* 7 and principal, interest or premium") to:
ABA #011000028
State Street Bank and Trust Company
Boston, Massachusetts 02101
Re: American General Life and Accident Insurance Company
AC-0125-934-0
OBI=PPN Number and description of payment
Fund Number PA 10
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
American General Life and Accident Insurance Company and PA 10
c/o State Street Bank and Trust Company
Insurance Services Custody (AH2)
1776 Heritage Drive
North Quincy, MA 02171
Telefacsimile: (617) 985-4923
Duplicate payment notices and all other correspondences:
American General Life and Accident Insurance Company
c/o American General Corporation
P.O. Box 3247
Houston, Texas 77253-3247
Attention Investment Research Department, A37-01
Telefacsimile: (713) 831-1366
I-16
<PAGE> 104
Overnight Mail Address:
2929 Allen Parkway
Houston, Texas 77019-2155
Telefacsimile: (713) 831-1366
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 62-0306330
I-17
<PAGE> 105
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE NORTHWESTERN MUTUAL Series A Series B Series C Series D
LIFE INSURANCE COMPANY -0- $5,000,000 $10,000,000 -0-
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telefacsimile: (414) 299-7124
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as (i) in
the case of the Series B Notes, "Plum Creek Timber Company, L.P., 7.87% Senior
Notes, Series B due 2008, PPN: 729237 B* 7 and principal or interest," and (ii)
in the case of the Series C Notes, "Plum Creek Timber Company, L.P., 7.97%
Senior Notes, Senior C due 2011, PPN: 729237 B@ 5 and principal and interest")
to:
Bankers Trust Company (ABA #0210-01033)
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10005
for credit to: The Northwestern Mutual Life Insurance Company
Account Number 00-000-027
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed,
Attention: Treasurers Department/Securities Operations.
Telefacsimile: (414) 299-5714
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
I-18
<PAGE> 106
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE MINNESOTA MUTUAL LIFE Series A Series B Series C Series D
INSURANCE COMPANY $7,500,000 -0- -0- -0-
400 Robert Street North
St. Paul, Minnesota 55101
Attention: MIMLIC Asset Management Company
Telefacsimile: (612) 223-5959
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006 PPN: 729237 A#
4 and principal or interest") to:
First Bank National Association
Minneapolis, Minnesota
ABA #091000022
BNF The Minnesota Mutual Life Insurance Company
Account Number 1801-10-00600-4
(with sufficient information to identify the source and application of such
funds).
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0417830
I-19
<PAGE> 107
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
FEDERATED MUTUAL INSURANCE Series A Series B Series C Series D
COMPANY $2,500,000 -0- -0- -0-
c/o MIMLIC Asset Management Company
400 North Robert Street
St. Paul, Minnesota 55101
Attention: Client Administrator
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
Norwest Bank, Minnesota
Minneapolis, Minnesota
ABA #091-000-019
For Credit to: Trust Department
Account Number: 0840245
For further credit to: Federated Mutual Insurance Company
Account Number: 12364600
Attention: Jim Kosse
Also, please reference sufficient information to identify the source and
application of such funds.
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0417460
I-20
<PAGE> 108
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
FARM BUREAU LIFE INSURANCE Series A Series B Series C Series D
COMPANY OF MICHIGAN $1,250,000 -0- -0- -0-
c/o MIMLIC Asset Management
Company
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
Comerica Bank
Detroit, Michigan
ABA #072-000-096
For credit to: Trust Operation -- Fixed Income
Unit Cost Center 98530
Account Number 21585-98530
For further credit to: Farm Bureau Life Insurance Company of Michigan
Account Number: 84-550
Also, please reference sufficient information to identify the source and
application of such funds.
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 38-6053670
I-21
<PAGE> 109
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
FB ANNUITY COMPANY Series A Series B Series C Series D
c/o MIMLIC Asset Management $1,250,000 -0- -0- -0-
Company
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
Comerica Bank
Detroit, Michigan
ABA #072-000-096
For credit to: Trust Operation -- Fixed Income
Unit Cost Center 98530
Account Number: 21585-98530
For further credit to: FB Annuity Company
Account Number: 84-553
Also, please reference sufficient information to identify the source and
application of such funds.
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 38-2315027
I-22
<PAGE> 110
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
ALLSTATE LIFE INSURANCE Series A Series B Series C Series D
COMPANY $10,000,000 -0- -0- -0-
3075 Sanders Road, Ste G3A (TWO NOTES:
Northbrook, Illinois 60062-7127 $6,000,000 AND
Attention: Private Placements $4,000,000)
Department
Telephone: (847) 402-4394
Telefacsimile: (847) 402-3092
</TABLE>
Payments
All payments on or in respect of the Notes to be made by Fedwire transfer of
immediately available funds (identifying each payment with name of the Issuer
(and the Credit, if any), the Private Placement Number preceded by "DPP" and the
payment as principal, interest or premium) in the exact format as follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = Plum Creek Timber Company, L.P.
OBI = DPP (PPN) - 729237 A# 4
Payment Due Date (MM/DD/YY)---
P ______ (enter "P" and the amount of principal being remitted,
for example, P5000000.00) --
I ______ (enter "I" and the amount of interest being remitted,
for example, I225000.00)
Notices
All notices of scheduled payments and written confirmation of such wire
transfer, to be sent to:
Allstate Insurance Company
Investment Operations--Private Placements
3075 Sanders Road, STE G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-8709
Telefacsimile: (847) 402-7331
I-23
<PAGE> 111
All financial reports, compliance certificates and all other written
communications, including notice of prepayments to be addressed as first
provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 36-2554642
I-24
<PAGE> 112
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE MUTUAL LIFE INSURANCE Series A Series B Series C Series D
COMPANY OF NEW YORK -0- -0- $10,000,000 -0-
1740 Broadway
New York, New York 10019
Attention: MONY Capital Management Unit
Telefacsimile: (212) 708-2491
</TABLE>
Payments
All payments on or in respect of the $10,000,000 Note issued in the name of The
Mutual Life Insurance Company of New York to be by bank wire transfer of Federal
or other immediately available funds (identifying each payment as "Plum Creek
Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237 B@ 5
and principal or interest") to:
Chase Manhattan Bank ABA #021000021
for credit to: The Mutual Life Insurance Company of New York,
Security Remittance Account Number 321-023803
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
Glenpointe Marketing & Operations Center--MONY
Glenpointe Center West, 500 Frank W. Burr Blvd.
Teaneck, New Jersey 07666-6888
Attention: Securities Custody
Telefacsimile: (201) 907-6979
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1632487
I-25
<PAGE> 113
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE EQUITABLE LIFE ASSURANCE Series A Series B Series C Series D
SOCIETY OF THE UNITED STATES -0- $5,750,000 -0- -0-
c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas, 37th Floor
New York, New York 10105
</TABLE>
Payments
All payments on account of the Notes shall be made by bank wire transfer of
immediately available funds to:
The Chase Manhattan Bank, N.A.
110 West 52nd Street
New York, New York 10019
ABA # 021-00002-1
Account of: The Equitable Life Assurance Society of the United States
Account Number: 037-2-409417
On Order of: "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B
due 2008"
PPN: 729237 B* 7
Contemporaneous with the above wire transfer, advice setting forth:
(a) the full name, interest rate and maturity date of the Notes;
(b) allocation and payment between principal and any special payment;
and
(c) name and address of Bank (or Trustee) from which wire transfer was
sent
Shall be delivered to:
The Equitable Life Assurance Society of the United States
c/o Alliance Capital Management, L.P.
135 West 50th Street - 5th Floor
New York, NY 10020
Attention: Treasury Services
I-26
<PAGE> 114
Notices
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
The Equitable Life Assurance Society of the United States
c/o Alliance Capital Management, L.P.
135 West 50th Street, 5th Floor
New York, New York 10020
Attention: Treasury Services
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, as well as
notices of unscheduled prepayments shall be delivered or mailed to:
The Equitable Life Assurance Society of the United States
c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, NY 10105
Attention: Fixed Income Credit
Research Division - 37th Floor
Beatriz M. Cuervo
(212) 969-1477 - TEL
(212) 969-1466 - FAX
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-5570651
I-27
<PAGE> 115
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
THE EQUITABLE OF COLORADO, INC. Series A Series B Series C Series D
c/o Alliance Capital Management, L.P. -0- $3,000,000 -0- -0-
1345 Avenue of the Americas, 37th Floor
New York, New York 10105
</TABLE>
Payments
All payments on account of the Notes shall be made by bank wire transfer of
immediately available funds to:
The Chase Manhattan Bank, N.A.
110 West 52nd Street
New York, New York 10019
ABA #021-00002-1
Account of: The Equitable of Colorado, Inc.
Account Number: 037-2-406389
On Order of: "Plum Creek Timber Company, L.P., 7.87% Senior Notes, Series B
due 2008"
PPN: 729237 B* 7
Notices
Contemporaneous with the above wire transfer, advice setting forth:
(a) the full name, interest rate and maturity date of the Notes;
(b) allocation and payment between principal and any special payment;
and
(c) name and address of Bank (or Trustee) from which wire transfer was
sent
Shall be delivered to:
The Equitable of Colorado, Inc.
c/o Alliance Capital Management, L.P.
135 West 50th Street - 5th Floor
New York, NY 10020
Attention: Treasury Services
I-28
<PAGE> 116
All notices with respect to prepayments, both scheduled and unscheduled, whether
partial or in full, and notice of maturity shall be delivered or mailed to:
The Equitable of Colorado, Inc.
c/o Alliance Capital Management, L.P.
135 West 50th Street, 5th Floor
New York, New York 10020
Attention: Treasury Services
All other communications which shall include, but not be limited to, financial
statements and certificates of compliance with financial covenants, as well as
notices of unscheduled prepayments shall be delivered or mailed to:
The Equitable of Colorado, Inc.
c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, NY 10105
Attention: Fixed Income Credit
Research Division - 37th Floor
Beatriz M. Cuervo
(212) 969-1477 - TEL
(212) 969-1466 - FAX
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-319-8083
I-29
<PAGE> 117
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
PROVIDENT LIFE AND ACCIDENT SERIES A SERIES B SERIES C SERIES D
INSURANCE COMPANY -0- -0- -0- $8,600,000
One Fountain Square, 6th Floor
Chattanooga, Tennessee 37402
Attention: Private Placements/Investment Department
Telefacsimile: (615) 755-3351
Confirmation: (615) 755-1365
</TABLE>
All payments on account of the Notes shall be made by wire transfer of
immediately available funds to:
CUDD & CO.
c/o The Chase Manhattan Bank, N.A.
New York, New York
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G06706
Please reference: Issuer (Plum Creek Timber Company,
L.P.), 8.05% Senior Notes, Series D due 2016), PPN (3 B# 3) P=$ I=$
Address for all communications with respect to payments and for all other
communications to:
Provident Companies, Inc.
Private Placements/Investment Department
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755-1365
Telefacsimile: (423) 755-3351
Name of Nominee in which Notes are to be issued: CUDD & CO.
Taxpayer Identification Number: 13-6022143
I-30
<PAGE> 118
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
AMERICAN ENTERPRISE LIFE SERIES A SERIES B SERIES C SERIES D
INSURANCE COMPANY $4,750,000 -0- -0- -0-
c/o American Express Financial
Corporation
3000 IDS Tower--10
Minneapolis, Minnesota 55440
Attention: Director, Senior Securities Research
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237
A# 4 and principal or interest") to:
Norwest Bank Minneapolis, N.A. (ABA #091-000-019)
6th and Marquette Avenue
Minneapolis, Minnesota 55480
for credit to: American Express Trust Co.
Account # 0-38-500
for the benefit of: WRAP TWO & Co.
Notices
All notices of payments on or in respect of the Notes and written confirmation
of each such payment to:
WRAP TWO & Co.
c/o American Express Trust Co.
P. O. Box 1450 NW--9744
Minneapolis, Minnesota 55485
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: WRAP TWO & Co.
Taxpayer I.D. Number: 94-2786905
I-31
<PAGE> 119
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
SERIES A SERIES B SERIES C SERIES D
<S> <C> <C> <C> <C>
IDS LIFE INSURANCE COMPANY $1,000,000 -0- -0- -0-
c/o American Express Financial
Corporation
3000 IDS Tower--10
Minneapolis, Minnesota 55440
Attention: Director - Senior Securities Research
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237
A# 4 and principal or interest") to:
Norwest Bank Minneapolis, N.A. (ABA #091 000 019)
6th and Marquette Avenue
Minneapolis, Minnesota 55480
for credit to: American Express Trust Co.
Account Number 00-38-500
for the benefit of: WRAP TWO & Co.
Notices
All notices of payment, on or in respect of the Notes and written confirmation
of each such payment to:
WRAP TWO & Co.
c/o American Express Trust Co.
P.O. Box 1450 NW-9744
Minneapolis, Minnesota 55485
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: WRAP TWO & Co.
Taxpayer I.D. Number: 41-0823832
I-32
<PAGE> 120
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
SERIES A SERIES B SERIES C SERIES D
<S> <C> <C> <C> <C>
AMERICAN CENTURION LIFE $500,000 -0- -0- -0-
ASSURANCE COMPANY
c/o American Express Financial Corporation
3000 IDS Tower--10
Minneapolis, Minnesota 55440
Attention: Director--Senior Securities Research, Research Department
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A, due 2006 PPN: 729237
A# 4 and principal or interest") to:
Chase NYC/Cust/American Centurion Life Assurance Company
ABA #021-000-021
Account GO5342
Notices
All notices of payments on or in respect of the Notes and written confirmation
of each such payment to:
Chase Manhattan Bank
Worldwide Insurance Securities Service
One Chase Manhattan Plaza, Floor 3B
New York, New York 10081
Attn: 3CMC-6th Floor
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: CUDD & Co.
Taxpayer I.D. Number 13-6022143
I-33
<PAGE> 121
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Nationwide Life Insurance SERIES A SERIES B SERIES C SERIES D
Company $6,000,000 -0- -0- -0-
One Nationwide Plaza
Columbus, Ohio 43215-2220
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
The Bank of New York
ABA #021-000-018
BNF: IOC566
F/A/O Nationwide Life Insurance Company
Attention: P&I Department
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
Nationwide Life Insurance Company
c/o The Bank of New York
P. O. Box 19266
Newark, New Jersey 07195
Attention: P&I Department
With a copy to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-05)
Columbus, Ohio 43215-2220
Attention: Investment Accounting
I-34
<PAGE> 122
All notices and communications other than those in respect to payments to be
addressed:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 31-4156830
I-35
<PAGE> 123
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Providian Life and Health SERIES A SERIES B SERIES C SERIES D
Insurance Company $5,000,000 -0- -0- -0-
c/o Providian Capital Management
400 West Market Street
P.O. Box 32830
Louisville, Kentucky 40202
Attention: Securities Department, 10th Floor
Telefacsimile: (502) 560-2030
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
Bankers - NYC
ABA No. 021-001-033
Account No. 99-911-145
for further credit to: Providian Life & Health Insurance Company
Account No. 099159
Notices
Contemporaneous with the above wire transfer, advice setting forth (1) the full
name, interest rate and maturity date of the bond or note; (2) allocation of
payment between principal and interest; and (3) name and address of bank from
which wire transfer was sent, should be mailed to:
Attention: Securities Processing - 11th Floor
Providian Life and Health Insurance Company
c/o Providian Capital Management
400 West Market Street
Louisville, Kentucky 40202
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: KINSAT
I-36
<PAGE> 124
Taxpayer I.D. Number for Providian Life & Health Insurance Company: 43-0378030
Taxpayer I.D. Number for KINSAT: 13-2839318
I-37
<PAGE> 125
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
The Union Central Life SERIES A SERIES B SERIES C SERIES D
Insurance Company $3,000,000 -0- -0- -0-
c/o Carillon Advisors Inc.
1876 Waycross Road
Cincinnati, Ohio 45240
Attention: Mr. Gary Rodmaker
Telefacsimile: (513) 595-2843
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
Hare BNF/IOC 566
New York, New York
ABA #021-000-018
for credit to: The Union Central Life Insurance Company
Account # 367614
Attention: P&I Department
Subject: Plum Creek 7.74% Senior Notes, Series A due 2006
Notices
All notices with respect to payment shall be addressed to:
The Union Central Life Insurance Company
Post Office Box 179
Cincinnati, Ohio 45201
Attention: Treasury Department
Telefacsimile: (513) 595-2843
All notices with respect to all other communications to be addressed as first
provided above.
Name of Nominee in which Notes are to be issued: Hare & Co.
Taxpayer I.D. Number for Union Central Life: 31-0472910
Taxpayer I.D. Number for Hare & Co.: 13-6062916
I-38
<PAGE> 126
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
RGA Reinsurance Company SERIES A SERIES B SERIES C SERIES D
(GUARANTY LIFE INSURANCE COMPANY, -0- -0- $980,000 -0-
as agent)
660 Major Ridge Center Drive
St. Louis, Missouri 63141-8557
Attention: Carl Greiner
Telefacsimile: (314) 453-7464
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237
B@ 5 and principal or interest") to:
State Street Bank and Trust Company
ABA #0100 0002 8
DTC #997
State Street Portfolio #: EQ3I
DDA #2894 614 3
Contact Person: Mark Kelly (617) 985-6444
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 43-1235868
I-39
<PAGE> 127
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
GUARANTEE LIFE Series A Series B Series C Series D
INSURANCE COMPANY -0- -0- $420,000 -0-
One Guarantee Centre
8801 Indian Hills Drive
Omaha, Nebraska 68114-4066
Attention: Investment Division
Telefacsimile: (402) 361-7400
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.97% Senior Notes, Series C due 2011, PPN: 729237
B@ 5 and principal or interest") to:
State Street Bank and Trust Company
ABA #0100 0002 8
DTC #997
State Street Portfolio #: EQ3H
DDA #2894 614 3
Contact Person: Mark Kelly (617) 985-6444
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0179235
I-40
<PAGE> 128
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
AMERITAS LIFE INSURANCE CORP. Series A Series B Series C Series D
5900 "O" STREET -0- $1,250,000 -0- -0-
Lincoln, Nebraska 68510-2234
Attention: James Mikus
Telefacsimile: (402) 467-6970
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.87% Senior Notes, Series B due 2008,
PPN: 729237 B* 7 and principal or interest") to:
First Bank Nebraska, NA
ABA # 104-000-029
Ameritas Life Insurance Corp.
Account # 1-494-0070-0188
Re: Description of Note; Principal and Interest Breakdown with
sufficient information to identify the source and application of
such funds.
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0098400
I-41
<PAGE> 129
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL AMOUNT OF
OF PURCHASERS NOTES TO BE PURCHASED
<S> <C> <C> <C> <C>
Woodmen Accident and Life Series A Series B Series C Series D
Company $1,250,000 -0- -0- -0-
P.O. Box 82288
Lincoln, Nebraska 68501
Attention: Securities Division
Telefacsimile: (402) 437-4392
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as "Plum
Creek Timber Company, L.P., 7.74% Senior Notes, Series A due 2006, PPN: 729237
A# 4 and principal or interest") to:
First Bank Nebraska, NA
13 and M Streets
Lincoln, Nebraska 68508
ABA #1040-000-29
for credit to:
Woodmen Accident and Life Company's General Fund
Account No. 1-494-0092-9092
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above; provided, however, all notices and communications delivered by overnight
courier shall be addressed as follows:
Woodmen Accident and Life Company
1526 K Street
Lincoln, Nebraska 68508
Attention: Securities Division
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0339220
I-42
<PAGE> 130
PLUM CREEK TIMBER COMPANY, L.P.
____(1)% SENIOR NOTE, SERIES ___, DUE _____________(1)
NO. R-____
$_________ NOVEMBER ___, 1996
PPN: (3)
FOR VALUE RECEIVED, the undersigned, PLUM CREEK TIMBER COMPANY, L.P. (the
"Company"), a limited partnership duly organized under the Delaware Revised
Uniform Limited Partnership Act, hereby promises to pay to
_______________________________, or registered assigns, the principal sum of
__________________ DOLLARS on ________,(1) with interest (computed on the basis
of a 360-day year consisting of twelve 30-day months) (a) on the unpaid balance
thereof at the rate of _____(1)% per annum from the date hereof, payable on the
13th day of May and November in each year, commencing with the May 13 or
November 13 next succeeding the date hereof, until the principal hereof shall
have become due and payable, and (b) on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of premium and, to the
extent permitted by applicable law, any overdue payment of interest, payable
semiannually as aforesaid (or, at the option of the registered holder hereof, on
demand), at a rate per annum from time to time equal to the greater of (i)
____(2)% or (ii) the rate of interest publicly announced by Morgan Guaranty
Trust Company of New York from time to time in New York City as its Prime Rate
plus 2.0%.
Payments of principal, premium, if any, and interest are to be made at
the main office of Morgan Guaranty Trust Company of New York in New York City or
at such other place as the holder hereof shall designate to the Company in
writing, in lawful money of the United States of America.
This Note is one of the Company's _____% Senior Notes, Series ___, due
_____________,(1) (the "Notes") issued pursuant to that certain Senior Note
Agreement, dated as of November 13, 1996 (the "Agreement"), between the Company
and the respective original purchasers of the Notes named in the Schedule I
attached thereto and is entitled to the benefits thereof. [As provided in the
Agreement, this Note is subject to prepayment, in whole or from time to time in
part, with such premium as is specified in the Agreement, and
- - ---------------------
(1) The Senior Notes will be issued in Series A, B, C and D, due November
13, 2006, November 13, 2008, November 13, 2011 and November 13, 2016,
respectively, and bearing interest at the rate per annum of 7.74%, 7.87%, 7.97%
and 8.05%, respectively.
(2) A rate equal to 1% over the interest rate borne by such series of
Senior Notes.
(3) Series A - 729237 A #4; Series B - 729237 B *7; Series C - 729237 B
@5; Series D - 729237 B #3.
EXHIBIT A
(to Senior Note Agreement)
<PAGE> 131
this Note is not otherwise subject to prepayment.](2) [As provided in the
Agreement, this Note is subject to certain scheduled prepayments of principal,
which the Company hereby agrees to make as provided in paragraph 4A(1) of the
Agreement, and in addition this Note is subject to prepayment, in whole or from
time to time in part, with such premium as is specified in the Agreement. This
Note is not otherwise subject to prepayment.](3)
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur and
be continuing, the principal of this Note may be declared or otherwise become
due and payable in the manner and with the effect provided in the Agreement.
THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK, AND
THIS NOTE AND THE AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK.
PLUM CREEK TIMBER COMPANY, L.P.
By: Plum Creek Management Company,
L.P., its General Partner
By:
----------------------------------
Title
- - -------------
(2) To be included in Series A, B and C Notes.
(3) To be included in Series D Notes.
A-2
<PAGE> 132
PURCHASERS' SPECIAL COUNSEL'S OPINION
____________________, 1996
To the Purchasers listed on the
Schedule attached hereto:
Re: $200,000,000 Senior Notes, Series A, B, C and D
Due 2006-2016
of
Plum Creek Timber Company, L.P.
Ladies and Gentlemen:
We have acted as your special counsel in connection with your separate
purchases on the date hereof of $200,000,000 aggregate principal amount of the
Senior Notes, Series A, B, C and D due 2006-2016 (the "Notes") of Plum Creek
Timber Company, L.P., a Delaware limited partnership (the "Company"), issued
under and pursuant to the Senior Note Agreement dated as of November 13, 1996
(the "Note Agreement"), among the Company and each of you.
In that connection, we have examined the following:
(a) The Note Agreement;
(b) [charter documents of Company and General Partner];
(c) The opinion of James A. Kraft, Vice President, General Counsel
and Secretary of the Company, dated the date hereof and delivered
responsive to paragraph 3B of the Note Agreement;
(d) The Notes delivered on the date hereof;
(e) Such certificates of officers of the Company, its General
Partner and of public officials as we have deemed necessary to give the
opinions hereinafter expressed; and
(f) Such other documents and matters of law as we have deemed
necessary to give the opinions hereinafter expressed.
We believe that the opinion referred to in clause (c) above is
satisfactory in scope and form and that you are justified in relying thereon.
Our opinion as to matters referred to in paragraph 1 below is based solely upon
an examination of the Articles of Partnership of the
EXHIBIT B-1
(to Senior Note Agreement)
<PAGE> 133
Company and certificates of Company. We have also relied, as to certain factual
matters, upon appropriate certificates of public officials and officers of the
Company and its General Partner and upon representations of the Company and you
delivered in connection with the issuance and sale of the Notes.
Based upon the foregoing, we are of the opinion that:
1. The Company is a limited partnership, validly existing and in
good standing under the laws of the State of Delaware and has the power
and the authority to execute and deliver the Note Agreement and to issue
the Notes.
2. The Note Agreement has been duly authorized by all necessary
partnership action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent conveyance and similar laws
affecting creditors' rights generally, and general principles of equity
(regardless of whether the application of such principles is considered
in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary
partnership action on the part of the Company, and the Notes being
delivered on the date hereof have been duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors' rights generally, and general principles of equity (regardless
of whether the application of such principles is considered in a
proceeding in equity or at law).
4. The issuance and sale of the Notes and the execution and
delivery of the Agreement by the Vice President and Chief Financial
Officer of Plum Creek Management Company, L.P., the Company's general
partner, on behalf of the Company do not conflict with or result in a
breach of any provision of the Company's Amended and Restated Agreement
of Limited Partnership dated as of October 17, 1995.
5. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreement do not, under existing
law, require the registration of the Notes under the Securities Act of
1933, as amended, or the qualification of an indenture under the Trust
Indenture Act of 1939, as amended.
Our opinion is limited to the laws of the State of New York, the Delaware
Revised Uniform Limited Partnership Act and the Federal laws of the United
States and we express no opinion on the laws of any other jurisdiction.
Respectfully submitted,
B-1-2
<PAGE> 134
_________________, 1996
To Each of the Purchasers
Listed on the Attached
Schedule of Purchasers
Re: Plum Creek Timber Company, L.P.
$200,000,000 Senior Notes Series A, B, C and D,
due 2006-2016
Dear Purchaser:
I am the Vice President, General Counsel and Secretary of Plum Creek
Management Company, L.P. (the "General Partner"), which serves as the general
partner of Plum Creek Timber Company, L.P., a Delaware limited partnership (the
"Company"). In such capacity I have acted as counsel to the Company and as such
I am familiar with transactions contemplated by the Senior Note Agreement, dated
as of November 13, 1996 (the "Note Agreement"), between the Company and the
purchasers listed in the attached Schedule of Purchasers (the "Purchasers").
Capitalized terms used in this opinion without definition have the respective
meanings specified in the Note Agreement.
In so acting, I have examined the following documents:
(a) the Notes; and
(b) the Note Agreement.
The Notes and the Note Agreement are sometimes herein collectively
referred to as the "Loan Documents". This opinion is being delivered to you
pursuant to paragraph 3B of the Note Agreement.
In such capacity, I have participated in the preparation of the Loan
Documents. For purposes of this opinion, I have (a) investigated such questions
of law, (b) examined such certificates of public officials and of officers of
the Company and other documents, as in my judgment are necessary or appropriate
to enable me to render the opinions expressed below, and (c) relied upon the
representations and warranties as to factual matters contained in or made
pursuant to the Loan Documents. In addition, I have, with your approval, assumed
(i) the genuineness of the signatures of Persons signing all Loan Documents in
connection with which this opinion is rendered on behalf of parties thereto
(other than Persons signing on behalf of the Company or the General Partner),
(ii) the authority of all Persons signing
EXHIBIT B-2
(to Senior Note Agreement)
<PAGE> 135
all documents on behalf of the parties thereto (other than Persons signing on
behalf of the Company or the General Partner), (iii) the authenticity of all
documents submitted to me as originals, (iv) the conformity to authentic
original documents of all documents submitted to me as certified, conformed or
photostatic copies, (v) that each of the parties to the Loan Documents other
than the Company has all requisite power and authority to execute, deliver and
perform the Loan Documents to which it is a party and (vi) the due
authorization, execution and delivery of the Loan Documents by all the parties
thereto other than the Company.
Based upon the foregoing, and subject to the further assumptions and
qualifications hereinafter set forth, I am of the opinion that:
1. The Company is a limited partnership duly organized, validly
existing and in good standing under the Delaware Revised Uniform Limited
Partnership Act and has all requisite partnership power and authority to
own and operate its properties, to conduct its business as currently
conducted, to execute and deliver the Loan Documents, to issue and sell
the Notes and to carry out the terms of the Note Agreement and the Notes.
The Company has been qualified or registered and is in good standing as a
foreign limited partnership for the transaction of business under the
laws of the States of Arkansas, Idaho, Louisiana, Montana, Texas and
Washington, which are the only jurisdictions in which the failure so to
qualify or register would be likely, in my reasonable judgment, to
subject the Company to any liability or disability which would be
material to the financial condition or operations of the Company or to
have a material adverse effect upon the ability of the Company to perform
its obligations under the Loan Documents.
2. The Note Agreement and the Notes have been duly authorized by
all necessary partnership action on the part of the Company. The Note
Agreement and the Notes have been duly executed and delivered on behalf
of the Company, and constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, subject to the qualifications that (a) such
enforceability may be limited by bankruptcy, insolvency, reorganization
and other similar laws of general applicability relating to or affecting
creditors' rights generally, (b) such enforceability may be limited by
public policy, and (c) the enforceability of equitable rights and
remedies is subject to equitable defenses and judicial discretion and
such enforceability may be limited by general equitable principles.
3. The Company is not in violation of any term of the Partnership
Agreement or, to my knowledge, of any term of any other agreement or
instrument to which it is a party or by which it or any of its properties
is bound or, to my knowledge, of any term of any applicable law,
ordinance, rule or regulation of any governmental authority or, to my
knowledge, of any term of any applicable order, judgment or decree of any
court, arbitrator or governmental authority, the consequences of which
violations, individually or in the aggregate, would be reasonably likely
to have a material adverse effect on its business, property or assets,
B-2-2
<PAGE> 136
condition or operations or on the ability of the Company to perform its
obligations under the Loan Documents. The execution, delivery and
performance by the Company of the Loan Documents will not result in any
violation of or be in conflict with or constitute a default under or
result in the creation of (or impose any obligation on the Company to
create) any Lien (other than the Liens required by paragraph 5C of the
Note Agreement) upon any of the properties of the Company pursuant to the
provisions of the Company's Partnership Agreement or (i) any other
agreement or instrument known to me (it being understood that all
agreements and instruments filed by the Company with the Securities and
Exchange Commission are known to me), to which the Company is a party or
by which the Company or any of its properties is bound, (ii) any term of
any applicable law, ordinance, rule or regulation of any governmental
authority, or (iii) to my knowledge any term of any applicable order,
judgment or decree of any court, arbitrator or governmental authority.
4. No consent, approval or authorization of, or declaration or
filing with, or the taking of any other action in respect of, any
commission, authority, governmental agency or body of the United States
of America or the State of Arkansas, Delaware, Idaho, Louisiana, Montana,
Texas or Washington is required for the valid execution, delivery and
performance by the Company of the Loan Documents or the valid offer,
issue, sale and delivery of the Notes pursuant to the Note Agreement
except such consents, approvals or authorizations as have been obtained
and such filings as may be required under state securities laws or Blue
Sky Laws in connection with the offer, issue, sale and delivery of the
Notes.
5. There are no legal or governmental proceedings to which the
Company is a party or to which any property or assets of the Company is
subject or which is pending or, to my knowledge, threatened against the
Company which questions the validity of the Loan Documents or any actions
pursuant thereto or which would be reasonably likely to result in any
material adverse change in the business, property or assets, condition or
operations of the Company.
6. The Company is not an "investment company" as defined under the
Investment Company Act of 1940, as amended, nor is the Company or the
issue and sale of the Notes by the Company subject to regulation
thereunder.
7. Based upon the representations of the Purchasers contained in
the Note Agreement and a letter dated November 13, 1996 from BA
Securities, Inc. to the Company, Andrews & Kurth, L.L.P., Perkins Coie
and Chapman and Cutler representing as to certain facts in connection
with the offer and sale of the Notes, the offer, issue, sale and delivery
of the Notes under the circumstances contemplated by the Note Agreement
constitute exempt transactions under the registration provisions of the
Securities Act of 1933, as amended, and neither the registration of the
Notes thereunder nor the qualification of an indenture in respect of the
Notes under the Trust Indenture Act of 1939, as amended, is required in
connection with such offer, issue, sale and delivery.
B-2-3
<PAGE> 137
8. Based upon the representation of the Company as to the use of
the proceeds of the Notes contained in the Note Agreement, the issue and
sale of the Notes do not violate Regulation G, T or X of the Board of
Governors of the Federal Reserve System.
The opinions expressed herein are based upon and limited exclusively to
the laws of the State of Washington, the Delaware Revised Uniform Limited
Partnership Act, and federal laws of the United States of America insofar as any
of such laws are applicable, and I render no opinion with respect to any other
laws, except that the opinions expressed in paragraphs 1, 2, 3 and 4 cover the
laws of the State of Delaware, New York, Arkansas, Idaho, Louisiana, Montana or
Texas, in each case, insofar as any such laws are applicable; provided that,
with respect to my opinions relating to the laws of Arkansas, Idaho, Louisiana,
Montana and Texas, please note that I am not licensed to practice law in those
states and such opinions are based solely upon a general review of the
partnership law and commercial law of those states and discussions with local
counsel in such states.
This opinion is solely for your benefit in connection with the
transactions contemplated by the Note Agreement and may not be relied upon by
any Person other than you or any transferee of any Note. This opinion is not to
be quoted in whole or in part or otherwise referred to (except in a list of
closing documents in connection with the transactions described herein), nor
shall it be filed with any governmental agency or other Person without my prior
written consent. I express no opinion with respect to any matter not expressly
set forth in this opinion.
Very truly yours,
------------------------------------
James A. Kraft, Vice President,
General Counsel and Secretary
B-2-4
<PAGE> 138
Liens
Mortgage, Security Agreement and Fixture Filings dated June 8, 1989
recorded in Flathead, Lake and Lincoln Counties, Montana as supplemented and
amended by Mortgage Recording Supplements and Security Agreement and Fixture
Filings dated January 1, 1991; and Deed of Trust, Security Agreement and Fixture
Filing dated June 8, 1989 recorded in Kittitas County, Washington; all of which
were executed by Plum Creek Manufacturing, Inc. in favor of Wells Fargo Bank,
National Association (as successor by merger to First Interstate Bank of
Washington, N.A.), as Trustee, to secure the indebtedness evidenced by the
Mortgage Note Agreement dated May 31, 1989 among Plum Creek Manufacturing, LP.
(as successor in interest to Plum Creek Manufacturing, Inc.) ("Manufacturing"),
Plum Creek Timber Company, L.P. as guarantor, and each of the purchasers of the
Mortgage Notes, as amended by (a) the Mortgage Note Agreement Amendment, Consent
and Waiver dated as of January 1, 1991, (b) the letter agreement dated April 22,
1993, (c) the Mortgage Note Agreement Amendment dated as of September 1, 1993,
(d) the Mortgage Note Agreement Amendment dated as of May 20, 1994, (e) the
Amendment to Mortgage Note Agreement dated as of June 15, 1995 and (f) the
Mortgage Note Agreements Amendment dated as of May 31, 1996 (as amended, the
"Mortgage Note Agreement"). As a result of Manufacturing's October 11, 1996 sale
of its sawmill near Colville, Washington, Manufacturing is required, pursuant to
the terms of the Mortgage Note Agreement, to grant to or secure for the benefit
of the Mortgage Note Agreement Trustee, a first mortgage lien on and first
priority perfected security interest in its sawmill in Huttig, Union County,
Arkansas, acquired as part of the Riverwood Assets.
EXHIBIT D
(to Senior Note Agreement)
<PAGE> 139
Plum Creek Timber Company, L.P.
Permitted Investments
1. Plum Creek Manufacturing, L.P. (98% interest)
2. Plum Creek Marketing, Inc. (96% interest)
3. Plum Creek Land Company (100% interest)
4. PCTC Limited Liability Company (100% interest, 99% direct and 1%
indirect)
5. For purposes of effecting the Company's 1031 tax deferred exchanges, PCTC
Limited Liability Company has made loans to the following purchasers of
real property from the Company, in the amounts listed below. Each of the
loans is evidenced by a Promissory Note secured by a Deed of Trust in
Favor of PCTC Limited Liability Company:
a. Jack McCann Co., Inc. ($229,059.00)
b. Jack McCann Co., Inc. ($300,945.00)
c. First South Properties, L.L.C. ($240,000.00)
d. Beaconsfield Associates II ($337,500.00)
e. Jeld-Wen, Inc. ($9,983,507.00)
6. In conjunction with the Company's in-woods chipping operations, the
Company has made loans or guaranteed loans to three of its contractors in
order that such contractors could purchase chipping equipment, in the
following amounts:
a. Knoles Fiber, L.L.C. (loan of $587,454.12)
b. Richards Logging, Inc. (loans of $541,636.00)
c. Joe A. McDougall and Robert Suhoversnik, dba M&S Logging
(guarantee of $568,516.00 promissory note)
EXHIBIT E
(to Senior Note Agreement)
<PAGE> 140
Environmental Notices
Environmental notices from Federal, State and Local Environmental
Agencies to the Company citing environmental violations that have not been
finally resolved and disposed of:
1. In June 1995, the Company received a Compliance Order ("Order") from
the Environmental Protection Agency ("EPA") under the Clean Air Act. The Order
alleges that the startup in 1990 of a boiler at the Company's Pablo sawmill did
not meet new source performance standards ("NSPS"). Work on the boiler project
commenced in March 1989, when NSPS did not apply to boilers of this size. Prior
to final startup of the boiler, however, new rules were proposed that, if
applicable, would have required meeting these standards. The EPA has taken the
position that the new rules applied, and is seeking compliance with NSPS. In
December 1995, the Company voluntarily installed a pollution control device and
an opacity monitor on the boiler at a cost of $700,000 without waiving any
defenses to the EPA claim. The Company believes it is in full compliance with
both the Order and NSPS. On March 12, 1996, the Department of Justice, on behalf
of the EPA, filed suit in federal court seeking civil penalties and injunctive
relief for the alleged violation of NSPS in accordance with the Clean Air Act
which contemplates civil penalties. The Company believes it has meritorious
defenses to the claim. However, due to the inherent nature of litigation, the
Company cannot predict the outcome of the enforcement case. If not resolved
earlier, it is likely that the matter will go to trial in 1997. The General
Partner believes, based upon available information and current EPA enforcement
policies, that the ultimate outcome of this action will not have a material
adverse effect on the Company's financial position, results of operations or
liquidity.
2. The Company has worked with the State of Washington Department of
Ecology ("DOE") concerning opacity above permitted levels associated with
emissions at the Arden Sawmill that may have occurred prior to the sale of the
mill described below. Prior to the sale of the Arden Sawmill, the Company
received a letter from DOE requesting information concerning such emissions. DOE
has not taken any other compliance actions with respect to this matter. As part
of the Newport Asset Sale, on October 11, 1996 the Company sold the Arden
Sawmill to Stimson Lumber Company, an Oregon corporation ("Stimson"), and will
be required to indemnify Stimson for any liabilities that arise relating to the
period when the Company owned the Arden Sawmill. However, based upon its past
experience with similar compliance issues, the Company believes that this matter
will not materially affect the Company's financial position, results of
operations or liquidity.
3. The State of Washington Department of Ecology ("DOE") alleged in March
1990 that a release or threatened release of a hazardous substance had occurred
in an area designated "The Old Landsburg Mine," which is owned by Palmer Coking
Coal Company ("Palmer") and Plum Creek. Plum Creek and other parties are
required to respond to the DOE regarding a high priority clean up of the site
under the model Toxics Control Act. The Plum Creek portion of the site was
leased to Palmer from 1978 through 1983 by Burlington Northern Railroad and its
successors for disposal of certain demolition debris. From 1991 to the present,
Plum Creek has participated on a Potentially Liable Party ("PLP") task force
which cooperated with the DOE and voluntarily conducted removal of
EXHIBIT F
(to Senior Note Agreement)
<PAGE> 141
barrels and fencing from the site. In 1992, Plum Creek participated in
negotiations regarding an Agreed Order and in planning for a Remedial
Investigation/Feasibility Study ("RI/FS"). From 1993 to the present, Plum Creek
has participated in the ongoing RI/FS. Plum Creek does not believe it will be
ultimately liable for disposal of barrels or hazardous waste at the site and is
vigorously defending its position. Plum Creek believes that it is an innocent
landowner and that any liability will ultimately be borne by the parties
responsible for the waste disposal. To the extent liability is assessed against
Plum Creek as a landowner, the Company believes that Palmer, by virtue of the
terms of the lease, and/or Burlington Northern Inc., by virtue of an indemnity
contained in the deed that transferred the property to Plum Creek, will be
responsible. It is not known at this time what the cost of ultimate cleanup will
be or what portion, if any, will be funded by Plum Creek.
F-2
<PAGE> 142
Other Subsidiaries
Plum Creek Land Company (100% interest)
PCTC Limited Liability Company (100% direct and indirect interest)
Plum Creek Foreign Sales Corporation (inactive Guam corporation) (100% interest
held by Plum Creek Marketing, Inc.)
Plum Creek Remanufacturing, Inc. (a Washington corporation) (100% interest held
by Plum Creek Marketing, Inc.)
Plum Creek Remanufacturing Joint Venture (50% general partner interest)
EXHIBIT 8C
(to Senior Note Agreement)
<PAGE> 143
Subsequent to December 31, 1995, neither the Company nor the Facilities
Subsidiary has incurred any material liabilities or obligations or entered into
any material transactions not in the ordinary course of business, other than the
Company's sale of the Newport Assets and acquisition of the Riverwood Assets,
including the financing thereof, all as described in the Placement Memorandum
dated October 1996.
Subsequent to December 31, 1995, there has not been any material adverse
change in the financial condition or operations of the Company or the Facilities
Subsidiary.
Subsequent to December 31, 1995, there have been the following Restricted
Payments declared, paid or made by the Company:
1. Fourth Quarter 1995 Distribution of Available Cash in the
amount of $25.9 million paid to Unitholders in the first quarter of 1996;
2. First Quarter 1996 Distribution of Available Cash in the amount
of $25.9 million paid to Unitholders in the second quarter of 1996;
3. Second Quarter 1996 Distribution of Available Cash in the
amount of $27.2 million paid to Unitholders in the third quarter of 1996;
4. Third Quarter 1996 Distribution of Available Cash in the amount
of $31.0 million payable to Unitholders on November 29, 1996.
EXHIBIT 8G
(to Senior Note Agreement)
<PAGE> 144
The Company's title to the timberlands it acquired during its formation
in 1989 includes the related hard rock mineral interests. However, the Company
did not obtain the hard rock mineral interest to most of the 865,000 acres of
timberland purchased in 1993 from Champion International Corporation. In
addition, the Company does not own oil and gas mineral interests to any of its
timberlands. The title to the Company's timberlands is subject to presently
existing easements, rights of way, flowage and flooding rights, servitudes,
cemeteries, camping sites, hunting and other leases, licenses and permits, none
of which materially adversely affect the value of the timberlands or materially
restrict the harvesting of timber or other operations of the Company.
EXHIBIT 8K
(to Senior Note Agreement)
<PAGE> 145
NONE
EXHIBIT 8T
(to Senior Note Agreement)
<PAGE> 146
April 5, 1993
Corporate Investment Policy
I. Objective
This policy provides guidelines for the management of the Company's cash.
It is essential that these assets be invested in a high quality portfolio which:
o Preserves principal
o Meets liquidity needs
o Allows for appropriate diversification of investments
o Delivers good yield in relationship to the guidelines and
market conditions
The Company is adverse to incurring market risk or credit risk, and will
generally sacrifice yield in the interest of safety. Care must always be taken
to insure that the Company's reported financial statements are never materially
affected by decreases in the market value of securities held.
II. Maturity or Put
Within the constraints provided throughout this document, or by addendum
to this document, the maximum maturity or put of any investment instrument will
be within two years from the purchase settlement date; however, the total
portfolio must have an average maturity of less than 12 months.
III. Permissible Investments
A. Investments will be made in U.S. dollars only.
B. The Company may own, purchase or acquire marketable direct obligations
in the following:
1. Obligations (fixed and floating rate) issued by, or
unconditionally guaranteed by the U.S. Treasury, or any agency thereof,
or issued by any political subdivision of any state or public agency.
2. Commercial paper rated as A-1 or better by Standard & Poor's,
and P-1 or better by Moody's (or equivalent).
EXHIBIT 10B(1)
(to Senior Note Agreement)
<PAGE> 147
3. Floating rate and fixed rate obligations of corporations, banks
and agencies including: medium term notes and bonds, deposit notes, and
euro dollar/yankee notes and bonds.
4. Certificates of deposit, bankers acceptances and time deposits
of commercial banks, domestic or foreign, whose short term credit ratings
are A-1/P-1 (or equivalent).
5. Repurchase agreements collateralized by U.S. Treasury and
agency securities.
6. Insurance company Funding Agreements, Investment Contracts, or
similar obligations.
7. Asset backed and mortgage backed securities.
8. Master Notes.
9. Taxable money market preferreds.
10. Tax exempt securities including municipal bonds/notes, money
market preferreds, and variable rate demand notes.
C. Issuing institutions shall be Corporations, Trusts, Partnerships, and
Banks domiciled in the U.S., Canada, Japan and Western Europe, or Insurance
Companies domiciled in the U.S.
IV. Credit Requirements
Safety shall always be a primary consideration in structuring the
Company's investment portfolio. Credit ratings should be tied to duration as
prescribed below in order to combine safety, liquidity and acceptable market
performance:
MINIMUM CREDIT RATING
DURATION S&P Moody's
6 months or less A- A3
6 - 18 months AA Aa2
18 months or more AAA Aaa
Original issue securities allowable under this policy with less than
twelve months to maturity may substitute the issuers, short term credit rating
if that rating is A-1/P-1 or better.
-2-
<PAGE> 148
V. Diversification
To diversify risk, no more than $2 million or 10% of the portfolio can be
invested with any one issuer. Exceptions are issues of the U.S. Treasury or
agency securities, insured or government collateralized issues and daily money
market funds.
-3-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<DESCRIPTION>REVOLVING CREDIT & BRIDGE LOAN AGREEMENT
<TEXT>
<PAGE> 1
EXHIBIT 10.1
REVOLVING CREDIT AND BRIDGE LOAN
AGREEMENT
Dated as of October 17, 1996
among
PLUM CREEK TIMBER COMPANY, L.P.
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Agent
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Table of Schedules and Exhibits..............................................vi
1. Definitions................................................................1
1.1 Defined Terms.......................................................1
1.2 Other Interpretive Provisions......................................32
1.3 Accounting Principles..............................................33
2. The Credits...............................................................34
2.1 Amounts and Terms of Revolving Commitments.........................34
2.2 Amounts and Terms of Bridge Commitments............................34
2.3 Loan Accounts......................................................34
2.4 Procedure for Borrowing Revolving Loans............................35
2.5 Procedure for Borrowing Bridge Loans...............................36
2.6 Conversion and Continuation Elections for Borrowings...............37
2.7 Voluntary Termination or Reduction of Commitments..................38
2.8 Optional Prepayments...............................................39
2.9 Mandatory Prepayments of Loans; Mandatory Commitment Reductions....39
2.10 Repayment.........................................................42
2.11 Interest..........................................................42
2.12 Swingline Loans...................................................43
2.13 Fees..............................................................45
2.14 Computation of Fees and Interest..................................46
2.15 Payments by the Company...........................................46
2.16 Payments by the Banks to the Agent................................47
2.17 Sharing of Payments, Etc..........................................48
2.18 Loan Tranches.....................................................49
3. The Letters Of Credit.....................................................50
3.1 The Letter of Credit Facility......................................50
3.2 Issuance, Amendment and Renewal of Letters of Credit...............51
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.3 Risk Participations, Drawings and Reimbursements...................54
3.4 Repayment of Participations........................................56
3.5 Role of the Issuing Bank...........................................56
3.6 Obligations Absolute...............................................57
3.7 Cash Collateral Pledge.............................................58
3.8 Letter of Credit Fees..............................................59
3.9 Uniform Customs and Practice.......................................59
4. Taxes, Yield Protection And Illegality....................................60
4.1 Taxes..............................................................60
4.2 Illegality.........................................................63
4.3 Increased Costs and Reduction of Return............................63
4.4 Funding Losses.....................................................64
4.5 Inability to Determine Rates.......................................65
4.6 Certificate of Bank................................................65
4.7 Survival...........................................................65
5. Conditions Precedent......................................................66
5.1 Conditions of Initial Credit Extensions............................66
5.2 Conditions to All Credit Extensions................................68
6. Representations And Warranties............................................69
6.1 Corporate Existence and Power......................................69
6.2 Authorization; No Contravention....................................69
6.3 Governmental Authorization.........................................70
6.4 Binding Effect.....................................................70
6.5 Litigation.........................................................70
6.6 No Default.........................................................71
6.7 ERISA Compliance...................................................71
6.8 Use of Proceeds; Margin Regulations................................73
6.9 Title to Properties................................................73
6.10 Taxes.............................................................73
6.11 Financial Condition...............................................73
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
6.12 Environmental Matters.............................................74
6.13 Regulated Entities................................................75
6.14 No Burdensome Restrictions........................................75
6.15 Solvency..........................................................75
6.16 Labor Relations...................................................75
6.17 Copyrights, Patents, Trademarks and Licenses, Etc.................75
6.18 Subsidiaries......................................................76
6.19 Partnership Interests.............................................76
6.20 Broker's, Transaction Fees........................................76
6.21 Insurance.........................................................76
6.22 Full Disclosure...................................................77
7. Affirmative Covenants.....................................................77
7.1 Financial Statements...............................................77
7.2 Certificates; Other Information....................................78
7.3 Notices............................................................79
7.4 Preservation of Partnership Existence, Etc.........................81
7.5 Maintenance of Property............................................81
7.6 Insurance..........................................................81
7.7 Payment of Obligations.............................................82
7.8 Compliance with Laws...............................................82
7.9 Inspection of Property and Books and Records.......................82
7.10 Environmental Laws................................................83
7.11 Use of Proceeds...................................................83
7.12 Solvency..........................................................83
8. Negative Covenants........................................................83
8.1 Limitation on Liens................................................83
8.2 Merger; Disposition of Assets......................................85
8.3 Harvesting Restrictions............................................88
8.4 Loans and Investments..............................................89
8.5 Limitation on Indebtedness.........................................90
8.6 Transactions with Affiliates.......................................93
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
8.7 Use of Proceeds....................................................93
8.8 Sale of Stock and Indebtedness of Subsidiaries.....................94
8.9 Certain Contracts..................................................94
8.10 Joint Ventures....................................................95
8.11 Compliance with ERISA.............................................95
8.12 Sale and Leaseback................................................96
8.13 Restricted Payments...............................................96
8.14 Change in Business................................................97
8.15 Issuance of Stock by Subsidiaries.................................97
8.16 Amendments........................................................97
8.17 Available Cash....................................................98
8.18 Interest Coverage Ratio...........................................98
9. Events Of Default.........................................................99
9.1 Event of Default...................................................99
9.2 Remedies..........................................................102
9.3 Rights Not Exclusive..............................................103
10. The Agent...............................................................103
10.1 Appointment and Authorization....................................103
10.2 Delegation of Duties.............................................104
10.3 Liability of Agent...............................................104
10.4 Reliance by Agent................................................104
10.5 Notice of Default................................................105
10.6 Credit Decision..................................................105
10.7 Indemnification of Agent.........................................106
10.8 Agent in Individual Capacity.....................................107
10.9 Successor Agent..................................................107
11. Miscellaneous...........................................................108
11.1 Amendments and Waivers...........................................108
11.2 Notices..........................................................109
11.3 No Waiver; Cumulative Remedies...................................110
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C>
11.4 Costs and Expenses...............................................110
11.5 Indemnity........................................................110
11.6 Marshalling; Payments Set Aside..................................111
11.7 Successors and Assigns...........................................111
11.8 Assignments, Participations, Etc.................................111
11.9 Set-off..........................................................115
11.10 Automatic Debits of Fees........................................115
11.11 Notification of Addresses, Lending Offices, Etc.................115
11.12 Counterparts....................................................115
11.13 Severability....................................................116
11.14 No Third Parties Benefited......................................116
11.15 Time............................................................116
11.16 Governing Law and Jurisdiction..................................116
11.17 Arbitration; Reference..........................................116
11.18 Entire Agreement................................................117
</TABLE>
v
<PAGE> 7
TABLE OF SCHEDULES AND EXHIBITS
Schedules
Schedule 1.1 -- Corporate Investment Policy
Schedule 2.1 -- Commitments
Schedule 6.7 -- Plans
Schedule 6.12 -- Environmental Matters
Schedule 6.18 -- Subsidiaries
Schedule 8.1 -- Permitted Liens
Schedule 8.4 -- Permitted Investments
Schedule 11.2 -- Addresses for Notices, Domestic and Offshore
Lending Offices
Exhibits
Exhibit A -- Notice of Borrowing
Exhibit B -- Notice of Conversion/Continuation
Exhibit C-1 -- Legal Opinion of Counsel for the Company
Exhibit C-2 -- Legal Opinion of Perkins Coie
Exhibit D -- Compliance Certificate
Exhibit E --Form of Cash Collateral Account Agreement
Exhibit F -- Form of Assignment and Acceptance Agreement
vi
<PAGE> 8
REVOLVING CREDIT AND BRIDGE LOAN AGREEMENT
This REVOLVING CREDIT AND BRIDGE LOAN AGREEMENT is entered into as of
October 17, 1996, among PLUM CREEK TIMBER COMPANY, L.P., a Delaware limited
partnership (the "Company"), the several financial institutions from time to
time party to this Agreement (collectively, the "Banks"; individually, a
"Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a letter
of credit issuing bank and as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a bridge
loan and a revolving credit facility with a letter of credit subfacility upon
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
1. DEFINITIONS
1.1 DEFINED TERMS
In addition to the terms defined elsewhere in this Agreement, the
following terms have the following meanings:
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of 5% or more of
the equity of a Person shall for the purposes of this Agreement, be deemed to
control the other Person. Notwithstanding the foregoing, no Bank shall be deemed
an "Affiliate" of the Company or of any Subsidiary of the Company.
"Agent" means BofA in its capacity as agent for the Banks hereunder, and
any successor agent.
"Agent's Payment Office" means the address for payments set forth on
Schedule 11.2 in relation to the Agent or such other address as the Agent may
from time to time specify in accordance with Section 11.2.
"Agent-Related Persons" means BofA, the Arranger, and any successor agent
arising under Section 10.9 and any successor to BofA as letter of credit issuing
bank or Swingline Bank hereunder, together with their respective Affiliates, and
1
<PAGE> 9
the officers, directors, employees, agents and attorneys-in-fact of such Persons
and Affiliates.
"Aggregate Revolving Commitment" means the combined Revolving Commitments
of the Banks, in the initial amount of four hundred million dollars
($400,000,000), as such amount may be reduced from time to time pursuant to this
Agreement.
"Agreement" means this Agreement, as amended from time to time in
accordance with the terms hereof.
"Applicable Margin" means, in respect of all Loans outstanding on any date
(A) for the period from the Closing Date through the earlier of (i) the Equity
Closing and (ii) March 31, 1997, 0.5500% for Offshore Rate Loans and 0.0000% for
Base Rate Loans, (B) from the calendar day after the Equity Closing through
March 31, 1997, 0.4500% for Offshore Rate Loans and 0.0000% for Base Rate Loans,
and (C) from April 1, 1997, the percentage specified below opposite the Interest
Coverage Ratio (which ratio shall be calculated on a four quarter rolling basis
for the relevant fiscal quarter) calculated for the periods described below.
<TABLE>
<CAPTION>
================================================================================
INTEREST COVERAGE RATIO AT END OF APPLICABLE MARGIN
FISCAL QUARTER
- - --------------------------------------------------------------------------------
Offshore Rate Base Rate
- - --------------------------------------------------------------------------------
<S> <C> <C>
Greater than or equal to 4.0 0.3500% 0.0000%
- - --------------------------------------------------------------------------------
Less than 4.0 but greater than or equal to 3.7 0.4000% 0.0000%
- - --------------------------------------------------------------------------------
Less than 3.7 but greater than or equal to 3.4 0.4500% 0.0000%
- - --------------------------------------------------------------------------------
Less than 3.4 but greater than or equal to 3.1 0.5500% 0.0000%
- - --------------------------------------------------------------------------------
Less than 3.1 but greater than or equal to 2.8 0.6500% 0.0000%
- - --------------------------------------------------------------------------------
Less than 2.8 but greater than or equal to 2.5 0.8750% 0.0000%
- - --------------------------------------------------------------------------------
Less than 2.5 1.1250% 0.0000%
================================================================================
</TABLE>
2
<PAGE> 10
The Applicable Margin for each fiscal quarter commencing on and after April
1, 1997 shall be calculated in reliance on the financial reports delivered
pursuant to subsections 7.1(a) and 7.1(c) and the certificate delivered pursuant
to subsection 7.2(b) with respect to the fiscal quarter ending one fiscal
quarter before the fiscal quarter in question (e.g., June 30 financials
determine the Applicable Margin for the fiscal quarter beginning October 1). If
the Company fails to deliver such financial reports and certificate to the Agent
for any fiscal quarter by the beginning of the next succeeding fiscal quarter
(e.g., by October 1 for the fiscal quarter ending June 30), then the Applicable
Margin for the following fiscal quarter (e.g., October 1 through December 31)
shall equal the next higher Applicable Margin as set forth in the chart above
immediately below the previously effective Applicable Margin; thus if the
Applicable Margin had previously been 0.6500% for Offshore Rate Loans and
0.0000% for Base Rate Loans, a failure to deliver quarterly financials by the
first day of the next fiscal quarter would cause the Applicable Margin to be
0.8750%, 1.000% and 0.0000%, respectively, for the duration of that quarter. In
addition, if such financial reports and certificate when delivered indicate that
the Applicable Margin for such period should have been higher than the
Applicable Margin provided for in the previous sentence, then the Company shall
pay on the date of delivery of such financial reports and certificate an amount
equal to the positive difference, if any, between the interest that the Company
should have paid hereunder had the financial reports and certificate been
delivered on a timely basis over what the Company actually paid. The Applicable
Margin shall be adjusted automatically as to all Loans then outstanding (without
regard to the timing of Interest Periods) as of the effective date of any change
in the Applicable Margin.
"Arranger" means BA Securities, Inc., a Delaware corporation.
"Assignee" has the meaning specified in subsection 11.8(a).
"Assignment and Acceptance" has the meaning specified in subsection
11.8(a).
"Attorney Costs" means and includes all fees and disbursements of any law
firm or other external counsel, the allocated cost of internal legal services
and all disbursements of internal counsel.
"Available Cash" means, with respect to any calendar quarter, (i) the sum
of:
(a) the Company's net income (or net loss) (excluding gain on the sale of
any Capital Asset) for such quarter,
(b) the amount of depletion, depreciation, amortization and other noncash
charges utilized in determining net income of the Company for such quarter,
3
<PAGE> 11
(c) the amount of any reduction in reserves of the Company of the types
referred to in clause (ii)(d) below,
(d) proceeds received by the Company from the sale of Designated Acres, and
(e) any Cash from Capital Transactions received by the Company during such
quarter in specific contemplation that such Cash from Capital Transactions will
be used to refund or refinance any payment of Indebtedness of the type specified
in clause (ii)(a) below which was made in either of the two immediately
preceding quarters,
less (ii) the sum of:
(a) all payments of principal on Indebtedness made by the Company in such
quarter (excluding any payments of principal on Indebtedness made with Cash from
Capital Transactions received by the Company during such quarter or, to the
extent such Cash from Capital Transactions remains available, received by the
Company during the four immediately preceding quarters),
(b) capital expenditures made by the Company during such quarter
(excluding any capital expenditures for such quarter made with Cash from Capital
Transactions received by the Company during such quarter or, to the extent such
Cash from Capital Transactions remains available, received by the Company during
the four immediately preceding quarters, and capital expenditures which the
General Partner reasonably anticipates will be financed with Cash from Capital
Transactions within 90 days from the end of such quarter),
(c) the amount of any capital expenditures made by the Company in a prior
quarter which was anticipated would be financed from Cash from Capital
Transactions but which have not been financed from such source within 90 days
from the end of such quarter,
(d) the amount of any reserves of the Company established during such
quarter which are necessary or appropriate (1) to provide funds for the future
payment of items of the types specified in clauses (ii)(a) and (ii)(b) above,
(2) to provide additional working capital, (3) to provide funds for cash
distributions with respect to any one or more of the next four quarters, or (4)
to provide funds for the future payment of interest in an amount equal to the
interest to be accrued in the next quarter,
(e) the amount of any noncash items of income utilized in determining net
income of the Company for such quarter,
(f) the amount of any Investments (other than guarantees, contingent
liabilities or endorsements, except to the extent payments are actually made
under
4
<PAGE> 12
such guarantees, contingent liabilities or endorsements) made by the
Company during such quarter pursuant to subsections 8.4(a), (h) or (i) (or in
the case of any Subsidiary, Investments (other than guarantees, contingent
liabilities or endorsements, except to the extent payments are actually made
under such guarantees, contingent liabilities or endorsements) of similar type)
to the extent not included in capital expenditures or payments on principal on
Indebtedness made by the Company during such quarter (excluding any such
Investments for such quarter made with Cash from Capital Transactions received
by the Company during such quarter or, to the extent such Cash from Capital
Transactions remains available, received by the Company during the four
immediately preceding quarters, and Investments which the General Partner
reasonably anticipates will be financed with Cash from Capital Transactions
within 90 days from the end of such quarter), and
(g) the amount of any Investments (other than guarantees, contingent
liabilities or endorsements, except to the extent payments are actually made
under such guarantees, contingent liabilities or endorsements) made by the
Company in a prior quarter pursuant to subsections 8.4(a), (h) or (i) (or in the
case of any Subsidiary, Investments (other than guarantees, contingent
liabilities or endorsements, except to the extent payments are actually made
under such guarantees, contingent liabilities or endorsements) of similar type)
to the extent not included in capital expenditures made by the Company during
such quarter which was anticipated would be financed from Cash from Capital
Transactions but which have not been financed from such source within 90 days
from the end of such quarter.
Notwithstanding the foregoing, "Available Cash" shall not take into
account any reductions in reserves or disbursements made or reserves established
after commencement of the dissolution and liquidation of the Company. In
determining "Available Cash," (i) all items under clauses (i)(a), (b), (c), (d)
and (e) above and all items under clauses (ii)(a), (b), (c), (d), (e), (f) and
(g) above shall be calculated on a combined basis with any Subsidiary of the
Company whose income is accounted for on a consolidated or combined basis with
the Company and, in accordance therewith, "Available Cash" shall include a
percentage of each such item of each such Subsidiary equal to the Company's
percentage ownership interest in such Subsidiary, provided, however, that the
items under clauses (i)(a), (b), (c), (d) and (e) above shall only be included
in Available Cash to the extent that the General Partner determines such amount
to be legally available for dividends or distributions to the Company by such
Subsidiary; (ii) the amount of net income and the amount of depletion,
depreciation, amortization and other noncash charges utilized in determining net
income shall be determined, with respect to the Company, by the General Partner
in accordance with generally accepted accounting principals and, with respect to
any Subsidiary, by its Board of Directors (or by such other body or person which
has the ultimate management authority of such Subsidiary) in accordance with
generally accepted accounting principles; (iii) the
5
<PAGE> 13
net income of any Subsidiary shall be determined on an after-tax basis; (iv) the
amount of any reductions in, or additions to, reserves for purposes of clauses
(i)(c) and (ii)(d) above shall be determined, with respect to the Company, by
the General Partner in its reasonable good faith judgment and, with respect to
any Subsidiary, by its Board of Directors (or by such other body or person which
has the ultimate management authority of such Subsidiary) in its reasonable good
faith judgment; and (v) any determination of whether any capital expenditures or
Investments are financed, or anticipated to be financed, with Cash from Capital
Transactions for purposes of clause (ii)(b) or (ii)(f) above shall be made, with
respect to the Company, by the General Partner in its reasonable good faith
judgment and, with respect to any Subsidiary, by its Board of Directors (or by
such other body or person which has the ultimate management authority of such
Subsidiary) in its reasonable good faith judgment.
"Bank" has the meaning specified in the introductory clause hereto.
References to the "Banks" shall include BofA in its capacity as a Swingline Bank
and an Issuing Bank, for purposes of clarification only, to the extent that BofA
may have any rights or obligations in addition to those of the Banks due to its
status as a Swingline Bank or an Issuing Bank, its status as such will be
specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) the rate of interest in effect for such day as publicly announced from
time to time by BofA in San Francisco, California, as its "reference rate." It
is a rate set by BofA based upon various factors including BofA's costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by BofA shall take effect at the
opening of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan or an L/C Advance that bears interest based
on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
6
<PAGE> 14
"Board Foot" means a unit of measurement one foot square and one inch
thick.
"Borrowing" means a borrowing hereunder consisting of Loans of the same
Type made to the Company on the same day by the Banks, or a Swingline Loan or
Loans made to the Company on the same day by the Swingline Bank, in each case
pursuant to Article II, and, other than in the case of Base Rate Loans, having
the same Interest Period.
"Bridge Commitment" has the meaning specified in Section 2.2.
"Bridge Loan" has the meaning specified in Section 2.2 and may be an
Offshore Rate Loan or a Base Rate Loan.
"Bridge Termination Date" means April 17, 1998.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City or San Francisco are authorized or
required by law to close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Asset" means any asset on the Company's or any Subsidiary's
balance sheet, as the case may be, other than inventory, accounts receivable or
any other current asset and assets disposed of in connection with normal
retirements or replacements.
"Capital Expenditure Tranche" has the meaning specified in Section 2.18.
"Capital Expenditure Tranche Loan" means a Loan allocated by the Company to
the Capital Expenditure Tranche as provided in Section 2.18.
"Capital Lease" has the meaning specified in the definition of "Capital
Lease Obligations."
"Capital Lease Obligations" means all monetary obligations of the Company
or any of its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, is classified as a capital lease ("Capital Lease").
"Capital Transaction" means (i) borrowings and sales of debt securities
(other than for working capital purposes and other than for items purchased on
open
7
<PAGE> 15
account in the ordinary course of business) by the Company, (ii) sales of equity
interests by the Company and (iii) sales or other voluntary or involuntary
dispositions of any assets of the Company (other than (x) sales or other
dispositions of inventory in the ordinary course of business, (y) sales or other
dispositions of other current assets including receivables and accounts and (z)
sales or other dispositions of assets as a part of normal retirements or
replacements), in each case prior to the commencement of the dissolution and
liquidation of the Company, provided that in determining Cash from Capital
Transactions, items (i), (ii) and (iii) above shall include, with respect to
each Subsidiary of the Company whose income is accounted for on a consolidated
or combined basis with the Company, a percentage of each such item of such
Subsidiary equal to the Company's percentage ownership interest in such
Subsidiary.
"Cash Collateral Account Agreement" means an agreement or agreements
entered into between the Company and the Agent substantially in the form of
Exhibit E.
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of (i) in the case of L/C Obligations, the Agent, the
Issuing Banks and the Banks, (ii) in the case of Offshore Rate Loans, the Agent
and the Banks, and (iii) in the case of Swingline Loans, the Agent, the
Swingline Bank and the Banks, in each case as collateral for the L/C
Obligations, the Loans or the Swingline Loans, as the case may be, cash or
deposit account balances pursuant to a Cash Collateral Account Agreement.
Derivatives of such term shall have corresponding meaning.
"Cash from Capital Transactions" means at any date, such amounts of cash
as are determined by the General Partner to be cash made available to the
Company from or by reason of a Capital Transaction.
"CERCLA" has the meaning specified in the definition of "Environmental
Laws."
"Closing Date" means the date on which all conditions precedent set forth
in Section 5.1 are satisfied or waived by all Banks.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Commitment," with respect to each Bank, means such Bank's Revolving
Commitment, such Bank's Bridge Commitment or both, as the case may be.
"Commitment Fee Percentage" means (A) for the period from the Closing Date
through the earlier of (i) the Equity Closing and (ii) March 31, 1997, 0.1750%,
(B) from the calendar day after the Equity Closing through March 31,
8
<PAGE> 16
1997, 0.1500% and (C) from April 1, 1997, the percentage specified below
opposite the Interest Coverage Ratio (which ratio shall be calculated on a
rolling four quarter basis for the relevant fiscal quarter) calculated for the
periods described below.
<TABLE>
<CAPTION>
================================================================================
INTEREST COVERAGE RATIO AT END OF FISCAL QUARTER COMMITMENT FEE
PERCENTAGE
- - --------------------------------------------------------------------------------
<S> <C>
Greater than or equal to 4.0 0.1250%
- - --------------------------------------------------------------------------------
Less than 4.0 but greater than or equal to 3.7 0.1375%
- - --------------------------------------------------------------------------------
Less than 3.7 but greater than or equal to 3.4 0.1500%
- - --------------------------------------------------------------------------------
Less than 3.4 but greater than or equal to 3.1 0.1750%
- - --------------------------------------------------------------------------------
Less than 3.1 but greater than or equal to 2.8 0.2000%
- - --------------------------------------------------------------------------------
Less than 2.8 but greater than or equal to 2.5 0.2750%
- - --------------------------------------------------------------------------------
Less than 2.5 0.3250%
================================================================================
</TABLE>
The Commitment Fee Percentage for each fiscal quarter commencing on and
after April 1, 1997, shall be calculated in reliance on the financial reports
delivered pursuant to subsections 7.1(a) and 7.1(c) and the certificate
delivered pursuant to subsection 7.2(b) with respect to the fiscal quarter
before the fiscal quarter in question (e.g., June 30 financials determine the
Commitment Fee Percentage for the fiscal quarter beginning October 1). If the
Company fails to deliver such financial reports and certificate to the Agent for
any fiscal quarter by the beginning of the next succeeding fiscal quarter (e.g.,
by October 1 for the fiscal quarter ending June 30), then the Commitment Fee
Percentage for the following fiscal quarter (e.g., October 1 through December
31) shall equal the next higher Commitment Fee Percentage as set forth in the
chart above immediately below the previously effective Commitment Fee
Percentage; thus if the Commitment Fee Percentage had previously been 0.2000%, a
failure to deliver quarterly financials by the first day of the next fiscal
quarter would cause the Commitment Fee Percentage to be 0.2750% for the duration
of that quarter. In addition, if such financial reports and certificate when
delivered indicate that the Commitment Fee Percentage for such period should
have been higher than the Commitment Fee Percentage provided for in the previous
sentence, then the Company shall pay on the date of delivery of such financial
reports and certificate an amount equal to the positive difference, if any,
between the interest that the Company should have paid hereunder had the
financial reports and certificate been delivered on a timely basis over what the
Company actually paid.
9
<PAGE> 17
"Commitment Percentage" means, as to any Bank, the percentage equivalent of
the aggregate of such Bank's Revolving Commitment divided by the Aggregate
Revolving Commitment.
"Company's Knowledge" or "Knowledge of the Company" shall mean the actual
knowledge of (i) Rick R. Holley, President and Chief Executive Officer, Charles
P. Grenier, Executive Vice President, Diane M. Irvine, Vice President and Chief
Financial Officer, James A. Kraft, Vice President, General Counsel and
Secretary, Susanna N. Duke, Director, Law and Human Resources, William R. Brown,
Vice President, Resource Management, and Mitchell Leu, Environmental Engineer,
and any successor to the offices and officers, such persons being the principal
persons employed by the Company ultimately responsible for environmental
operations and compliance, ERISA and legal matters relating to the Company and
(ii) the Treasurer or any other person having the primary responsibility for the
day-to-day administration of, and dealings with the Agent and the Banks in
connection with, this Agreement.
"Contractual Obligations" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Controlled Group" means the Company and all Persons (whether or not
incorporated) under common control or treated as a single employer with the
Company pursuant to Section 414(b), (c), (m) or (o) of the Code.
"Conversion/Continuation Date" means any date on which, under Section 2.6,
the Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Loan hereunder,
including any conversion or continuation thereof, and (b) the Issuance of any
Letter of Credit hereunder.
"Cunit" means 100 cubic feet of wood.
"Debt Proceeds" means the proceeds of Indebtedness permitted by subsection
8.5(i), net of customary expenses payable to Persons that are not Affiliates of
the Company.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
10
<PAGE> 18
"Designated Acres" means up to an aggregate of 200,000 acres owned by the
Company which (based on the good faith determination of the Responsible
Representatives that such acres have at the time such determination is made a
higher value as recreational, residential, grazing or agricultural property than
for timbe